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WHAT
INVESTORS SHOULD KNOW
Tax
implications in each country are an important consideration for
an investor. Here is an overview of taxation in Bangladesh.
What
is the tax structure for individual tax payers?
If
an individual has been in Bangladesh for a period/period
totaling 182 days or more in the income year, he/she is
considered a resident. In case an individual has been in the
country for 90 days in the income year and 365 days in four
years preceding this year, he/she will also be considered a
resident.
Each
individual is entitled to an investment tax credit of 15 percent
of the total income or Tk 100,000 whichever is less. Incomes
from small and cottage industries are entitled to a 5 to 10 per
cent tax rebate depending on the production volume.
On
the first Tk. 60,000.00 of total income - no tax obligation
On
the next Tk. 40,000.00 of total income - 10%
On
the next Tk. 50,000.00 of total income - 15%
On
the next Tk. 1,50,000.00 of total income - 20%
On
the balance of total income - 25%
What
is the percentage of corporate tax levied?
Any
income collected or gained by a company doing business in
Bangladesh, whether resident or not is taxable. Corporate tax
rates for industrial companies whose shares are publicly traded
is 35% and the rate of those whose shares are not publicly
traded is 40%.
Tax
rates on income of all other companies including banks,
financial institutions, insurance companies and local
authorities is 45%. Companies enjoying tax holiday are required
to invest only 25% to 30% of their income in other activities as
per rules of the National board of Revenue (NBR).
How
is the period for assessment determined?
Income
tax is levied on all companies and individuals for the previous
year and payable for the year of assessment of fiscal year (July
to June). If a company adopts an accounting period different
from the fiscal year, the business period is a 12 month
accounting period preceding the year of assessment. Taxable
income is calculated after adjusting for incurred expenses in
the production of income.
Returns
filed received by or due to foreign technician under contract if it is
accompanied by audited accounts and certified by a chartered accountant
as to the correctness of the total income of the assessee.
Salary
income received by or due to a foreign technician under contract of
service approved by the NBR is fully exempted from paying tax (subject
to prescribed conditions and limitations) for a period of three years
from the date of his arrival in Bangladesh.
Expenditure
incurred by an employer in respect of remuneration of a foreign
technician is also fully exempted from income tax (subject to stipulated
conditions).
Expenditure
incurred as a remuneration payable to a foreign technician by a
Bangladeshi firm carrying on the business of consultant and engineers in
Bangladesh is fully exempted from tax (subject to prescribed conditions
and limitations).
Who
is entitled to a Tax Holiday?
Tax
holiday is allowed to industries subject to the relevant rules and
procedures set by the National Board of Revenue (NBR) for the following
period according to the location of the establishment.
In
Dhaka and chittagong Divisions (excluding 3 hill districts): 5 years. In
other divisions (including 3 hill districts of chittagong Division): 7
years.
The
period of such tax holiday will be calculated from the month of
commencement of commercial production. The eligibility of tax holiday to
be determined by the NBR and the time of the commencement of commercial
production is certified by the respective sponsoring agencies. The
industrial establishment should be registered under the companies Act.
1994.
Tax
holiday facility can be availed by industries coming into commercial
production within 30 June 2000 A.D.
What
are the other tax incentives in Bangladesh?
Other
tax incentives: Exemption of tax on interest of foreign loan. Exemption
of tax on Royalty/Technical know-how. Tax exemption on capital gains.
Avoidance of double taxation. Liberal investment allowance for tax
assessment.
An
accelerated depreciation instead of a tax holiday of a tax holiday is
allowed at the rate of 80 per cent of the actual cost of the machinery
or plant from the year the plant starts production and 20 per cent for
the following year provided the industry is located within a
"developed area". the depreciation is 10 per cent if the
industry is set up in a location considered less than a "developed
area".
Corporate
tax:
Corporate
tax rates for industrial companies whose shares are publicly traded is
35% and the rate of those whose shares are not publicly traded is 40%
Tax
rates on other companies:
Tax
rates on income of all other companies including banks, financial
institutions, insurance companies and local authorities is 45%
Investment
requirement by companies enjoying tax holiday:
Companies
enjoying tax holidays are required to invest only 25% to 30% of their
income in other activities as per rule of N.B.R.
Accepted
of returns of public limited companies:
Returns
filed by the public limited companies shall be accepted as correct if it
is accompanied by audited accounts and certified by a chartered
accountant as to the correctness of the total income of the assessee
Salary
of foreign technicians:
Salary
income received by or due to a foreign technician under contract of
service approved by the National Board of Revenue is fully exempted from
paying tax (subject to prescribed conditions and limitations) for a
period of three years from the date of his arrival in Bangladesh
Tax
payable by employer on remuneration of foreign technician:
Expenditure
incurred by an employer in respect of remuneration of a foreign
technician is also fully exempted from income tax (subject to the
stipulated conditions)
Remuneration
of foreign technicians employed by the firms of consultancy and
engineers:
Expenditure
incurred as remuneration payable to a foreign technicians by a
Bangladeshi firm carrying on the business of consultant and engineers in
Bangladesh is fully exempted from tax (subject to prescribed conditions
and limitations)
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