Tax Structure ( Private Investors )

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Tax Incentives and Facilities for Private Investment Tax Holiday

Tax holiday is allowed to industries subject to the relevant rules and procedures set by the National Board of Revenue (NBR). Presently, it is allowed for 5, 7, 9 and 12 years for industries set up in the developed, less developed, least developed and special economic zones respectively. The period of such tax holiday is calculated from the month of commencement of commercial production. The eligibility of tax holiday is to be determined by the NBR and the commencement of production is certified by the respective sponsoring agencies.

Accelerated Depreciation

Accelerated depreciation in lieu of tax holiday is allowed at the rate of 80 percent of actual cost of machinery or plant from the year the unit starts commercial production and 20 percent for the following year, if the industry is located in the developed area. If the unit is set up in a less developed area, the rate of depreciation is 100 percent.

Concessionary Duty Imported Capital Machinery

Import duty at the rate of 7.5 percent ad valorem is payable on capital machinery and spares imported for initial installation or for BMR/BMRE of existing industries. The value of spare parts should not, however, exceed 10 percent of the value of the machinery. Out of this 7.5 percent rate of duty payable. Export-oriented industries and industries located in the under-developed areas, may enjoy a further concession of the import duty in the following manner:

· For 100 percent export oriented Industries : No import duty or any other tax is payable.
· Export-oriented industries in developed areas : Effective rate of duty 5 percent (Industries exporting minimum 70 percent of the total annual production may submit a bank guarantee to the customs authority for 33.33 percent of the total import duty payable at the rate of 7.5 percent ad valorem. This bank guarantee will be returned after installation of the machinery and fulfilling the conditions of export. In this case effective rate of import duty payable is 5 percent ad valorem).
· Other industries In developed areas : Effective rate of duty 7.5 percent.
· Export oriented industries outside developed areas : Effective rate of duty 2.5 percent (Export- oriented industries, as mentioned above, located in under-developed areas may also submit a bank guarantee to the customs authority for 33.33 percent of the total import duty. In addition to this they may submit another bank guarantee for 33.33 percent of the total import duty payable at the rate of 7.5 percent ad valorem for being located in an under-developed area. These bank guarantees (33.33 percent plus 33.33 percent) will be returned after installation of the machinery and fulfilling the condition of export. In this case effective rate of import duty payable is 2.5 percent.

Other industries outside developed areas : Effective rate of duty 5 percent (all other industries located in under developed areas other than export.oriented, may submit a bank guarantee to the customs authority for 33.33 percent of the total import duty payable at the rate of 7.5 percent ad valorem. This bank guarantee will also be returned after installation of the machinery. In this case, the effective rate of import duty is 5 percent ad valorem).

Value Added Tax (VAT) is not payable for imported capital machinery and spares.

Tariff Rationalization

Products of local industries are protected through tariff rationalization, keeping in view the interest of entrepreneurs and consumers. Tariff protection is allowed upto 4 years to the new industries. There is Tariff Commission to prescribe protective rate where necessary.

Incentives to Non-Resident Bangladeshis

Special incentives are provided to encourage non-resident Bangladeshis for investment in industries. Non-resident Bangladeshi investors will enjoy facilities similar to those of foreign investors. Moreover, they can buy newly issued shares/debentures of Bangladeshi companies. Furthermore, they can maintain Non-resident Foreign Currency Deposit (NFCD) account for upto 5 years.

Rationalization of Import Duty  

Duties and taxes on import of goods which are produced locally will be higher than those applicable to import of raw materials for producing such goods.

Other Incentives

· Exemption of tax on interest of foreign loans
· Exemption of tax on royalty, technical know-how and technical assistance fees, etc.,
· Liberal investment allo ance for tax assessment
· Import of machinery under supplier's credit or pay-as-you-earn (PAD)
scheme on approved terms;
· Availability of long term credit facilities on liberal debt-equity ratio from industrial financing institutions (development finance institutions, nationalized commercial banks and rivate commercial banks)
· Income tax exemption of foreign technicians employed in approved industries for a period of 3 years
· Remittance of 50 percent of the salary of foreign nationals employed in approved industries;
· Remittance of savings from earnings, retirement benefits and personal assets of individuals on retirement/termination of services and
· Remittance of approved royalties, technical know-how and technical assistance fees.