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CHAPTER - ONE

INTRODUCTION
1.1 Introductory Background
The corporate taxation system has been a focus of many recent debates about tax reform and
the economy. Many economists and policy makers argue that reform of the corporate tax
system is needed, although a variety of rationales on why and how have been offered. Some
argue that a simpler system with lower tax rates is necessary to encourage domestic
investment, employment, and economic growth. Others argue that reform is needed to close
loopholes and restrict access to tax havens, both of which are seen by some to allow
corporations to avoid taxes too easily.
A number of others have advocated for corporate tax reform on the basis that the current
system puts Bangladeshi corporations at an advantage when compared with foreign
competitors. Many believe it is a combination of these arguments that justify reforming the
corporate tax system.
This report presents information and research on the corporate tax to help policy makers
understand and evaluate arguments presented in the tax reform debate. Many of the topics
and ideas discussed here are analyzed in greater detail in the other CRS reports and academic
research referenced throughout.
This report first reviews the structure of the corporate income tax. Data on which companies
pay the corporate tax, corporate tax revenue are analyzed. Next, the economic effects of the
corporate tax are reviewedincluding a discussion of the purpose of the corporate tax, who
bears the burden of the tax, and how to evaluate alternative corporate tax systems. The report
then reviews broad reform options and concludes with a comparison of specific proposals
that have been offered.

1.2 Background of the Study


Income Tax is a kind of tax which is incurred from individuals, company and others source
on the basis of their income level. In the Development country, like Bangladesh income Tax
is main of the national revenue. The tax authority (National Board of Revenue) NBR collects
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all the revenue of the country on the behalf of the Government of Bangladesh (GOB). They
also collect Value Added Tax (VAT) and Customs Duties. In Income tax Individuals income
tax, Corporate Tax and Travel Tax are the main source. In those sources the corporate tax are
top of them, means mostly income tax generated sources.

GOB is deeply emphasis in the income tax sector to increase the national revenue. So that
they can meet up their expenditure; Making report or work with like this topic of any
government intuition is too difficult. Finding out the details Information of this intuition are
available. I visited National Board of Revenue Bhaban, Income Tax Fair and visited
everywhere where these types of information are available. Thats not helping too much, but
little bit. Therefore, I am always interested to work with such topics. It is my pleasure to work
with such topics.

1.3 Origin of the Report


The Term paper is a basic requirement for the MBA program. The proposed topic is A detail
study on Corporate Taxation systems of any Company of Bangladesh. The topic is
assigned by Sheuly Akter, Lecturer, Department of Accounting, Victoria Govt. College, Comilla

1.4 Objectives of the Report


There are mainly two objectives behind the preparation of this report such as primary
objectives and secondary objectives. These are discussed as under:
1. Primary Objective:
The primary objective of preparing this report is to fulfill the partial requirements of the
MBA program and to represent the A detail study on Corporate taxation of any Company
of Bangladesh.
2. Secondary Objective:
The secondary objective of this report is as below:

To know the history of tax and corporate taxation in Bangladesh.


To know how the corporate tax implementation in Bangladesh.
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To know the major sources of corporate ax


.To knows the problem of incurred of corporate Tax.
To familiar with the cannon of taxation in Bangladesh.
How the Corporate taxation contributing in development process of Bangladesh.
Identifying the Strength and Weakness of corporate taxation in Bangladesh.
To Recommendation Action that may be necessary to redesign the corporate taxation
system in Bangladesh.

CHAPTER - TWO
CONCEPTUAL ISSUE
2.1 Corporate Taxation in Bangladesh
Corporate tax or company tax refers to a tax imposed on entities that are taxed at the entity
level in a particular jurisdiction. Such taxes may include income or other taxes. The tax
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systems of most countries impose an income tax at the entity level on certain type(s) of
entities (company or corporation). Many systems additionally tax owners or members of
those entities on dividends or other distributions by the entity to the members. The tax
generally is imposed on net taxable income. Net taxable income for corporate tax is generally
financial statement income with modifications, and may be defined in great detail within the
system. The rate of tax varies by jurisdiction. The tax may have an alternative base, such as
assets, payroll, or income computed in an alternative manner.
Most income tax systems provide that certain types of corporate events are not taxable
transactions. These generally include events related to formation or reorganization of the
corporation. In addition, most systems provide specific rules for taxation of the entity and/or
its members upon winding up or dissolution of the entity.
In systems where financing costs are allowed as reductions of the tax base (tax deductions),
rules may apply that differentiate between classes of member-provided financing. In such
systems, items characterized as interest may be deductible, subject to interest limitations,
while items characterized as dividends are not. Some systems limit deductions based on
simple formulas, such as a debt-to-equity ratio, while other systems have more complex rules.
Some systems provide a mechanism whereby groups of related corporations may obtain
benefit from losses, credits, or other items of all members within the group. Mechanisms
include combined or consolidated returns as well as group relief (direct benefit from items of
another member).
Most systems also tax company shareholders on distribution of earnings as dividends. A few
systems provide for partial integration of entity and member taxation. This is often
accomplished by "imputation systems" or franking credits. In the past, mechanisms have
existed for advance payment of member tax by corporations, with such payment offsetting
entity level tax. Many systems (particularly sub-country level systems) impose a tax on
particular corporate attributes. Such non-income taxes may be based on capital stock issued
or authorized (either by number of shares or value), total equity, net capital, or other measures
unique to corporations.

Corporations, like other entities, may be subject to withholding tax obligations upon making
certain varieties of payments to others. These obligations are generally not the tax of the
corporation, but the system may impose penalties on the corporation or its officers or
employees for failing to withhold and pay over such taxes.

2.2 Literature Review


This paper proposes an alternative treatment of international transactions that would relieve
the international pressure to reduce rates while attracting foreign business activity to the
Bangladesh. It addresses concerns about the effect of rising international competition for
multinational business operations on the sustainability of the current corporate tax system.
With rising international capital flows, multinational corporations, and cross-border
investment, countries tax rates and tax structures are of increasing importance.
Indeed, part of the explanation for declining corporate tax rates abroad is competition among
countries for business activity. Given that Bangladesh a relatively high corporate tax rate of
45 percent, some observers suggest that we must join this race to the bottom by reducing
rates and further eroding tax revenues to keep business activity and jobs in the United States.
Generating long-run productivity gains for workers and firms by increasing investment in
businesses is a related concern. Investments in factories, machines, software, and equipment
are a key driver of increases in workers productivity and wages; changes in the corporate tax
system that increase investment can help increase living standards for workers. A key
challenge is finding a revenue-efficient means to support new investment.
Finally, the recent economic crisis heightened concerns that the corporate tax contributes to
economic instability by encouraging excessive corporate borrowing. The growing importance
of the financial sector as well as increases in financial innovation and the sophistication of
financial transactions have contributed to the recent financial crisis, recession, and the
resultant increase in unemployment. The corporate tax system contributes to private debt
burden because it encourages borrowing relative to other forms of financinginterest
payments are deductible whereas payments to shareholders are not. Addressing this economic
distortion provides a means to facilitate a more sustainable, efficient and stable business
sector.
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The corporate tax can survive as an important source of federal revenue, but its survival and
the alleviation of concerns about its effects on the economy require that it be reformed to
address the challenges described above. I propose changes that would set the corporate tax
apart from those found abroad, but these proposals are based on ideas that are neither new nor
radical and would result in a tax system better suited to todays economy than our current
system.
In brief, the reform would consist of two fundamental pieces, one affecting the treatment of
investment and borrowing, and the other dealing with international transactions.

CHAPTER - THREE
DATABASE
3.1 Scope of the Study
The scope of this paper is limited to the organizational structure, background, and objectives,
functions, and collecting revenue system of NBR as a whole. The scope is also limited to
different revenue collection of NBR.
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3.2 Methodology of the Study


I have collected my information/ data from the following sources, which helped me to make
this report. The source can divide into two parts. Such as: I. Primary Sources and II.
Secondary Sources
I. Primary Sources
Primary sources include interviews and conversation with officers and others of NBR office.
II. Secondary Sources
Secondary sources of information include

Website
Bangladesh Bank Annual report
Budget Speech 2016-17
General report
World Bank report
Income Tax Manual
Book and others publications.

3.3 Limitation of the Study


Every task has some limitations. I faced some usual constraints during the course of my
thesis. Though I have given utmost effort to prepare this report but there are some limitations
of the study.
They are as follows Firstly, Short timing is main limitation of the report, as the thesis is research paper but
I have short time to research on the following topic.
Secondly, insufficient data is another big problem. There is no special periodical on
the behalf the NBR. So, it is hard to collect the data.
Thirdly, the information that are published in website is really confusing, information
that in the NBR website and MOF website are not same.

Fourthly, lack of in-depth knowledge & analytical ability for writing such report.
Fifthly, Lack of enough experience in analyzing data.
Finally, as it is the Government organization so many of information cant disclose by
nature in front of publicly and hard to get somebodys interview.

CHAPTER - FOUR
FINDINGS OF THE STUDY
4.1 Taxation of Corporations
Corporations may be taxed on their incomes, property, or existence by various jurisdictions.
Many jurisdictions impose a tax based on the existence or equity structure of the corporation.
For example, Maryland imposes a tax on corporations organized in that state based on the
number of shares of capital stock issued and outstanding. Many jurisdictions instead impose a
tax based on stated or computed capital, often including retained profits.

In Bangladesh, the principal direct taxes are personal income taxes and corporate income
taxes, and a value-added tax (VAT) of 15% levied on all important consumer goods. The top
income tax rate for individuals is 25%. For the 2014/15 tax year (July, 1 2014June 30, 2015)
the top corporate rate was 45%. However, publicly traded companies registered in
Bangladesh are charged a lower rate of 30%. Banks, financial institutions and insurance
companies are charged the 45% rate.
All other companies are taxed at the 37.5% rate. Effective 1 July 2002, the VAT rate on
computer hardware and software was reduced to 7.5%, and certain agricultural equipment
and electricity supplied to the agricultural sector was exempted from VAT altogether. VAT on
the transfer of land is also to be abolished. Essential agricultural implements and irrigation
pumps had previously been excluded from certain taxes.
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 are 35% and the rate of those whose shares are not publicly traded is 40%. A
tax rate 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).

4.2 Structure of the Corporate Tax


The corporate tax generally only applies to C corporations (also known as regular
corporations). These corporationsnamed for Subchapter C of the Internal Revenue Code
(IRC), which details their tax treatmentare generally treated as taxable entities separate
from their shareholders. Corporate income is taxed once at the corporate level according to
the corporate tax system.
When corporate dividend payments are made or capital gains are realized income is taxed
again at the individual-shareholder level according to the individual tax system. This
treatment leads to the so-called double taxation of corporate profits. In contrast, noncorporate businesses, including corporations and partnerships, pass their income through to
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owners who pay taxes. Collectively, these non-corporate business entities are referred to as
pass-through. For these types of entities, business income is taxed only once, at individual
income tax rates.
The corporate taxation is designed as a tax on corporate profits (also known as net income).
Broadly defined, corporate profit is total income minus the cost associated with generating
that income. Business expenses that may be deducted from income include employee
compensation; the decline in value of machines, equipment, and structures (i.e., deprecation);
general supplies and materials; advertising; and interest payments. The corporate tax also
allows for a number of other special deductions, credits, and tax preferences. Oftentimes,
these provisions are intended to promote particular policy goals, as deductions reduce taxes
paid by corporations.
A corporations tax liability can be calculated as:
Taxes = [(Total Income Expenses) (1 p) t] Tax Credits,
Where t is the statutory tax rate and p is the Section 199 production activities deduction. The
Section 199 deduction, which is discussed in Corporate Tax Expenditures section,
effectively lowers the corporate tax rate for those corporations engaged in domestic
manufacturing activities. The corporate tax system becomes increasingly complex as the
details of specific provisions are examined. The following sections discuss some of the more
fundamental features of the tax system.

4.3 Corporate Income Taxes and the Current Macroeconomics Context


The analysis of the impact of globalization on corporate taxes assumes special importance in
the context of the recent sharp deterioration in the fiscal positions of many countries
following the global crisis amid continuing competition for mobile capital. At the same time,
decisions being taken regarding corporate income tax (CIT) rates in the current highly
challenging budgetary environment bring into relief many of the strategic and political
economy factors that are seen to impinge on corporate taxation. In the past, these factors
which include fiscal competition under budget rigidities, and equity considerations, have
been seen to help explain the absence of a race to the bottom in capital taxation even as
globalization proceeded. The conjectural situation in the aftermath of the crisis presents a
more complex dilemma.
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The crisis hit particularly hard advanced economies whose gross public debt ratios are
projected to average over 110 percent of GDP by end-2015, some 35 percentage points of
GDP higher than before the crisis, and the highest since the Second World War, and
continuing very high fiscal deficits. Many of these countries face historically high net and
gross financing requirements, increasing pressure to find ways to reduce the large deficits and
debt ratios. Fiscal policy has already shifted from supporting domestic demand to reducing
deficits, with a significant number of advanced economies projected to at least have a
declining deficit this year. Most advanced economies, with or without market pressure, are
implementing or have announced consolidation plans.
However, it is striking that most of the consolidation plans focus on expenditure cuts, rather
than revenue measures, and within the latter, there is no evidence that tax increases are
planned to be broad based (IMF, 2015). In particular, while increases in consumption taxes
are being contemplated, the impact on direct taxes is much less, and so far there has not been
a single case of CIT rates being raised. This reflects in part the fact that side by side with the
increase in deficits and debts is the concern about the weak economic recovery in many
economies and the likelihood that potential growth may have declined. In view of that, there
is even a consideration being given in several countries to reducing CIT rates to help spur
investment activity, including by attracting foreign capital and growth.
In the United States, the National Commission on Fiscal Responsibility in its
recommendations to cut the U.S. deficit proposed cutting the corporate tax rate (CTR) to 28
percent from the current 35 percent (while eliminating many loopholes, and moving the
United States to a territorial system that would not tax profits generated overseas). In Japan
and Canada, policy action on this front has already been taken. Japans Prime Minister Kan
proposed a reduction in CIT from 40 to 35 percent; Canadas Prime Minister Harper cut
Canadas CTR to 26.5 percent, effective January 1, 2016. Japans cut comes despite the fact
that it was particularly hard hit by the global crisis, and its already very high public debt
ratios exploded further. At end-2015, Japan had a debt ratio exceeding 325 percent of GDP,
the highest of any advanced or emerging market economy.

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At the same time, its general government deficit for 201415 averaged 16 percent of GDP.
Given its fiscal position, illustrative analysis suggests that it would require an unprecedented
adjustment of over 13 percent of GDP to reduce and stabilize the debt ratio at 200 percent of
GDP by 2020. And yet, faced with such fiscal pressure, the government has announced this
cut. This action was rationalized on the basis that Japanese companies compete not only with
U.S. and European companies, but increasingly equally so with Chinese and Korean
companies, which face much lower tax rates.4 Thus, despite the fiscal straits, the competition
for mobile capital is seen likely to put further pressure on CIT rates.

4.4 Statutory Definition of Company


Under Section 2(20), Company means a company as defined in the companies Act, 1913 (vii
of 1913) or company act 1994 and includes
a) A body corporate established or constituted by or under any law for the time being in force;
b) Any nationalized banking or other financial institution, insurance body and industrial or
business enterprise;
bb) an association or combination of persons, called by whatever name, if any of such
persons is a company as defined in the companies act, 1913 (vii of 1913) or company act,
1994.
c) Any foreign association or body not incorporated by or under any, which the board may, by
general or special order, declare to be a company for the purposes of this ordinance.
Residential Status
Residential status may be resident [defined u/s 2(55), ITO] or non-resident [defined u/s 2(42),
ITO]. Under section 17, resident assessee (taxpayer) has to pay income tax on total global
income including foreign income, but non-resident taxpayer has to pay income tax only on
his total domestic (Bangladeshi) income as determined u/s 18 (income deemed to accrue or
arise in Bangladesh).
Under section 2(55), an individual is to be a resident if his period of stay in Bangladesh is at
least 182 days in the concerned income year, or at least 90 days in the concerned income year,
and at least 365 days in the preceding 4 income years. A partnership firm is considered as
resident, if the control and management of its affairs situated wholly or partly in Bangladesh
in the concerned income year. A company will be a resident, if control and management of its
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affairs situated wholly in Bangladesh in the concerned income year. Otherwise, a taxpayer
will be treated as non-resident [u/s 2(42)].

4.5 Corporate Tax Rate in Bangladesh


The Corporate Tax Rate in Bangladesh stands at 27.50 percent. Corporate Tax Rate in
Bangladesh averaged 31.18 percent from 1997 until 2016, reaching an all time high of 40
percent in 1998 and a record low of 27.50 percent in 2009. Corporate Tax Rate in Bangladesh
is reported by the National Board of Revenue (NBR), Bangladesh.
Actual
27.50

Previous
27.50

Highest
40.00

Lowest
27.50

Dates
1997 - 2016

Unit Frequen
percent
Yearly

In Bangladesh, the Corporate Income tax rate is a tax collected from companies. Its amount is
based on the net income companies obtain while exercising their business activity, normally
during one business year. The benchmark we use refers to the highest rate for Corporate
Income. Revenues from the Corporate Tax Rate are an important source of income for the
government of Bangladesh. This page provides - Bangladesh Corporate Tax Rate - actual
values, historical data, forecast, chart, statistics, economic calendar and news. Bangladesh
Corporate Tax Rate - actual data, historical chart and calendar of releases - was last updated
on September of 2016.
Bangladesh Taxes

Last

Previous

Highest
13

Lowest

Unit

Corporate Tax Rate

27.50

27.50

40.00

27.50

percent

The tax rates in Bangladesh have been at a very rational level and as such I propose these
rates to remain the same. Listed companies currently pay a tax of 25 percent with the
exception of banks, insurance firms, cigarette manufacturers and mobile phone operators.
Mobile phone operators pay a tax of 40 percent. Banks, insurance and non-banking financial
institutions are also taxed at 40 percent, if listed on the stock market. Those that are not, pay
42.50 percent. Other non-public trading companies pay 35 percent tax.
Publicly traded companies generally taxed at 25% rate; banks, insurance companies and
financial institutions taxed at 42.5% rate (40% if publicly traded); mobile phone operator
companies and cigarette manufacturing companies taxed at 45% rate; all other companies
subject to 35% rate. Additional tax of 5% may apply on certain undistributed profits of public
limited companies. Minimum tax of 0.30% (0.10% for certain industrial undertakings) on
gross receipts exceeding BDT 5 million applies. Branches also subject to 20% tax on
remittances of profits abroad.
The budget for fiscal year 2016/2017 was presented on 2 June 2016. Budget measures
concerning corporate taxation, once adopted, will take effect from 1 July 2016 (unless
indicated otherwise).
Some of the proposed measures are detailed below.
The "income year" for subsidiaries of any banks and insurance and financial
institutions must coincide with the calendar year, i.e., 1 January to 31 December
The 5% additional tax imposed on public listed companies for declaring dividends of
less than 15% will be withdrawn
The minimum tax rates will be increased, ranging from 0.6% to 1%
The payment of salary to an employee who is not a holder of a 12-digit taxpayer's
identification number (TIN) will not be allowed as a deduction

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The allowable deduction for overseas traveling expenditure will be increased from 1%
to 1.25% of disclosed turnover
Withholding tax (WHT) rates to be levied on the following payments to residents
(payments to residents without TIN will be subject to WHT of 50% or higher) will
apply at the specified rate of the contract value, or billed or invoiced amount, or
payment including VAT, whichever is higher
Type of income or activity

WHT rate
(%)

Payment, including a transfer, credit or adjustment of a payment made to


a resident, for the execution of a contract, the supply of goods, a
manufacturing process or conversion, printing or packaging procedure

10

Royalty, franchise or fee for using license, brand name and know-how
intangible

10

Up to BDT 2.5 million


Above BDT 2.5 million
WHT on export proceeds will be increased to 1.5%

12

Interest on savings instruments in the hands of an approved superannuation fund,


pension fund or gratuity fund, or a recognized provident fund or Workers' Profit
Participation Fund, previously exempt, will now be subject to WHT of 5% if the
investor's cumulative investment at the end of the relevant income year exceeds
BDT0.5 million
WHT of 5% will be levied on any interest on any savings, fixed or term deposits
maintained by a tax-exempt fund
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The limit for turnover for the purpose of tax exemption for any small to medium-sized
enterprises will be increased from BDT3 million to BDT3.6 million
Submission of Return
The return under sub-section 2[(1), (1A) and (1B)] shall be furnished in the prescribed form
setting forth therein such particulars and information as may be required thereby including
the total income of the assessee.
Signed and Verified(i)

in the case of an individual, by the individual himself ; where the individual is absent
from Bangladesh, by the individual concerned or by some person duly authorized by
him in this behalf; and when the individual is mentally incapacitated from attending to
his affairs, by his guardian or by any other person competent to act on his behalf ;

(ii)

in the case of Hindu undivided family, by the Karta, and, where the Karta is absent from
Bangladesh or is mentally incapacitated from attending to his affairs, by any other adult
member of such family ;

(iii) in the case of a company or local authority, by the principal officer thereof ;
(iv) in the case of a firm, by any partner thereof, not being a minor;
(v)

in the case of any other association, by any member of the association or the principal
officer thereof ; and

(vi) in the case of any other person, by that person or by some person competent to act on
his behalf.

4.6 Assessment Procedure


Provisional Assessment1.

The Deputy Commissioner of Taxes may, at any time after the first day of July of the
year for which the assessment is to be made, proceed to make, in a summary manner,
a provisional assessment of the tax payable by the assessee on the basis of the return
and the accounts and documents, if any, accompanying it and where no return has
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been filed, on the basis of the last assessment including an assessment under this
section.
2.

In making a provisional assessment under this section, the Deputy Commissioner of


Taxes shall-(a)

rectify any arithmetical errors in the return, accounts and documents;

(b)

allow, on the basis of the information available from the return, accounts and
documents, such allowances as are admissible under the Third Schedule and any
loss carried forward under section 38 or 39 or 41.

3.

For the purposes of payment and recovery, the tax as determined to be payable upon
provisional assessment shall have effect as if it were determined upon regular
assessment.

4.

The tax paid or deemed to have been paid under Chapter VII, in respect of any
income provisionally assessed under sub-section (1), shall be deemed to have been
paid towards the provisional assessment.

5.

Any amount paid or deemed to have been paid towards provisional assessment under
this section shall be deemed to have been paid towards regular assessment; and the
amount paid or deemed to have been paid towards provisional assessment in excess of
the amount found payable after regular assessment shall be refunded to the assessee.

6.

Nothing done or suffered by reason or in consequence of any provisional assessment


made under this section shall prejudice the determination on merit of any issue which
may arise in the course of regular assessment.

7.

There shall be no right of appeal against a provisional assessment under this section.

Universal Self-Assessment: (Sec. 82BB)


Two new sub-sections 4 and 5 have been added to this section.
Sub-sec 4, no question as to the source of investment by a new assessee deriving income
from business or profession shall be made when he shows a minimum income of 25% of
invested capital and pays tax before filing of return.
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Sub-sec. 5, initial capital investment shall not be transferred or let out within five years from
the end of the assessment year in respect of which return of income has been filed under this
section.

4.7 Tax Payment Procedure


Deduction at Source and Advance Payment of Tax(1)

Notwithstanding that regular assessment in respect of any income is to be made later in


any assessment year, and without prejudice to the charge and recovery of tax under this
Ordinance after such assessment, the tax on income shall be payable by deduction or
collection at source, or by way of advance payment.

(2)

Any sum deducted or collected, or paid by way of advance payment shall, for the
purpose of computing the income of assesses, be deemed to be the income received,
and be treated as payment of tax in due time, by the assesses.

Payment of Tax On The Basis Of Return


1) Every person who is required to file a return under section 75 shall, on or before the date
on which he files the return, pay the amount of the tax payable by him on the basis of
such return as reduced by the amount of any tax deducted from his income or paid by
him.
2) Any amount paid under sub-section (1) shall be deemed to have been paid towards the
sum as may be determined to be payable by him after regular assessment.
3) A person who, without reasonable cause, fails to pay the tax as required by sub-section
(1) shall be deemed to be assesses in default.

4.8 Fiscal Incentives for Stock Market Development in Bangladesh


Guideline:
SEC is the regulator: No tax
DSE and CSE are the trading place: No tax
They are no longer physical trading place as it goes to online and brokerage houses are
allowed to do substandard for Stock Market Development in Bangladesh, it is necessary to
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increase the number of company. For bank, there is no difference in listing, but Mobile Phone
Company has 45% to 35%. For others 27.5% to 37.5%, but condition is 30 days, when
commerce will be there, then dividend will be paid instantly.
Publicly Traded Company
Dividend declared by less than 10% or failure to pay declared dividend

27.5% within

SEC stipulated time (30 days from 9.2.10)


0

Other situation

42.5%

Other company

40%

Minimum Tax irrespective of profit or loss: Taka 5,000


If dividend paid at more than 20%, 10% rebate on applicable tax.
Income from Mutual fund is totally tax exempted. Part A 6 th Schedule. 208. Because they
have obligation to pay all the income (95%) directly except management expenses (5%).
They cant retain the income and reinvest it because their prime purpose is not to do business.
There is exemption in head
Exemption of Dividend from Mutual Fund or Unit Fund:
Any income from dividend of a mutual fund or a Unit fund where such dividend does not
exceed taka 25000. So if the income from dividend of a mutual fund is less than 25000 then
there is no tax on that but if it exceeds 25000tk then the total income is taxable.
Mobile phone operator companies
Types of Income

Tax Rate

1. Capital gain from:


0

Transfer of stocks & shares of non-listed private limited company

10%

Transfer of other capital assets

15%

2. Dividend income
Resident/non-resident Bangladeshi Company @
Income from Dividend

U/S 54

20%
Resident/non-resident Bangladeshi Person other
than Company @ 10%

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For example: In EPZ there is Korean company. If Korean company gives dividend, that
dividend is not taxable is Bangladesh, it is taxable in Korea. Also he is given stock
dividend. According to the definition of income, it is said that stock dividend is not an
income.
Other Industrial Companies:
Types of Income
Capital gain from:

Tax Rate

0 Transfer of stocks & shares of non-listed private limited company

10%

1 Transfer of other capital assets


Dividend income

15%
20%

Other income
Publicly traded company
Dividend declared by less than 10% or failure to pay declared
dividend within SEC stipulated time (30 days from 9.2.10)
Other situation
3. Other income
Company being converted into a publicly traded through transfer of at least 10% shares
through stock exchanges, of which maximum 5% may be throughPre-IPO Placement

Tax rate is

Other company Tax rate is

35%
45%

Minimum Tax irrespective of profit or loss: Taka 5,000


Non-Corporate Taxpayers
Resident individual assesse, non-resident Bangladeshi, association of persons, firm and other
artificial juridical persons
5% tax on Capital gain on transfer of shares of
a sponsor shareholder or director of a listed company [source tax u/s 53M and settled tax u/s
82C]
a sponsor shareholder or director of bank, financial institution, merchant bank, insurance
company, leasing company, portfolio management company and stock dealer company
[proposed]

20

other shareholder or director of a listed company having more than 10% of share capital of a
company at any time in income year [proposed]
Placement Shareholder: (106: Transfer of Government)
Types of Income

Tax Rate

Capital gain from transfer of shares of listed company [proposed]

10%

If a company raises its share capital through book building

3%

Or,

public

offering

or

rights

offering

or

private

placement

or

preferential share or in any other way, at a value in excess of face value [sec. 16E]
(Source tax u/s 53L and settled tax u/s 82C)
When the company will submit its return?
It is mandatory for the company whether it incurs loss or gain. For others the date is 13 th
September. For company, the date is by 15th July or within 6 months whichever is earlier.
(Sec. 75)
According to 19 (11G), rule 24 companys return form is different.
Assessment: Two types of assessments. One is universal self-assessment and other is normal
assessment. In universal self-assessment, there is less hassle in general.
When the tax will be given?
For company, they have obligation advance quarterly tax payment. If they have total income
of 400000 tk., then they have to pay advance tax, (Sec 68). And the regular payment is before
filing the return. Its obligation is 15th July or within 6 months before the income year ends
whichever is earlier.
But maximum companies follow the financial year, because in 15th July the account has not
closed yet. For this, there is opportunity to take time. It has rule like at first you need to apply
for 3 months and after that you can apply for another 3 months. In total, you will get 6
months for return submission. If the assessment is not completed, you cannot submit the
revised return.
Tax holiday: tax rate is zero on business income, but if he has other income, tax will be
imposed on that. He has to submit the return.
21

Advance payment of tax: two types of rules. First one is on his assessed income of previous
year. Suppose assessed income is 1 crore tk. If he pays (1/4) of 1 crore quarterly, then there
will be no problem. If he says that in this year, income will go down to 80 lacks, he has to
pay tax on that quarterly. But here is a problem. Like if his estimated income fluctuates
widely with the actual, suppose his income becomes 1.5 crore, he has to pay tax on 1.5 crore
with interest payment calculated from the very beginning (1st April). In this case, if he has
already given tax on 1 crore taka earlier, then no question will be asked. The rule of advance
tax is at least 75% of tax should be given.
Tax recovery: When the person does not pay tax, then the question of recovery comes. In
this regard, at first tax authority will do the assessment. If difference is there, they will issue
notice of demand of how to recover tax. {Rule 58 (192 to 246)}

4.9 Tax Rebate for Investment


Rate of Tax Rebate:
Amount of allowable investment is either actual investment in a year or up to 25% of total
income or Tk. 10,00,000/- whichever is less. Tax rebate amounts to 10% of allowable
investment.
Types of investment qualified for the tax rebate are:
Life insurance premium,
Contribution to deferred annuity,
Contribution to Provident Fund to which Provident Fund Act, 1925 applies ,
Self contribution and employer's contribution to Recognized Provident Fund ,
Contribution to Super Annuation Fund,
Investment in approved debenture or debenture stock, Stocks or Shares ,
Contribution to deposit pension scheme approved by the government,
Contribution to Benevolent Fund and Group Insurance premium,
Contribution to Zakat Fund,
Donation to charitable hospital approved by National Board of Revenue,
Donation to philanthropic or educational institution approved by the Government,
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Donation to socio-economic or cultural development institution established in


Bangladesh by
Aga Khan Development Network,
Donation to ICDDR, B, Dhaka Community Hospital,
Donation to philanthropic institution- CRP, Savar, Dhaka,
Donation upto five lac to (1) Shishu Swasthya Foundation Hospital Mirpur,
Shishu Hospital, Jessore and Hospital for Sick Children, Satkhira run by Shishu
Swasthya Foundation, Dhaka, (2) Diganta Memorial Cancer Hospital, Dhaka, (3)
The ENT and Head-Neck Cancer Foundation of Bangladesh, Dhaka; and (4)
Jatiya Protibandhi Unnayan Foundation, Mirpur, Dhaka;
Asiatic Society of Bangladesh;
Muktijudha Jadughar;

4.10 Special Reduced Corporate Tax Rates


Following new industries (established between 01.07.2012 to 30.06.2016) have been
prescribed for special reduced tax rates of 5 or 10 percent over first 5 to 6 years: Agro
processing industry (fruits processing, baby corn packeting, fruit juice producing and rubber
industry), textiles, spinning, textile machinery, garments and forward and backward linkages
thereof, leather goods, toys, furniture, information technology, pharmaceuticals, light
engineering, ceramic or ceramic goods, melamine, plastic products, sanitary ware, steel, MS
rod and CI sheet from iron ore, fertilizer, insecticide, pesticide, computer hardware, petro
chemicals, agricultural machinery, boilers, drugs, chemicals, basic raw materials of drugs,
compressors, ship building, diamond cutting industry, shrimp processing industry, milk
processing industry, accumulator and battery industry, tour operators, energy saving bulb
producing industry, industry producing goods from wastage, jute goods producing industry,
recycling industry, herbal medicine, basic chemicals and dyes, cosmetics and toiletries,
tourism industry, foot wear, MS billet and any other category of industry as the government
may by notification in the official gazette specify (SRO No. 172-Ain/Aykar/2009, dated
01.07.2016). The tax rates are applicable as follows:
Year

Dhaka
Divisions

and

Chittagong Rajshahi, Khulna,

(except

Sylhet, Barisal

for Divisions and Rangamati, Bandarban

Rangamati, Bandarban and and Khagrachari hill districts of


23

st

nd

1 and 2
3rd
4th
5th
6th

Khagrachari hill districts)


5%
10%
10%
15%
Ordinary rate

Chittagong Divisions
5%
5%
10%
10%
10%

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.
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.
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.
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

Tax Withholding Functions


Corporations, like other entities, may be subject to withholding tax obligations upon making
certain varieties of payments to others. These obligations are generally not the tax of the
corporation, but the system may impose penalties on the corporation or its officers or
employees for failing to withhold and pay over such taxes.
In Bangladesh withholding taxes are usually termed as Tax deduction and collected at source.
Under this system both private and public limited companies or any other organization
24

specified by law are legally authorized and bound to withhold taxes at some point of making
payment and deposit the same to the Government Exchequer. The taxpayer receives a
certificate from the withholding authority and gets credits of tax against assessed tax on the
basis of such certificate.
Residential Status
Residential status may be resident [defined u/s 2(55), ITO] or non-resident [defined u/s 2(42),
ITO]. Under section 17, resident assessee (taxpayer) has to pay income tax on total global
income including foreign income, but non-resident taxpayer has to pay income tax only on
his total domestic (Bangladeshi) income as determined u/s 18 (income deemed to accrue or
arise in Bangladesh).
Under section 2(55), an individual is to be a resident if his period of stay in Bangladesh is at
least 182 days in the concerned income year, or at least 90 days in the concerned income year,
and at least 365 days in the preceding 4 income years. A partnership firm is considered as
resident, if the control and management of its affairs situated wholly or partly in Bangladesh
in the concerned income year. A company will be a resident, if control and management of its
affairs situated wholly in Bangladesh in the concerned income year. Otherwise, a taxpayer
will be treated as non-resident [u/s 2(42)].2

25

CHAPTER - FIVE
CONCLUSION
5.1 Summary Observation
Although the tax accounts for a small share of federal revenues, changes in the corporate
income tax and its associated revenues have often been a significant part of revenue
legislation. Moreover, because its incidence is often perceived to fall on the affluent,
assignment of the corporate tax burden can have a significant impact on the assessed
progressivity of the tax system as a whole.
Corporate Income Tax may simply result to lower corporate profits and dividends. It may
reduce their income of all owners of property and businesses. The company may move
toward raising the prices of their products.
This chapter includes historical data for Highest marginal tax rate; corporate rate (%) in
Bangladesh. The Highest marginal tax rate; corporate rate (%) in Bangladesh was reported at
30.00 in 2014, according to the World Bank. In 2015, the Bangladesh highest marginal tax
rate; corporate rate (%) was 27.50. Highest marginal tax rate (corporate rate) is the highest
rate shown on the schedule of tax rates applied to the taxable income of corporations.
Bangladesh is considered as a developing economy which has recorded GDP growth above
5% during the last few years. Microcredit has been a major driver of economic development
in Bangladesh and although three fifths of Bangladeshis are employed in the agriculture
sector, three quarters of exports revenues come from garment industry. The biggest obstacles
to sustainable development in Bangladesh are overpopulation, poor infrastructure, corruption,
political instability and a slow implementation of economic reforms.

5.2 Recommendation

Relative to the shareholder allocation and imputation credit prototypes of relieving the
double taxation of corporate equity income, the dividend exclusion approach is the
most straight-forward and easily administered.

While there are strong arguments that some version of the Comprehensive Business
Income Tax (CBIT) prototype may be preferable from a long-term policy and
26

administrative perspective, the dividend exclusion approach can be implemented


much more rapidly, with far less potential for disruption of financial markets and
many fewer transition issues.

The dividend exclusion approach is preferable to the shareholder allocation and


imputation credit prototypes because it is consistent with our policy view that, over
the long-term, it may be desirable to move the tax system in the direction of a
scheduler tax on enterprise activity.

Corporations will continue to calculate their income under current law rules and will
pay tax according to the existing graduated rate schedule. Credits, including foreign
tax credits, will offset corporate tax as under current law.

Shareholders will exclude all dividends from gross income. As under current law,
shareholders will not reduce their share bases when dividends are received.

Distributions in excess of AT1 will not be classified as dividends, and will instead be
treated as returns of capital.

Taxable acquisitions will be treated as under current law and section will remain
available. As a result, a stock acquisition will not affect the target corporation's ATI.

The current treatment of S corporations, partnerships, and other pass-through entities,


such as regulated investment companies, real estate investment trusts and real estate
mortgage investment conduits will be retained.

Shareholders will be taxed on sales of their stock as under current law.

The accumulated earnings tax will be repealed, because it is of diminished importance


in a system that does not tax dividends.

The personal holding company rules will be retained.

Bibliography
Websites

http://www.reportbd.com/articles/35/1/Taxation-in-Bangladesh/Page1.html
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http://www.taxrates.cc/html/bangladesh-tax-rates.html

http://www.asiatradehub.com/bangladesh/tax.asp

http://www.taxrates.cc/html/bangladesh-tax-rates.html

http://www.taxrates.cc/html/bangladesh-tax-rates.html

http://www.reportbd.com/articles/35/1/Taxation-in-Bangladesh

www.assaignmnetpoint.com

www.scribd.com

www.studyline.com

www.slideshare.com

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