02 2011 - Provisions of ITO 1984 As Amended Upto FA 2011 and Changes Brought in by The FA 2011 in Respect of VAT Act and Rules

Rahman Rahman Huq
Chartered Accountants 9 Mohakhali C/A (11th & 12th Floors) Dhaka 1212 Bangladesh
Telephone Fax Email Internet
+880 (2) 988 6450-2 +880 (2) 988 6449 kpmg-rrh@citech-bd.com www.kpmg.com/bd
September 2011
Rahman Rahman Huq, a partnership firm registered in Bangladesh and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity Tel Fax Email Internet +880 (2)710 704, 710 996 +880(2) 810 795 kpmgrrh@globalctg.net www.kpmg.com/bd
Chittagong office address: 102 Agrabad C/A (3rd floor) Chittagong, Bangladesh
Important provisions of ITO 1984 as amended up to
Rahman Rahman Huq Chartered Accountants
Finance Act 2011 and changes brought in by the Finance Act 2011 in respect of VAT Act and Rules
About Rahman Rahman Huq (RRH)

In 1962, when Price Waterhouse Peat & Co. left Pakistan, one of its former partners Mr. Rezaur Rahman joined forces with two other chartered accountants Mr. M. Saifur Rahman and Mr. Tasfin I. Huq to form Rahman Rahman Huq. Rahman Rahman Huq is a Member Firm of KPMG International. Rahman Rahman Huq (hereinafter referred to as RRH or the Firm) takes pride in being the only Member Firm in Bangladesh of any of the Big 4 global accounting firms. Member Firm status is the highest level of affiliation offered by such global firms. This formally establishes RRH as the premier accounting firm in Bangladesh. This status is positioned on top of our reputation built over the last half a century by providing services to our clients with sound technical knowledge, combined with uncompromising integrity, objectivity and independence. RRH offers wide range of services in the fields of Audit, Tax and Advisory. We provide services to a broad group of clients: major domestic and international companies, medium-sized enterprises, non-profit organisations and government institutions etc. RRHs clients include Grameenphone, Orascom Telecom, Ericsson, Alcatel Lucent, British American Tobacco, Nestle, Singer, KAFCO, Bata Shoe, BOC Bangladesh, Holcim, Cemex, Standard Chartered Bank, HSBC, Bank Asia, Eastern Bank, Southeast Bank, Siemens, Ericsson, Esprit , Chevron, Niko, Summit Power, Khulna Power, Wartsila, APM Muller, Avery Dennisson, Wall Mart, Halliburton, Sainsbury, Maidenform, Marico, Asian Paints, Youngone group etc. The complicated problems faced by clients require a multidisciplinary approach. We strive to add value for our clients by drawing on knowledge and experience, gained in a wide range of different organisations and markets and from a well structured comprehensive training programme. Currently RRH has five active partners. The practice is headed by Mr. Altaf Siddiqui. Other partners are Mr. Mosleh Uddin, Mr. Adeeb H. Khan, Mr. Ali Ashfaq and Mr. Mehedi Hasan. All partners are the members of the Institute of Chartered Accountants in England & Wales and the Institute of Chartered Accountants of Bangladesh. New legislation and regulations, market conditions and changing needs require a constant revisioning of services and processes. We and the KPMG network invest considerably in enhanced methodology both domestically and internationally, in order to continue to provide clients with a level of service that aims to meet or exceed their expectations. Operating from offices in Dhaka and Chittagong, we employ around 225 people. The firm, the partners and personnel who work for it, and the processes under which we operate are governed not just by a strict code of ethics, but also by an elaborate risk management structure. We have an IT Wing manned by professionals with the qualification and experience necessary to meet the diverse needs of client. Our ambition is to continue to recruit some of the best talent entering this profession, train them in an environment of technical and ethical excellence to meet the highest expectations of clients in this age of continually evolving multi-dimensional challenges.
2011 Rahman Rahman Huq, a partnership firm registered in Bangladesh and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.
Table of Contents
1. 2. 2.1 2.2 2.3 2.4 2.5 2.6 2.7 3. 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.14 3.15 3.16 Preface ......................................................................................................................................4 Tax rates ...................................................................................................................................5 Tax rates for individual, etc. ......................................................................................................5 Corporate tax rates.....................................................................................................................6 Reduced rates of Corporate Tax applicable to certain industrial companies .............................7 Capital gains tax ........................................................................................................................8 Tax on dividend/remittance of profit .........................................................................................9 Applicability of tax rates ...........................................................................................................9 Charge of minimum tax .............................................................................................................9
Personal income tax...............................................................................................................10 Introduction .............................................................................................................................10 Residence.................................................................................................................................10 Taxable Income .......................................................................................................................10 Filing of tax return ...................................................................................................................10 Requirement of taxpayer's Identification Number (TIN) ........................................................11 Issuance of TIN without application and re-registration .........................................................12 Penalty and prosecution for non-compliance ..........................................................................12 Universal self assessment (Section 82BB) ..............................................................................13 Submission of statement of Assets & Liability and Life Style................................................14 Tax Clearance Certificate ........................................................................................................14 Tax rebate on investment.........................................................................................................14 Deemed income .......................................................................................................................15 Deduction from income ...........................................................................................................16 Special tax treatment in respect of investment in the purchase of Bangladesh Government Treasury Bond ....................................................................................................16 3.17 Investment in share market ......................................................................................................16 3.18 Imposition of tax on income from other than donation and subscription of chamber of commerce and industry, trade federation or any such business organization .........................17 4. 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 Corporate tax .........................................................................................................................18 Introduction .............................................................................................................................18 Residence.................................................................................................................................18 Taxable income .......................................................................................................................18 Deductions of Income Tax Ordinance 1984 ............................................................................19 Allowable perquisites ..............................................................................................................19 Deductions not admissible in certain circumstances ...............................................................20 Donations.................................................................................................................................20 Amendment in Section 82C (Final tax) ...................................................................................20 Amendment in Third Schedule ................................................................................................21 Capital gains ............................................................................................................................22
4.11 4.12 4.13 4.14 4.18 4.19 4.20 4.21 4.22 4.23 5. 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 6. 6.1 6.2 7. 8. 8.1 8.2 9. 9.1 9.2
Income from other sources ......................................................................................................22 Losses ......................................................................................................................................22 Advance tax payment ..............................................................................................................22 Tax filing and tax payment ......................................................................................................23 Penalty for non-compliance.....................................................................................................24 Assessment ..............................................................................................................................25 Universal self assessment scheme ...........................................................................................25 Appeals ....................................................................................................................................26 Submission of certain return ....................................................................................................27 Power of search and seizure ....................................................................................................27 Tax incentives ........................................................................................................................28 Partial tax exemption for newly established industrial undertakings ......................................28 Partial tax exemption for newly established physical infrastructure facility .....................29 Income from exports ...............................................................................................................30 Export Processing Zones .........................................................................................................30 Dividend income of non-resident shareholders received from companies set-up in Export Processing Zones.........................................................................................................31 Income from the business of software development and information technology enabled services (ITES) ..........................................................................................................31 Income from poultry farming ..................................................................................................31 Incentives for private sector power generation companies......................................................31 Expansion of the area of CSR activity to get tax rebate ..........................................................32 Others amendments ..............................................................................................................34 Alternative Dispute Resolution (Section 152F).......................................................................34 Ordinance to override other laws ............................................................................................34 Tax withholding/deduction/collection A comprehensive list .................................35
International Tax ...................................................................................................................46 Double Taxation Avoidance Agreement .................................................................................46 Double Tax Relief ...................................................................................................................46 Value Added Tax ...................................................................................................................47 Important changes brought in the Finance Ordinance 2011 regarding VAT ..........................47 Truncated rate ..........................................................................................................................52
1.
Preface
We have prepared this booklet for the guidance of our existing and potential clients. This booklet incorporates many of the important provisions of the Income Tax Ordinance 1984 as amended up to Finance Act 2011 and major changes brought in by the Finance Act 2011 in respect of the VAT Act 1991 and the VAT rules 1991. The information contained in this booklet is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. This booklet contains selected aspects of Bangladesh tax provisions; it is not intended to be comprehensive. Finally we regret the delay in bringing out this edition; you will appreciate, ensuring quality demands extra time and effort. We would however welcome your comments on the booklet.
2.
2.1
Tax rates
Tax rates for individual, etc.
No tax is payable by tax residents on income not exceeding Tk.180,000. The rates applicable to resident individual, Hindu undivided family, partnership firm, non-resident Bangladeshi, and association of persons are as follows: Resident includes non-resident Bangladeshi Total income First Tk 180,000 * Next Tk 300,000 Next Tk 400,000 Next Tk 300,000 On the balance
*
Tax rate Nil 10% 15% 20% 25%
Initial exemption limit for women taxpayers, taxpayers having age of 65 years or more is Tk 200,000 and for retarded taxpayers is Tk 250,000. Please see section 3.2 for the definition of residence. Non-residents Non-residents other than Bangladeshi non-residents shall pay tax on the total income at the maximum rate of 25%. Minimum tax payable Minimum tax payable is Tk 2,000. Tax Rebate The rebate of 10% for the taxpayers who paid tax @ 25% in the last preceding assessment year is omitted in the Finance Act, 2011. Charge of Surcharge Where an assessee has shown net asset in his statement of assets and liabilities of more than Tk. 20 million, a surcharge @10% will be payable on tax payable on income of such income year. Rate for owner of small or cottage industry If an individual is the owner of a small or cottage industry situated in a less or least developed area and is engaged in manufacturing of products and derives income from
such industries then he will be entitled to rebate on income derived from such industries at the following rates: Particulars If production during the year is more than 15 % but less than 25% compared to previous year If production during the year exceeds 25 % as compared to previous year. Rate of rebate Rebate of 5% on tax payable on income derived from such industries. Rebate of 10% on tax payable on income derived from such industries.
Tax rates applicable for owners of motor car and Jeep Tax payable at the time of registration or renewal of fitness certificate for Motor Vehicles is: Type of Motor Vehicle Upto 1500 CC for each Upto 2000 CC for each More than 2000 CC for each Upto 2800 CC for each Jeep More than 2800 CC for each Jeep Tax payable (Taka) 10,000 15,000 30,000 35,000 50,000
However, this shall be treated as advance payment of tax of the assessee.
2.2
Corporate tax rates

The rates of tax applicable to companies, banks, insurance and other financial institutions: Companies Publicly traded companies i.e. companies listed with any stock exchanges in Bangladesh other than banks, insurance and other financial institutions and jute, textile, garment industries and mobile phone operator companies If such publicly traded companies other than banks, insurance and other financial institutions, mobile phone operator companies, jute, textile and garments companies declare/pay dividend at the rate of more than 20% of capital then a rebate of 10% of tax payable shall be allowed If such publicly traded companies other than banks, insurance and other financial institutions, jute, textile and garments declare/pay dividend at less than 10% of capital or fail to pay dividend within the time specified by Securities and Exchange Commission (which is currently 60 days from date of declaration) Rate
27.5%
37.5%
Companies Non-listed companies including branch companies other than banks, insurance and other financial institutions and jute, textile, garment industries and mobile phone operator companies. A rebate of an amount equal to 50% of the income derived from export business will be allowed to an assessee other than a company not registered in Bangladesh. Banks, insurance and other financial institutions Cigarette manufacturing companies (unlisted) Cigarette manufacturing companies, publicly listed in Bangladesh Mobile phone operator companies Mobile phone operator companies that convert themselves into a publicly traded company by transfer of at least 10% shares through stock exchanges, of which maximum 5% may be through Pre-Initial Public Offering Placement If a company raises its share capital through book building or public offering or rights offering or placement or preference share or in any other way at a value in excess of face value, the company shall be charged, premium tax on the difference between the value at which the share is sold and its face value.
Rate
37.5%
42.5% 42.5% 35% 45%
35%
3%
2.3
Reduced rates of Corporate Tax applicable to certain industrial companies

Companies Textile industries (time extended upto 30 June 2013) Jute industries (time extended upto 30 June 2013) Research Institutes recognised under the Trust Act Private universities, Private medical college, Private dental college, Private engineering college or Private college engaged in imparting education on information technology Exporter of knitwear and woven garment, terry towel, carton and accessories of garments industry, jute goods, frozen food, vegetables, leather goods, packed food etc. Rate 15% 15% 15% 15% *0.60% of export proceeds
Companies Fisheries, poultry, seed production, marketing of locally produced seeds, cattle farming, dairy farming, horticulture, frog farming, sericulture, mushroom farming, floriculture (w.e.f. 1 July 2011 to 30 June 2013) *To be deducted by the banker through whom the export proceeds is received.
Rate 5%
However, rebate on income from export business and rebate/penalty for paying more/less dividend shall not apply to companies who are enjoying tax exemption or paying tax at the aforesaid reduced rates.
2.4
2.4.1
Capital gains tax

Capital gains tax on sale of shares of listed companies Capital gain from transfer of stocks and shares of public limited companies listed with stock exchange except listed govt securities (w.e.f 1 July 2010): - For companies and firm - Banks, financial institutions, merchant bank, insurance companies, leasing companies, portfolio management companies, sponsor shareholders or directors of stock dealer or stock broker company or directors of merchant banks - Other shareholders holding 10% or more at any time during the year except sponsor shareholders
10%
5% 5%
Provision that no tax shall be payable by a non-resident in respect of any profits and gains arising from the transfer of stocks or shares of a public limited company subject to the condition that the assessee is entitled to similar exemption in his country has been deleted by the Finance Act 2011. 2.4.2 Capital gains tax other than sale of shares of listed companies In the case of a company, income from capital gains will be separated from total income and tax @ 15% is payable on such capital gains regardless of the period of holding of the asset from the date of its acquisition. In the case of an assessee other than a company, if the asset is transferred before the expiry five years from the date of acquisition, the capital gains will be taxed at the usual rate applicable to the assessees total income including the capital gains. If the asset is transferred at any time after expiry of five years from the date of its acquisition, the capital gains will be taxed at the usual rate applicable to the assessees total income including the capital gains or at the rate of 15% on the amount of capital gains whichever of the two is lower.
2.5
Tax on dividend/remittance of profit

A company paying dividend shall withhold tax at the rate of 20% on dividend payable to a company and at 10% on dividend payable to a resident other than a company. Tax withholding on payment to non resident individual will be at the rate of 25%. A branch company shall withhold tax at the rate of 20% while remitting profit to Head Office. However in cases where dividend is payable to a shareholder resident in a country with which Bangladesh has signed a tax treaty, the rate mentioned in the tax treaty will apply.
2.6
Applicability of tax rates

The aforesaid tax rates will apply for the assessment year 2011-2012, unless stated otherwise.
2.7
Charge of minimum tax

Minimum tax payable of Tk. 5,000 irrespective of loss or profit of the company has been deleted by the Finance Act 2011. The new provisions are: Every company shall, irrespective of its profits or loss in an assessment year including the sustaining of a loss, the setting of a loss of earlier year or years or the claiming of allowances or deductions (including depreciation), be liable to pay tax @ 0.50% of the companys gross receipts from all sources for that year. Gross receipts meansa) All receipts derived from the sale of goods b) All fees or charges for rendering services or giving benefits including commissions or discounts c) All receipts derived from any heads of income
3.
3.1
Personal income tax

Introduction
In general, Bangladesh residents are taxed on their worldwide income. Other residents are taxed on income earned in Bangladesh irrespective of where the payment is made. There is no provision for married couples to file joint returns. Returns are to be filed by September 30 for the income year ending previous June 30. Individuals may file returns under universal self assessment scheme but the assessing officers have discretion to scrutinize the returns. Where total income exceeds Tk 400,000 during the income year for any individual, he is required to pay advance tax as either 100% of last assessed tax or 75% of current estimated income tax and pay the outstanding tax (if any) at the time of filing the return. Otherwise, tax will be payable at the time of the return. Tax on an employees salary is required to be withheld on a monthly basis by the employer.
3.2
Residence
An individual is treated as a resident of Bangladesh if that person stays in Bangladesh for 182 days or more in any income year; or 90 days or more in an income year if that person has previously resided in Bangladesh for a period of more than 365 days during the four preceding years. Residence is determined in Bangladesh purely on the period of presence in Bangladesh irrespective of residency in other countries. Short-term visitors and dependents of foreign nationals not earning any income in Bangladesh are not taxed in Bangladesh and are not required to file tax return.
3.3
Taxable Income
Taxable income is the total income earned from all sources, excluding exempt income. Foreign source income of a resident is included in his taxable income with the exception of the foreign source income of foreign nationals who are resident in Bangladesh.
3.4
Filing of tax return

Filing of tax return is compulsory for every person who resides within the limit of City Corporation or a pourashava or a district/divisional headquarter and who at any time during the relevant income year fulfils any of the following conditions: owns a building which consists of more than one story and the plinth area of which exceeds one thousand six hundred square feet; owns a motor car, jeep or microbus;
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subscribes a telephone; owns membership of a club registered under VAT Act 1991.
runs any business or profession having obtained a trade license from any City Corporation, paurashava or union parishad and operates a bank account; has registered with a recognised professional body as a doctor, lawyer, income tax practitioner, chartered accountant, cost and management accountant, engineer, architect or surveyor or any other similar profession; is a member of a chamber of commerce and industry or trade association; participates in a tender floated by the government, semi-government, autonomous body or local authority; is a candidate for an office of any union parishad, pourashava, city corporation or a Member of Parliament; in a fiscal year earns total income from all sources exceeding the minimum threshold; was assessed to tax for any one of the three years immediately preceding that income year; and is holding a Tax Identification Number (TIN). all non-government organizations (NGOs) registered with NGO Affairs Bureau
3.5
Requirement of taxpayer's Identification Number (TIN)

It has been made compulsory to obtain TIN certificate and acknowledgement receipt of income tax return and submission of same at the time of: opening a letter of credit for the purpose of import; submitting an application for the purpose of obtaining an import registration certificate; renewal of trade license; submitting any tender documents; submitting an application for membership of a club registered under the Companies Act 1994; issuance or renewal of license or enlistment of a surveyor of general insurance; registration for purchase of land, building or apartment situated within any city corporation deed value of which exceeds Taka one hundred thousand. This provision will not apply in cases of non-resident Bangladeshis; registration, change of ownership or renewal of fitness of a car, jeep or a microbus;
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registration, renewal of fitness or change of ownership of a bus, truck, prime mover, lorry etc. plying for hire; sanction of loan exceeding Taka five hundred thousand to a person by a commercial bank or a leasing company; issue of credit card; issue of practicing license to a doctor, a lawyer, a chartered accountant, a cost and management accountant or an income tax practitioner; giving connection of ISD to any kind of telephone; all sponsor directors at the time of registration of a company; applying for or renewal of membership of any trade body; Submitting a plan for construction of building for the purpose of obtaining approval from RAJUK, CDA, KDA and RDA; Issuance of drug license; applying for connection of gas for commercial use within a city corporation, paurashava or cantonment board; and applying for connection of electricity for commercial use within a city corporation, paurashava or cantonment board.
3.6
Issuance of TIN without application and re-registration
Tax Identification Number (TIN) may be issued without any application where any income tax authority has found a person having taxable income during the year and has failed to apply before issuance of the said number. Board may direct any person having a TIN to furnish such information or documents for the purpose of re-registration and thereafter issue a new Tax Payers Identification Number.
3.7
Penalty and prosecution for non-compliance

Heavy penalties have been prescribed for non-filing of tax returns within due dates as shown below:
The Deputy Commissioner of Taxes may impose penalty for the failure to file tax return by an assessee within the due date as shown below: Higher of 10% of tax imposed on last assessed income and Tk 1,000; and a further penalty of Tk 50 for every day during which the default continues.
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Where any person has without any reasonable cause failed to furnish particulars or information as required by the concern tax official, the Deputy Director General, Central Intelligence Cell or the Deputy Commissioner of Taxes may impose a penalty of Tk 25,000 and in case of a continuing default a further penalty of Tk 500 for each day of default. However discretionary power has been given to Deputy Commissioner of Taxes not to impose penalty in appropriate cases. Tk 500 and a further penalty of Tk 250 for every month during which default continues in issuing certificate of deduction of tax in prescribed form to persons from whom tax has been collected/deducted as required under section 58 of the Income Tax Ordinance or in filing of particulars of salary payments as provided in section 108 or information regarding payment of interest as provided in section 109 or information regarding payment of dividend as provided in section 110 in Income Tax Ordinance 1984.
Penalty for using fake Tax-payer's Identification Number

Where a person has, without reasonable cause, used Tax-payer's Identification Number (TIN) of another person or used fake TIN on a return of income or any other documents where TIN is required under the ITO 1984, the Deputy Commissioner of Taxes may impose a penalty not exceeding taka twenty thousand on that person.
Punishment for improper use of Tax-payer's Identification Number

A person is guilty of an offence punishable with imprisonment for a term which may extend to three years or with fine up to taka fifty thousand or both, if he deliberately uses or used a fake Tax-payer's Identification Number (TIN) or a Tax-payer's Identification Number (TIN) of another person.
Punishment for obstructing an income tax authority

A person, who obstructs an income tax authority in discharge of function, shall commit an offence punishable with imprisonment of maximum one year or with a fine, or with both.
3.8
Universal self assessment (Section 82BB)

Where an assessee furnishes a correct and complete return of income, the Deputy Commissioner of Taxes shall receive such return himself or cause to be received by any other official authorised by him and issue a receipt of such return and the said receipt shall be deemed to be an order of assessment for the assessment year for which the return is filed. A return shall be taken to be completed, if it is filed in accordance with the provisions of sub-section (2) of section 75 i.e. the return among others is furnished in the
13
prescribed form setting forth therein such particulars and information as may be required thereby including the total income of the assessee or sub-section (3) of section 75 i.e. the last date for the submission of return may be extended by the Deputy Commissioner of Taxes and tax has been paid in accordance with section 74. Tax returns filed under self assessment scheme may be selected by the National Board of Revenue or any other authority subordinate to the NBR for audit within two years from the end of the assessment year. Provided that a return of income shall not be selected for audit where such return shows at least 20% higher income than the income assessed or shown in the return of immediate preceding assessment year and1. 2. 3. 4. does not have any income which is exempted from tax; or does not have receipt of gift; or does not have loan other than from a bank or financial institution; or sum of accretion of net wealth and shown expenditure is covered by the income.
3.9
Submission of statement of Assets & Liability and Life Style

Every individual assessee is required to file a Statement of Assets & Liabilities and Life Style (personal expenditure statement) in prescribed form along with the tax return.
3.10 Tax Clearance Certificate

Every expatriate employed in Bangladesh is required to obtain a Tax Clearance Certificate from the concerned Deputy Commissioner of Taxes. This certificate may require to be produced as an evidence of tax payment/exemption at the port of departure from Bangladesh be it temporary or permanent departure.
3.11 Tax rebate on investment

An assessee shall be entitled to a rebate from the amount of tax payable if he invests during the income year in the following itemsa) b) c) d) e) f) g) h) life insurance premium contribution to approved Provident Fund (both by the employee and employer) contribution to deposit pension scheme amounting to not exceeding taka 60,000 donation to a national level institution setup in memory of the liberation war donation to a national level institution set up in memory of father of the nation donation to Prime Ministers Higher Education Fund any sum invested in Bangladesh Government Treasury Bond stocks and shares of listed companies, mutual fund and debentures listed with any stock exchange through initial public offering*
*investment rebate in stocks and shares other than through IPO has been omitted.
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A rebate of 10% against tax payable will be allowed on an investment of maximum Tk 10,000,000 or 20% of the total income whichever is lower.
3.12 Withdrawal of certain exclusions from total income

The following incomes which were excluded from total income have been withdrawn by the Finance Act 2011: a) any income upto Tk. 5,000 from interest on any securities of the Government b) any income upto Tk. 20,000 from interest on debentures approved by SEC c) any income of the mutual fund of the person issuing such mutual fund d) any income upto Tk. 25,000 received from interest on savings instrument
3.13 Withdrawal of tax exemptions of certain individual and organizations

a) any salary or remuneration of Prime Minister, Justice of supreme court, deputy chairman and members of planning commission, member of law committee. b) interest income on Wage Earners Development Bond c) any donation to Flood Relief Fund of Chief administrator of Martial Law d) any payment of bad loan by bringing money from foreign through banking channel e) exemption benefit for industry set up in KEPZ f) any foreign income brought through banking channel by a resident
3.14 Deemed income

House rent
(a) If rent free accommodation is provided to the employee, the rental value or 25% of the basic salary, whichever is less, is included in income. (b) Where the accommodation is provided to the employee at a concessional rate, the difference between the rent actually paid by him and the amount determined to be includable in the employees salary under sub rules (1) shall be added to his income. (c) Tax exempted house rent receivable in cash is Tk 15,000 per month or 50% of basic salary, whichever is lower.
Conveyance allowance
Tax exempt conveyance allowance receivable in cash is a maximum of Tk 24,000 per annum. If the employer provides conveyance for personal or private use, an amount equal to 7.5% of the employees basic salary is added with total income.
Other deemed to be income details are available in section 19 of Income Tax Ordinance 1984.
15
3.15 Deduction from income

Where a property or a portion thereof is self occupied and acquired, constructed, renewed or reconstructed with borrowed capital, the amount of any interest payable on such borrowed capital not exceeding Taka 2,000,000 (Tk two million) shall be deducted from total income of the assessee. In case the capital borrowed for the purpose is more than Taka 2,000,000 then proportionate interest on Tk 2,000,000 shall be deducted from the income of the assessee from all sources.
3.16 Special tax treatment in respect of investment in the purchase of Bangladesh Government Treasury Bond
No question regarding the source of any sum invested by any person in the purchase of Bangladesh Government Treasury Bond during the period between the first day of July, 2010 and thirtieth day of June, 2012 (both days inclusive) shall be raised if the assessee pays, before the filing of return of income for the relevant income year, tax at the rate of 10% on such sum invested with a declaration in the prescribed form. No investment rebate will be allowed for such assessee for investment in Bangladesh Govt. Treasury Bond.
3.17 Investment in share market

No question regarding the source of any sum invested in stocks and shares of listed
companies (primary and secondary market) during the period between 1st July 2011 to 30th June 2012 shall be raised if the assesee pays tax at the rate of 10% on such sum invested provided that:
(a) any person other than public limited company shall be eligible for such investment.
Tax payers such as individual, firm, private limited company shall declare such unexplained income subject to paying tax at prescribed rate.
(b) a declaration shall be given to DCT within 15 July 2012 or at the time of making
investment by the assesee in a prescribed form. In case of investment exceeding the declared investment, re-declaration shall be made on the excess amount.
(c) 10% tax shall be paid at the time of declaration made to the DCT. (d) no transfer or withdrawal of such investment shall be allowed within 30 June 2013. If
so, such withdrawal or transfer shall be deemed as income of the assessee.

(e) if any tax evasion by the assesee is found out within 30 June 2011 and action is taken
under section 93 accordingly, the assessee shall not be allowed to declare such investment.
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(f) such investment shall be shown in the statement of Assets and Liabilities of income
tax return.
(g) no investment rebate shall be allowed for such assessee for investment in stocks or
shares of listed companies through Initial Public Offering.
3.18 Imposition of tax on income from other than donation and subscription of chamber of commerce and industry, trade federation or any such business organization
Any income derived from any source other than donation or subscription by members of government approved chambers of commerce and industry, trade federation, industry and trade cooperative etc shall fall under scope of tax liability.
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4.
4.1
Corporate tax
Introduction
Every company is required to obtain a TIN and register with the VAT authorities to receive distinctive numbers. Companies have to file their tax returns within six months from the end of the accounting period/year or following July 15, whichever is later. The filing date may be extended by the tax authorities upon application. The return has to be accompanied with audited statement of accounts, computation of total income along with supporting schedules, for example depreciation schedule as per tax law, statement of profit/loss on sale of fixed assets, excess perquisite calculation statements, etc. An assessing officer verifies the filed return and may ask for information, explanation and evidences of claims made where required. Based on this, they may re-compute the total income and tax payable, and pass an order of assessment and communicate their order to assessee. An assessee who feels aggrieved may file an appeal against the order to the Commissioner of Taxes (Appeal) and against the order of the Commissioner of Taxes (Appeal) to the Taxes Appellate Tribunal. An assessee can file appeal against the order of the Taxes Appellate Tribunal only on the point of law to the Supreme Court High Court Division and then to the Appellate Division. Company means a company incorporated under the Companies Act in Bangladesh and includes:

A body corporate established or constituted by or under any law in force Any nationalized bank or industrial or commercial organization Any association or combination of persons, if any of such persons are registered as a company An association or body incorporated by or under any laws of a country outside Bangladesh Any foreign association or body which the NBR declares to be a company.
4.2
Residence
In general, a company which is incorporated in Bangladesh will be treated as a resident for tax purposes. Any company whose control and management is situated wholly in Bangladesh will also be treated as a resident for tax purposes.
4.3
Taxable income
Tax is imposed on total income from all sources after all allowable deductions. Sales revenue, fees, commissions, realized exchange gains, rents, dividends and interest received, provisions and trading liabilities not paid within three years, inadmissible expenses are included in taxable income. All expenses, including realized exchange losses and tax depreciation incurred in earning this income are allowable as deductions.
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Foreign source income of companies resident in Bangladesh is included in taxable income but credit is given for tax paid outside Bangladesh. Foreign source income of a non-resident company is not taxed in Bangladesh unless such income is brought into Bangladesh. Where a company not listed with a stock exchange, increases its paid up capital by issuing shares in an income year, the amount so received as increased paid up capital other than by crossed cheque or bank transfer, shall be deemed to be the income of the company from other sources for that income year.
4.4
Deductions of Income Tax Ordinance 1984

All expenses relating to the business operations of a company and incurred during the relevant income year are allowed as deductions. Tax depreciation on fixed assets of the company (except on cost of land) is allowed at prescribed rates as per third schedule. The cost of free samples and entertainment expenses are allowed as deductions at prescribed rates based on turnover and profit respectively or the actual amounts, whichever are lower. Provision for bad debts is not allowed. Specific provisions for accrued expenses in the relevant income year are allowed as deductions. Prepaid expenses can be carried forward and allowed as a deduction in the relevant accounting year. Liabilities for expenses which remain unpaid are added to income in the fourth year but allowed as a deduction in the year when the payments are made.
4.5
Allowable perquisites
Perquisite has been defined as follows: Perquisite means (i) any payment made to an employee by an employer in the form of cash or in any other form excluding basic salary, festival bonus, incentive bonus not exceeding 10% of the disclosed profit of the relevant income year, arrear salary, advance salary, leave encashment or leave fare assistance and overtime, and (ii) any benefit, called by whatever name, provided to an employee by an employer, whether convertible into money or not; other than contribution to a recognised provident fund, approved pension fund, approved gratuity fund and approved superannuation fund. Provided that the provision of this clause shall not be applicable to an employer where perquisites were paid to an employee in pursuance of any Government decision published in the official Gazette to implement the recommendation of a Wage Board Constituted by the Government.
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Limit of allowable perquisites has been fixed at Tk 250,000 per employee. The value of perquisites paid/provided to an employee in excess of Tk 250,000 in an assessment year shall be disallowed in company's assessment.
4.6
Deductions not admissible in certain circumstances

Certain payments will not be allowable for tax purposes as detailed below: (i) (ii) Payment of salaries if tax is not deducted; Payments from which applicable tax and VAT are not deducted and credited in accordance with tax and VAT law. (iii) Payments of royalty, technical know-how fee and technical assistance fee in excess of 8 % of net profit; (iv) Head office expenses debited in excess of the 10% of net profit; (v) Payment of salary to an employee: (vi) Any payment by way of salary or remuneration made otherwise than by crossed cheque or bank transfer by a person to an employee having monthly gross salary of Taka fifteen thousand or more; (vii) Any expenditure by way of incentive bonus exceeding 10% in aggregate of the disclosed net profit; (viii) Any expenditure by way of overseas travelling exceeding 1% of the disclosed turnover.
4.7
Donations
Any sum paid by an assessee as donation to a philanthropic or educational institutions which are approved by the Government for this purpose are exempt from tax. Such institutions have to apply to National Board of Revenue for obtaining approval. Donation to President/Prime Minister/Chief Adviser's relief fund is exempt from tax.
4.8
Amendment in Section 82C (Final tax)

The following classes of income, from which tax deducted or collected at source is under section 82C i.e. tax deducted or collected shall be treated as final discharge of tax liability: Section 52 - the amount representing the payments on account of supply of goods or execution of contracts Section 52A(2) - the amount representing the payments on account of royalty, fees for technical services Section 52AAA commission from clearing and forwarding agency business Section 52B the amount of the value of the banderols computed for purpose of collection of tax on account of the manufacture of cigarettes Section 52C the amount of compensation against acquisition of property Section 52O the amount of salaries of a foreign technician serving in a diamond cutting industry
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Section 53 the amount as computed for purpose of collection of tax in respect of goods imported, not being goods imported by an industrial undertaking as raw materials for its own consumption Section 53AA the amount received or receivable from shipping business of a resident Section 53B - the amount received on account of export of manpower Section 53BB - the amount received on account of export of certain items Section 53BBB - the amount received on account of transaction by a member of stock exchange Section 53C the amount of auction purchase Section 53CC - the amount received on account of courier business of a non-resident Section 53FF - the amount received from persons engaged in real estate or land development business Section 53G the amount or remuneration or reward, whether by way of commission or otherwise payable to an insurance agent Section 53GG the amount representing the payment on account of survey by surveyor of a general insurance company Section 53H - the amount of the value of the property Section 53L the premium received from raising of share at a premium over face value Section 53M income derived from transfer of securities or mutual fund units by sponsor shareholders of a company Section 55 the amount on account of winnings
Such tax shall not be adjusted against refund due from earlier year or years. Income from such sources shall be determined on the basis of the tax deducted or collected at source and the rate or rates of taxes applicable for the assessment year. Income computed as per above shall not be set off with loss computed under any other source for the assessment year or earlier years. Income shown in excess of deemed profit shall be liable to tax payable. In computing income on excess profit, inadmissible allowances under section 30 shall be added to the income.
4.9
Amendment in Third Schedule

Depreciation on physical infrastructure like road, bridge and flyover built under private public partnership (PPP) is allowable from the assessment year 2011-12 Applicable rates are as follows: i) Bridge ii) Road iii) Fly over 2% 2% 2%
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4.10 Capital gains

Please refer to section 2.4.
4.11 Income from other sources

Under section 19(24) of the Income Tax Ordinance, 1984 Where an assessee, being a private limited company or a public limited company not listed with a stock exchange, increases its paid up capital by issuing shares in an income year, the amount so received as increased paid up capital, not being received by crossed cheque or bank transfer, shall be deemed to be the income of such assessee for that income year classifiable under the head "Income from other sources. Where any sum, shown as initial capital of business or profession in return of income filed under section 82BB, is transferred by a person partly or fully within the period of limitation stipulated in the said action, the sum so transferred shall be deemed to be his income for the year in which sum was transferred and shall be classified as under the head Income from other sources. Where an assessee, being a company, receives any amount as loan from any other company otherwise than by a crossed cheque or by bank transfer, the amount so received shall be deemed to be the income of such assessee for that income year in which such loan was taken and shall be classified under the head Income from other sources. Where an assessee, being a company, purchases directly or on hire one or more motor car or jeep and value of any motor car or jeep exceeds 10% of its paid up capital, then 50% of the amount that exceeds such 10% of the paid up capital shall be deemed to be the income of such assessee for that income year under the head Income from other sources. This is applicable for each vehicle.
4.12 Losses
Losses can be carried forward for a maximum period of six years, but cannot be carried back. Unabsorbed tax depreciation can be carried forward indefinitely. Foreign sourced losses of a Bangladesh entity cannot be offset against the Bangladesh profits of that entity. Capital losses can only be offset against capital gains. As with trading losses, unabsorbed capital losses can only be carried forward for up to six years.
4.13 Advance tax payment

Advance tax payment is required by an assessee on the basis of the last assessed income or provisionally assessed income if his total income exceeds Tk 400,000. New assessees will also be required to pay advance tax if their estimated income is likely to exceed Tk
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400,000. Here total income excludes agricultural income and capital gain except gain from transfer of share of a company listed with a stock exchange. Advance tax is to be paid in four equal instalments on 15 September, 15 December, 15 March and 15 June of the financial year for which the tax is payable. In case of failing to pay advance tax, simple interest shall be charged on the amount by which the tax as so paid falls short of the said 75% of the assessed tax.
4.14 Tax filing and tax payment

Filing of tax return within due date and payment of due taxes have been made compulsory for any organisation who has obtained a Taxpayers Identification Number (TIN). It is also compulsory for all companies, businesses and professional firms, joint ventures, all registered NGOs, universities and educational institutions run commercially to file tax returns and pay taxes within due dates.
4.15 Return of withholding tax

Every person shall file return of withholding tax collected or deducted quarterly accompanied by withholding statement along with copy of treasury challans or payment orders. Such return shall be filed within 15th of October, January, April and July for concerned period to the concerned circle. The time for submission of such return may be extended by DCT upon application for maximum 15 days. For failure of filing such return, penalty u/s 124 will be imposed. If any inconsistency regarding deduction of taxes at source is found, the Board may enter the premises of a deducting authority to monitor or verify books of accounts.
4.16 Annual Information Return

Government may require any person or group of persons responsible for registering or maintaining books of accounts or other documents containing a record of any specified financial transaction to furnish an Annual Information return in a prescribed form.
4.17 Concurrent jurisdiction

Board may direct any other authority to exercise concurrently the power and functions of Deputy Commissioner of Taxes in respect of all or any proceeding relating to receiving of return of income and issuance of acknowledgement.
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4.18 Penalty for non-compliance

Heavy penalties are prescribed for non-filing of tax returns within due dates as shown below:
The Deputy Commissioner of Taxes may impose penalty for the failure to file tax return by an assessee within the due date as shown below: Higher of 10% of tax imposed on last assessed income or Tk 1,000 and a further penalty of Tk 50 for every day during which the default continues.
Where any person has without any reasonable cause failed to furnish particulars or information as required by the concern tax official, the Deputy Director General, Central Intelligence Cell or the Deputy Commissioner of Taxes may impose a penalty of Tk 25,000 and in case of a continuing default a further penalty of Tk 500 for each day of default. However discretionary power has been given to Deputy Commissioner of Taxes not to impose penalty in appropriate cases.
Tk 500 and a further penalty of Tk 250 for every month during which default continues in issuing certificate of deduction of tax in prescribed form to persons from whom tax has been collected/deducted as required under section 58 of the Income Tax Ordinance or in filing of particulars of salary payments as provided in section 108 or information regarding payment of interest as provided in section 109 or information regarding payment of dividend as provided in section 110 in Income Tax Ordinance 1984. Penalty for using fake Tax-payer's Identification Number Where a person has, without reasonable cause, used Tax-payer's Identification Number (TIN) of another person or used fake TIN on a return of income or any other documents where TIN is required under this Ordinance, the Deputy Commissioner of Taxes may impose a penalty not exceeding Tk 20,000 on that person.
Punishment for improper use of Tax-payer's Identification Number

A person is guilty of an offence punishable with imprisonment for a term which may extend to three years or with fine up to Tk. 50,000 or both, if he deliberately uses or used a fake Tax-payer's Identification Number (TIN) or a Tax-payer's Identification Number (TIN) of another person.
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Punishment for obstructing an income tax authority

A person, who obstructs an income tax authority in discharge of function, shall commit an offence punishable with imprisonment of maximum one year or with a fine, or with both.
4.19 Assessment
Assessment of companies may be completed under provisional assessment, assessment on correct return or universal self assessment. The most common mode of assessment is universal self assessment scheme.
4.20 Universal self assessment scheme

Universal self assessment scheme has been introduced for all companies under a new section 82BB of the Income Tax Ordinance 1984 by the Finance Ordinance 2007. Under universal self assessment scheme an assessee including a company, either manually or electronically, may furnish a correct and complete return of income other than under provision of section 82, the Deputy Commissioner of Taxes shall receive such return himself or cause to be received by any other official authorised by him and issue a receipt of such return manually or electronically and the said receipt shall be deemed to be an order of assessment for the assessment year for which the return is filed. A return shall be taken to be complete if it is filed in accordance with the provisions of sub-section (2) or (3) of section 75 i.e., the return is to 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 and signed and verified by a competent authority and filed within the due date and paid all due taxes before filing the return. Any such return may be selected by the National Board of Revenue for audit by the Deputy Commissioner of Taxes. Provided that a return of income shall not be selected for audit where such return shows at least 20% higher income than the income assessed or shown in the return of the immediate preceding assessment year anda) does not have any income which is exempted from tax; or b) does not have receipt of gift; or c) does not have loan other than from a bank or financial institution; or d) sum of accretion of net wealth and shown expenditure is covered by the income No question regarding the source of investment shall be raised, if a new assessee shows income at least 25% of the capital invested in business or profession. However, the initial capital investment or any fraction thereof shall not be transferred or lent out within five years from the end of the assessment year.
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The Deputy Commissioner of Taxes may extend the date up to three months from the specified date and he may further extend the date up to three months with the approval of the Inspecting Joint Commissioner. Time limitation for disposal of universal self assessment cases is two years from the end of assessment year in which the income was first assessable. So, all such cases will be time barred after two years from the end of the assessment year.
4.21 Appeals
An assessee who feels aggrieved may file an appeal against the order to the Commissioner of Taxes (Appeal) and against the order of the Commissioner of Taxes (Appeal) to the Taxes Appellate Tribunal. An assessee can file appeal against the order of the Taxes Appellate Tribunal only on the point of law to the Supreme Court High Court Division. An appeal can further be filed to the Appellate division if High Court Division certifies to be a fit one for appeal The first appeal before the Commissioner of Taxes (Appeal) shall have to file within 45 days of the date of received of assessment order. The time limit for second appeal is 60 days from the date of receiving of first appeal order. The first and second appeal shall be disposed of by the appellate authority within 150 days and 180 days respectively from the end of the month at which the appeal was filed. An assessee can file appeal against the order of the Taxes Appellate Tribunal only in the area of law to the High Court Division of Supreme Court within 90 days from the date of receiving tribunal order. If the assessee is aggrieved with the decision of High Court Division, he may appeal to the Appellate Division of Supreme Court. There is no time limit for disposal of appeal to Supreme Court. No appeal shall be filed to the Appellate Tribunal unless the assessee has paid 10% which was 5% previously of the amount representing the difference between the tax as determined on the basis of the order of the Appellate Joint Commissioner or Commissioner of Taxes (Appeals) and the tax payable u/s 74. Provided that the Commissioner of Taxes (Appeals) may reduce the requirement of such payment upon application by the assessee if the grounds of such application appears reasonable to him. No reference shall lie against an order of the Taxes Appellate Tribunal unless the assessee has paid the following tax at the rate ofa) 25% of the difference between the tax determined by the Appellate Tribunal and the tax payable u/s 74 where tax demanded does not exceed one million taka b) 50% of the difference between the tax determined by the Appellate Tribunal and the tax payable u/s 74 where tax demanded exceeds one million taka
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4.22 Submission of certain return

Companies are required to submit the following returns to the Deputy Commissioner of Taxes before the first day of September each year:

Information regarding the payment of salary Information regarding the payment of interest Information regarding the payment of dividend
4.23 Power of search and seizure

Under section 117 of the Ordinance, an officer may extract data or any inputs stored in the electronic system or enter system by breaking through password protection or analyze data, books of accounts etc.
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5.
5.1
Tax incentives
Partial tax exemption for newly established industrial undertakings
Qualifying industrial undertaking set up between 1st day of July 2011 and 30th June 2013 and going into commercial production/operation within those dates will be entitled to apply for granting tax exemption. Tax exemption of different proportions will now be granted for 5 years if the said undertakings are set up in Dhaka and Chittagong divisions excluding Dhaka, Narayangonj, Gazipur, Chittagonj, Rangamati, Bandarbon and Khagrachari districts, for a period of 7 years if the said undertakings are set up in Rajshahi, Khulna, Sylhet and Barisal divisions and Rangamati, Bandarbon and Khagrachari districts. Exemption % of income 100% 50% 25% 100% 50% 25%
Area Dhaka and Chittagong divisions excluding Dhaka, Narayangonj, Gazipur, Chittagonj, Rangamati, Bandarbon and Khagrachari districts Rajshahi, Khulna, Sylhet and Barisal divisions and Rangamati, Bandarbon and Khagrachari districts
Year First and second year Third and fourth year Fifth year First, second and third year Fourth, fifth and sixth year Seventh year
Industrial undertaking does not include expansion of an existing undertaking for the purpose of this section. In other words, expansion units will not qualify for tax exemption. The following undertakings only will qualify for tax exemption: a) "industrial undertaking" means an industry engaged in the production of active pharmaceuticals ingredient industry and radio pharmaceuticals industry, barrier contraceptive and rubber latex, basic chemicals or dyes and chemicals, basic ingredients of electronic industry, Bio-fertilizer, Bio-technology, boilers, compressors, computer hardware, energy efficient appliances, insecticide or pesticide, petro-chemical, pharmaceuticals, processing of locally produced fruits and vegetables, radioactive application industry, textile machinery, tissue grafting and any other category of industrial undertaking as the Government may by notification in the official Gazette specify; b) only those profits and gains of the said industry shall qualify for tax exemption which are within the purview of section 28, Income from business or profession, of the Income Tax Ordinance, 1984.
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c) The newly established undertaking is required to ensure that their paid up capital is not less than two million and thirty per cent of the income exempted is invested in the said undertaking or in any new industrial undertakings during the period of exemption or within one year from the end of the period to which the exemption under that sub-section relates and in addition another 10% of the income exempted is invested in each year before the expiry of three months from the end of the income year in the purchase of shares of a company listed with any stock exchanges in Bangladesh, failing which the income so exempted shall, notwithstanding the provisions of this Ordinance, be subject to tax in the assessment year in which the undertaking failed to comply with the provision. Provided that the quantum of investment referred to in this clause shall be reduced by the amount of dividend, if any, declared by the company enjoying tax exemption under this section. d) The undertaking has to apply in prescribed form for approval within six months from the end of the month of commencement of commercial production and be approved by the Board for this purpose. e) The undertaking need to obtain a clearance certificate from the Directorate of Environment and the undertaking has to maintain books of account on a regular basis and submits income tax return under section 75 of the ordinance.
5.2
Partial tax exemption for newly established physical infrastructure facility

Qualifying physical Infrastructure set up between 1st day of July 2011 and 30th June 2013 and going into commercial production/ operation within those dates will be entitled to apply for granting tax exemption. Tax exemption of different proportion will now be granted for 10 years if the said physical undertakings are set up in any area of Bangladesh. Year For the first five years (first, second, third, fourth and fifth year) For the next three years (sixth, seventh and eighth year) For the last two years (ninth and tenth year) Exemption % of income 100% 50% 25%
Physical Infrastructure facility" means an industry engaged in the production of deep sea port, elevated expressway, export processing zone, flyover, gas pipe line, Hi-tech park, information technology village or software technology zone, information technology park, large water treatment plan and supply through pipeline, LNG terminal and transmission line, mono-rail, rapid transit, renewable energy, sea or river port, toll road, underground rail, waste treatment plan or any other category as the Government may by notification in the official Gazette specify;
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a) Only those profits and gains of the said industry shall qualify for tax exemption which is within the purview of section 28, Income from business or profession, of the Income Tax Ordinance, 1984. b) The newly established undertaking is required to ensure that their subscribed and paid up capital is not less than two million and thirty per cent of the income exempted is invested in the said undertaking or in any new industrial undertakings during the period of exemption or within one year from the end of the period to which the exemption under that sub-section relates and in addition another 10% of the income exempted ) is invested in each year before the expiry of three months from the end of the income year in the purchase of shares of a company listed with any stock exchanges in Bangladesh, failing which the income so exempted shall, notwithstanding the provisions of this Ordinance, be subject to tax in the assessment year in which the undertaking failed to comply with the provision. c) Provided that the quantum of investment referred to in this clause shall be reduced by the amount of dividend, if any, declared by the company enjoying tax exemption under this section. d) The undertaking has to apply in prescribed form for approval within six months from the end of the month of commencement of commercial production and be approved by the Board for this purpose. e) The undertaking need to obtain a clearance certificate from the Directorate of Environment and the undertaking has to maintain books of account on a regular basis and submits income tax return under section 75 of the ordinance.
5.3
Income from exports

50 % of income derived by any taxpayer from export shall be exempt from tax, except for a company not incorporated in Bangladesh and company paying tax at a reduced rate.
5.4
Export Processing Zones

Income of industries set up in any Export Processing Zones is exempt from tax for a period of 10 years from the month in which commercial production commences. This exemption has been amended from 1st July 2012 to a period of 5 years as follows: a) 100% income will be tax exempted up to 2 years from the commencement of commercial production b) 50% income will be tax exempted for 3rd and 4th year c) 25% income will be tax exempted for 5th year d) proper books of accounts must be maintained e) income tax return has to be submitted as per section 75 of ITO 1984
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In addition, such industries will enjoy exemption at 50% of tax on income attributable to export sales after the expiry of the tax exemption period.
5.5
Dividend income of non-resident shareholders received from companies set-up in Export Processing Zones
Dividend income received by non-resident shareholders from companies set-up in the Export Processing Zones will be exempt from tax during the tax exemption period. Such dividend income shall continue to enjoy exemption after the tax exemption period if the dividend income is reinvested in the same project.
5.6
Income from the business of software development and information technology enabled services (ITES)
Income derived from the business of software development and information technology enabled services (ITES) is to be tax exempt for the period from the 1st July 2008 to 30th June 2013. However those enjoying the exemption must have to file tax return annually disclosing the income along with income from other sources, if any. Information Technology Enabled Services (ITES) means digital content development and management, animation, geographic maintenance service, website services, business process outsourcing, data entry, data processing, call centre, graphic design, search engine optimization, web listing, e-commerce and online shopping, document conversion, imaging and archiving.
5.7
Income from poultry farming

Any income derived from poultry farming for the period from the first day of July 2011 to the 30th of June, 2013 will be exempted from tax subject to the following conditions: a) if such income exceeds taka 1,50,000/-, an amount not less than 10% of the said income shall be invested in the purchase of bond or securities issued by government within six month from the end of the income year b) the person shall file income tax return under section 75 c) no such income shall be transferred by way of gift or loan within five years from the end of income year
5.8
Incentives for private sector power generation companies

Private power companies are exempt from corporate tax for a period of 15 years from the date of commencement of commercial operations if it starts its commercial production before 30 June 2013. Salaries of expatriate employees of such power generating companies shall also be tax exempt for a period of three years, starting with the date of the expatriates arrival in Bangladesh.
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The companies will be allowed to import plant, equipment and spares without payment of custom duties, VAT, import permit fees and any surcharges. Interest payments to foreign lenders will be tax exempt. Royalties and technical assistance fees paid by such companies will also be tax exempt and repatriation will be allowed without restriction. Capital gains from the sale or transfer of shares by the investing company shall be exempt from tax. Private power generation companies whose commercial production will commence on 1st July 2013 or afterwards shall get exemption from income at following ratesRate of tax exemption 100% 50% 25%
Tax exempted period First 5 years from the commencement of commercial production Up to next 3 years Up to next 2 years -
All such companies shall maintain accounts and submit return in due date of filing under section 75.
5.9
Expansion of the area of CSR activity to get tax rebate

[SRO no. 229-law/Income tax/2011 dated 04/7/2011] National board of revenue has issued a SRO 229-law/Income tax/2011 by annulling previously issued SRO 270-Law/2009 dated 15 January 2009 wherein it has been stated that a company will be eligible to a tax rebate @ 10% of allowable limit incurred in connection with corporate social responsibility subject to the following terms and conditions: a) any company will be allowed to get rebate on investment in CSR amounting to 20% of income of the company or Tk. 8 crore, whichever is lower b) any company who intends to get rebate through CSR shall make regular payment of salaries and wages to its employees, have waste treatment plant, make regular payment of tax, VAT and institutional loan, donate to Organizations approved by the Government and comply with all existing provisions of Labour Code. c) any company shall not show amount expended in CSR as inadmissible expenditure in its trading account or profit and loss account d) any company shall submit necessary information and documents to the Deputy Commissioner of Taxes regarding the amount expended in CSR as demanded allowable is actually expended or not. e) the company shall have to submit at NBR the plan on CSR activities adopted to obtain tax rebate certificate
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The following are the areas of CSR for which company could avail tax rebate facilities: a) b) donation made to natural disaster affected people through government organization donations made to institution engaged in establishment and maintenance of old home c) donations made to social institution engaged in the welfare of mentally or physically disabled people d) donations to organizations engaged in educating street children e) donations to organizations engaged in projects on accommodation for the slum dwellers f) donations to social institutions engaged in campaign for women rights and against dowry system g) donations made to institution engaged in maintenance and rehabilitation of orphan/rootless children h) donations made to institutions engaged in research on liberation war, expansion of the consciousness of independence war and the act of honorable living of the freedom fighters i) donations made to institutions engaged in sanitation and sewerage work at Chittagong Hill Districts, char areas and areas surrounding breaking up of banks of river j) donation made to institution engaged in medicating cleft leap, cataract, cancer and leprosy k) donation made to person or institution engaged in treatment of acid affected people l) donation to specialized hospital [like cancer hospital, lever hospital, kidney hospital, thalasemia hospital, eye hospital and cardiology hospital] for free treatment to poor patient m) donation to public universities n) donation to government approved educational institution for giving stipend to insolvent meritorious freedom fighters children with a view to providing technical or vocational education to them o) any assistance made to schools and colleges under MPO for improving computer and English education p) donations to organizations engaged in providing technical and vocational training to unskilled or semi-skilled labor for export of human resources q) donations made to national sports institutions engaged in the development of infrastructure and training at national level; r) any contribution to museum made for freedom fighter at national level s) any contribution to organization engaged in the preservation of the memories of the Father of the Nation t) any donation to Prime Ministers Higher Education Fund
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6.
6.1
Others amendments
Alternative Dispute Resolution (Section 152F)
Finance Act 2011 has made amendment regarding resolution of dispute. Any dispute of an assessee lying with any income tax authority, Taxes Appellate Tribunal or Court may be resolved through Alternative Dispute Resolution (hereinafter referred to as ADR) in a manner described in the following section of chapter xviiiB and rules may there under (section 152A). An assessee shall not be eligible for application to ADR if he fails toa) submit the return of income for the relevant year or years b) pay tax payable under section 74 (section 152J)
6.2
Ordinance to override other laws

Notwithstanding anything contained in any other law for the time being in force, the provisions of this ordinance or any proceedings thereunder shall prevail over any other law in respect of tax on income and exemptions of tax thereof.
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7.
Tax withholding/deduction/collection A comprehensive list

Income subject to tax withholding/deduction/collection at source All companies including private companies, branch companies, liaison offices, banks and other financial institutions etc. are required to collect/withhold tax at the time of payment as shown hereunder: Salaries (u/s 50) Tax withholding should be made monthly on the basis of computation of estimated annual total income. Refer to section 2 for tax rates. Discount on the real value of Bangladesh Bank bills (u/s 50A) Taxes are to be deducted at the maximum rate or at the rate applicable to such amount, whichever is greater. No tax shall be deducted from the discount received from these bills purchased by a superannuation fund, a pension fund, a gratuity fund, a recognised provident fund or a workers profit participation fund. Remuneration of Member of Parliament (u/s 50B) Taxes are to be deducted at source from remuneration paid to Members of Parliament at average rate but other allowances paid like bonus, house rent will remain tax-free. Interest/discount on govt. securities and securities approved by the govt. (u/s 51) Tax withholding has to be done at 10% on interest/discount on such securities. This rate will apply on securities purchased on or after 1st July 2005. Tax will be collected at the time of sale of such securities. However deduction of tax at source or collection upfront shall not apply on interest on Treasury Bond or Treasury Bill issued by the Government. Tax on discount/interest on such securities purchased prior to 1st July 2005 will continue to be withheld at 20% and collection will be done at the time of payment of interest/discount.
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Payments for supply of goods, execution of contracts (u/s 52, rule 16) Where any payment is to be made whether in full or part or by way of advance, on account of supply of goods, execution of contracts and sub-contracts, tax is to be withheld from such payments. Withholding at prescribed slab rates are as follows:
Where the payment does not exceed Tk 200,000 Where the payment exceeds Tk 200,000 but does not exceed Tk 500,000 Where the payment exceeds Tk 500,000 but does not exceed Tk 1,500,000 Where the payment exceeds Tk 1,500,000 but does not exceed Tk 2,500,000 Where the payment exceeds Tk 2,500,000 but does not exceed Tk 30,000,000 Where the payment exceeds Tk 30,000,000
Rates Nil 1.0% 2.5% 3.5% 4.0% 5.0%
In case of oil supplied by oil marketing companies:

Where the payment does not exceed Tk 200,000 Where the payment exceeds Tk 200,000 (up to any amount) Nil 0.75%
Indenting Commission (u/s 52, rule 17) Deduction from indenting commission has been prescribed at 7.5% on the total receipts of commission.
Shipping agency commission (u/s 52, rule 17) Deduction from shipping agency commission has been prescribed at 5 % on the total amount of commission.
Fees for professional or technical services or royalty (u/s 52A) Taxes are to be withheld @ 10% on fees for professional and technical services, technical assistance fee paid to lawyers, engineers, architects, accountant, management consultant, interior decorator or for advertisement purposes, on payment of royalty, technical know-how fee. While tax deducted from professional and technical services, technical assistance will be treated as advance tax, tax deduction from royalty and technical know-how fee will be treated as final tax u/s 82C. No deduction need to be made in cases where National Board of Revenue has issued a certificate waiving such deduction or exemption has been granted through S.R.O.
Payment of fees to doctors (u/s 52A) Any company registered under the Companies Act 1913 or 1994 or any nongovernment organisation registered with the NGO Affairs Bureau or any trust registered under the Trusts Act 1882 running any general or specialised hospital or
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any diagnostic centre shall be responsible to deduct tax at the rate of 10% from the payment of fees to any doctor which may be payable to him on account of fees for services rendered by him to a patient in such hospital or diagnostic centre. Deduction from the payments to stevedoring agency and private security services agency (u/s 52AA) This section provides for deduction of tax at source at 10% from payment of commission to stevedoring agency or making any payment to private security service agency. Any company making any payment to private security services providers shall withhold tax at the rate of 1.5% on the basis that 15% of the receipts are treated as income of the security service agency. In case of any payment made for any services other than u/s 52, 52A, 52AAA, 52M, 52O, 53D, 53GG will be included under this section 52AA and tax has to be deducted @ 10% Collection of tax from clearing and forwarding agents (u/s 52AAA) This section provides for deduction on account of commission receivable by clearing and forwarding agents licensed under Customs Act 1969 @ 10%. The collection will be made by the Commissioner of Customs at the time of clearance of goods imported or exported. Cigarette manufacturers (u/s 52B) Seller of banderols is liable to collection of tax @ 6.0% of the value of banderols. The seller will collect the tax from the manufacturer of cigarettes. The tax so collected shall be treated as final discharge of tax liability under section 82C. Compensation against acquisition of property (u/s 52C) Payment on account of compensation against acquisition by the Government of any immovable property is liable to deduction of tax at the rate of (a) 2% of the amount of compensation where the immovable property is situated in any city corporation, paurashava or cantonment board; (b) 1% of the amount of compensation where the immovable property is situated outside any city corporation, paurashava or cantonment board. Interest on savings instruments (u/s 52D) Taxes are to be deducted at source @ 5.0% on the interest on savings instruments. Interest received on savings instruments shall be included in the total income of the recipient. This rate will be applicable for saving instrument purchased on 1 July 2011
37
or afterwards. This rule will be applicable for Pensioner Sanchayapatra and Paribar Sanchayapatra purchased on 1 July 2011 or afterwards. No deduction to be made if the saving instrument is purchased by any approved superannuation fund or pension fund or gratuity fund or any recognized provident fund or any workers profit Participation fund. Brick manufacturers (u/s 52F) Any person responsible for issuing any permission or renewal of permission for the manufacture of bricks shall collect tax from the manufacturer at the following rates: (a) Tk 30,000 for one section brick field; (b) Tk 45,000 for two section brick field; (c) Tk 60,000 for three section brick field. Commission on opening of letter of credit (u/s 52I) Taxes are to be deducted @ 5% by banks at the time of collection of L.C. commission. Banks are required to deposit all taxes deducted by the 15th of the following month to Bangladesh Bank under appropriate head of accounts. The amounts so deposited will be treated as advance tax payment by the banks. Issue or renewal of trade licence (u/s 52K) City Corporation shall collect tax @ Tk 500 while issuing or renewing trade licence. The tax so collected shall be adjusted against tax payable by the recipient of licence. Collection of tax from freight forwarding agency commission (u/s 52M) Tax is to be withheld @ 5% from commission payable to freight forwarding agency. Tax so withheld shall be adjusted against tax payable by the assessee. Collection of tax on account of rental power (u/s 52N) Tax is to be withheld @ 4% by Bangladesh Power Development Board from the payment to any rental power company on account of purchase of rental power from the date of its operation in Bangladesh. Collection of tax from a foreign technician serving in diamond cutting industries (u/s 52O) Tax is to be withheld @ 5% from salaries of a foreign technician employed in diamond cutting industries for a period of three years from the date of his arrival in Bangladesh. The appointment is to be completed by 30 June 2010.
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Collection of tax from rent of convention hall, conference center (u/s 52P) Tax is to be withheld @ 5% from rental payment to institutions like convention hall, conference centre, hall room, hotel, community centre or restaurant. Provided that no deduction shall be made when such amount is paid directly to the Government.
Collection of tax from service charge and consultancy fee (u/s 52Q) If any Bangladeshi resident provides service to any foreigner, tax should be deducted at source from the payment received against this service. Bank should withhold tax @ 10% before the money credited in the account. Conditions applyPerson rendering the service has to reside at Bangladesh at the time of rendering the service. Service should be rendered to any foreigner. Payment should be received against the service rendered. The payment is received in any of the following name service charge, consultancy fees, commission, honourium or any other name.
But payment received for service rendered outside the country is excluded from this section. Collection from importers (u/s 53, rule 17A) The Collector of Customs or any other appropriate officer shall collect tax on imported items @ 5% of the value of imported goods, not being goods imported by an industrial undertaking as raw materials for its own consumption. The tax so collected shall be treated as final discharge of tax liability under section 82C. National Board of Revenue may grant exemption from tax collection upon application where the assessees income is not taxable in any year. Rent from house property (u/s 53A, rule 17B) House rent means any payment, by whatever name called, under any lease, tenancy or any other agreement for the use of any building including any furniture, fittings and the land appurtenant thereto. Taxes are to be withheld at the following rates:
Where the monthly payment does not exceed Tk 20,000 Where the monthly payment exceeds Tk 20,000 but does not exceed Tk 40,000 Where the monthly payment exceeds Tk 40,000 Nil 3% 5%
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Shipping business of a resident (u/s 53AA) This section provides for deduction of tax at 5% from total freight received or receivable by a ship owned or chartered by a resident assessee. The rate will be 3% if service is rendered between two or more foreign countries. The deduction will be made by the Commissioner of Customs at the time of granting port clearance. The deduction so made shall be treated as final tax liability under section 82C of the I.T. Ordinance.
Export of manpower (u/s 53B, rule 17C) Taxes are to be withheld @ 10% from the payment of service charges or fees.
Export of certain items (u/s 53BB) Taxes are to be withheld by banks @ 0.6% from the amounts of export proceeds received on account of exporters of knitwear and woven garments, terry towel, carton and accessories of garments industry, jute goods, frozen food, vegetables, leather goods and packed food. Tax so collected shall be treated as final tax liability of the exporter with certain exceptions under section 82C of the I.T. Ordinance.
Member of Stock Exchanges (u/s 53BBB) Taxes are to be withheld at 0.10% on the value of shares, debentures, mutual funds, bonds or securities transacted by a member of a stock exchange. The deduction will be made by the Chief Executive Officer of a stock exchange at the time of such payment. The tax so collected shall be treated as final tax liability of the members under section 82C of the I.T. Ordinance.
Export of any goods other than certain items (u/s 53BBBB) Any export proceeds received from export of any products other than garments will be subject to tax withholding at 0.7%. The tax so withheld shall be treated as advance payment of tax liability. A company enjoying tax exemption either wholly or partially may apply to tax authority and on the basis of his application the tax authority may exempt from deduction at source or give order to withhold at a reduced rate.
Public auction (u/s 53C, rule 17D) Taxes are to be withheld from sale price at the rate of 5.0%.
Courier business of a non resident (u/s 53CC) A company working as a local agent of a non resident courier company shall deduct or collect tax in advance at the rate of 15% on the amount of service charge accrued
40
from the shipment of goods, documents, parcels or any other thing outside Bangladesh. The tax so withheld shall be treated as final discharge of tax liability. Actors or actresses (u/s 53D, rule 17E) Taxes are to be withheld @ 10% in case of any payment made for the purchase of any Cinema, Drama or Radio and TV programme by any authority. In case of any payment made to an actor/actress, tax is to be withheld at the rate of 10% from such payment regardless of the amount. Commission, discount or fees payable to distributors for distribution or marketing of manufactured goods (u/s 53E) Taxes are to be withheld @ 10% from payment of commission or fees or discount for distribution or marketing of goods manufactured, at the time of credit of such commission or fees or discount or at the time of payment thereof, whichever is earlier. Commission, fees, charges, remuneration payable to foreign buyers agent (u/s 53EE) If any payment is made to a foreign buyers agent as per terms of L.C. as fees, commission etc. then tax is to be withheld @ 7.5% from such payment. Interest on savings, fixed deposits or term deposits and share of profit on term deposits (u/s 53F, rule 17H) Taxes are to be withheld by banks, non banking financial institutions, leasing companies, housing finance companies etc @ 10% from interest or share of profit at the time of payments to a resident. No tax shall be deducted on the amount of interest or share of profit arising out of any deposit pension scheme sponsored by the Government or by a Scheduled Bank with prior approval of the Government. Real estate or land development business (u/s 53FF) Taxes are to be collected at the following rates at the time of registering any document for transfer of any land or building or apartment by the transferor who is engaged in real estate or land development business:
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In case of building or apartment situated Area At Gulshan, Banani, Baridhara, Motijeel and Dilkusha Defense Officers Housing Society (DOHS), Dhanmondi, Mohakhali, Lalmatia, Uttara, Bashundhara,Dhaka Cantonment, Karwan Bazar and Khulshi, Panchlaish, nasirabad and Agrabad of Chittagong In any other areas For resident Tk 2,000 per square meter Tk 1,800 per square meter For non-resident Tk 8,000 per square meter Tk 6,000 per square meter
Tk 800 per square meter
Tk 2,000 per square meter
a) 2% of deed value from September 1, 2009 in case of property situated in any city corporation, paurashava or cantonment board. b) 1% of deed value from September 1, 2009 in case of property situated in places other than any city corporation, paurashava or cantonment board. The tax so collected shall be treated as final tax liability of the business u/s 82C. Insurance commission (u/s 53G) Tax has to be withheld @ 5% on commission paid to an agent. Surveyors of general insurance company (u/s 53GG) Taxes @ 15% is to be deducted from remuneration or fees paid to a resident surveyor engaged for conducting survey in connection with settlement of insurance claim. Collection of tax on transfer, etc of property (u/s 53H) The registering authority while registering a document shall collect income tax from the transferor on the value of the land, building which the document of transfer relates to and on which stamp duty is chargeable under Stamp Act 1899. The tax so collected shall be treated as final tax liability u/s 82C. Collection of tax shall apply to the following: @ 2% for transfer of any asset whether agricultural or Non-agricultural in the area of Dhaka, Narayangonj, Chittagong development authority, Rajshahi development authority, Khulna development authority, City corporation, pouroshova or Cantonment board area. In any other area, @ 1% for transfer of any Non-agricultural asset and No collection of tax should apply in case of transfer of agricultural asset.
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Collection of tax shall not apply to the following: i) ii) iii) iv) sale by a bank or any financial institution as a mortgagee empowered to sell; mortgage of any property to the Bangladesh House Building Finance Corporation against loan; mortgage to any bank of any property; transfer of any agricultural land in Bangladesh, not being land situated within municipal etc. areas and not situated within a distance not more than 5 miles from the local limits of municipality etc. [land as defined in section 2(15)(c)(i) or (ii)]. transfer of any non-agricultural land valued at a sum not exceeding one lakh taka, situated outside the jurisdiction of any City Corporation, Pourashava or Cantonment Board.
v)
Financial institution shall mean the Bangladesh House Building Finance Corporation, the Bangladesh Development Bank. Interest on deposits of Post Office Saving Bank Account (u/s 53I) Tax is to be withheld @ 10% from interest of Post Office Savings Bank Account. Rental value of vacant land or plant or machinery (u/s 53J, rule 17BB) Taxes are to be withheld at the time of payment or crediting service provider at the following rates:
Where the monthly payment does not exceed Tk 15,000 Where the monthly payment exceeds Tk 15,000 but does not exceed Tk 30,000 Where the monthly payment exceeds Tk 30,000 Nil 3% 5%
Advertisement of newspaper or magazine or private television channel (u/s 53k) Taxes are to be withheld @ 3% from the advertising bill of newspaper or magazine or private television channel.
Sale of share at a premium over face value (u/s 53L) The Securities & Exchange Commission (SEC) is to be collect tax @ 3% on share premium when a company raises its share capital through book building 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.
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Transfer of share by sponsor shareholders of a company listed with stock exchange (u/s 53M) The Securities & Exchange Commission (SEC) is to be collect tax @ 5% on the difference between transfer value and face value of the share(s) at the time of transfer shares of a sponsor shareholder or director of a company listed with a stock exchange. 'transfer' includes transfer under a gift, bequest, will or an irrevocable trust; transfer value' shall be deemed to be the value of shares based on the closing price of shares prevailing on the day of consent accorded by the Securities & Exchange Commission or the Stock Exchange, as the case may be, or where such shares were not traded on the date of such consent, the closing price of the last day when such shares were traded.
Deduction from dividend payments (u/s 54) The principal officer of a company shall deduct tax at the time of payment of dividend to a shareholder at the following rates (a) if the shareholder is a resident assessee (i) if the shareholder is a company at the rate of 20%. (ii) if the shareholder is a person other than a company at the rate of 10%. (b) if the shareholder is a non-resident assessee(i) if the shareholder is a company at the rate of 20%. (ii) if the shareholder is a person other than a company at the maximum rate which currently is 25%. Tax deducted from dividend paid to corporate shareholders, resident or non-resident, is final discharge of tax liability from that source.
Lottery and crossword puzzles (u/s 55) Taxes are to be deducted from the amount so payable (winnings) @ 20%.
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Income paid or payable to non-resident (u/s 56) Tax shall be deducted from payment of income to non-resident assessee at the following rates: Non-resident company Non-resident individual Rate applicable to the company 25%
The above deduction will not apply if the payer is himself liable for payment of tax as agent or a different rate for deduction is prescribed in a certificate obtained from the DCT. Consequence of failure to deduct tax (u/s 57, 58 and 59) Person/company responsible for making deduction shall be treated as assessee in default in respect of the tax not deducted in addition to other consequences.
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8.
8.1
International Tax
Double Taxation Avoidance Agreement
There are agreements on avoidance of double taxation between Bangladesh and 31 countries which are:
1. United Kingdom of Great Britain and Northern Ireland 2. Singapore 3. Sweden 4. Republic of Korea 5. Canada 6. Pakistan 7. Romania 8. Sri Lanka 9. France 10. Malaysia 11. Japan 12. India 13. Germany 14. The Netherlands 15. Italy
16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31.
Denmark China Belgium Thailand Poland Philippines Vietnam Turkey Norway USA Indonesia Switzerland Oman (air traffic only) Mauritius Myanmar United Arab Emirates
8.2
Double Tax Relief

A foreign tax credit is available to a Bangladesh resident in respect of any taxes paid in a foreign jurisdiction on the same income being taxed in Bangladesh. The allowable credit is the lower of the foreign tax paid or the Bangladesh tax otherwise payable. No provision exists for carry forward or carry-back of excess tax credits.
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9.
9.1
Value Added Tax

Important changes brought in the Finance Ordinance 2011 regarding VAT
The definition of input tax in section 2(d) has been replaced as follows:
"Input Tax" means the Value Added Tax paid on inputs imported by a registered
person, or purchased by him from any other registered person and also includes advance payment of VAT at import stage The definition of Reward Certificate in section 2 (yy) has been inserted as follows: Reward Certificates means a VAT reward certificate issued by the Commissioner under section 36A Section 2A has been newly inserted as follows: The VAT Act will prevail over any other law, rules, agreement or any legal contract etc Clause (e) of Subsection (3) of section 3 has been amended by the following: In other cases, suppliers and service receiver Subsection 4AA, 4B,4D and has been replaced by 4AA, 4AAA, 4 B, 4D, and 4G of section 6 4AA: Notwithstanding anything contained in any other provisions of this section, value added tax payable by a registered person shall be deducted and deposited to the Government exchequer by the receiver of goods or services or payers of consideration for goods or services or commission, as the case may be. Provided that in a case where the value added tax payable by any person rendering service under any foreign aided project has been realised or deducted and deposited to government treasury at the time of payment of service price or commission by a person receiving service or, as the case may be, the person paying the service price or commission and that service renderer appoints any subcontractor, agent or any other service rendering person, in such case value added tax shall not be realised at source again from such subcontractor, agent or any other service-rendering person appointed by the service renderer, subject to production or submission of documentary evidence of realisation or deduction of value added tax and deposition thereof in the Government treasury.
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4AAA: Board or by notification all Governmental organisation, semi-Government or autonomous organisation, NGO, banks, insurance companies or other financial institution, limited company, educational institution or any other organisation can create a list of service renderer showing the service code at the time of collect, deduct and depositing the same to the Government exchequer. 4B: A person who realises or deducts value added tax at source in accordance with sub-section (4AA) shall give, in respect of such realisation or deduction, a certificate to the person who renders the service, in accordance with the procedure laid down by the Board by an order in this behalf, which shall include the following information, namely:(a) (b) (c) (d) (e) the registration number of the value added taxpayer; the total price or commission paid for the service rendered; the amount of price or commission on which value added tax is assessable; the amount of value added tax realised or deducted; and any other information as required.
4D: In finance Act 2011 the requirement of withholding 3% VAT where full rate of 15% (other than truncated rates) would have been applied has been replaced with the person responsible for withholding VAT shall deduct withholding VAT at the applicable rates from making payments to its service providers as prescribed. 4G: In spite of the obligation for the collection and deduction of VAT at source and deposit thereof under subsection 4AA, if the person paying the service value or commission fails to collect, deduct and deposit VAT the VAT shall be collected with 2% interest per month from the person paying the service price or commission as if he was the service provider under subsection 4AA; The VAT collected, deducted and deposited under sub-section 4AA shall be treated as paid under the provisions of this Act on behalf of the concerned service provider and may, subject to validity of the certificate issued under subsection 4B be shown in the return referred to in section 35 as paid by the concerned service provider. Subsection (6) has been inserted after Sub-section (5) of section 6 is as follows: The board may impose VAT on the receiver of services through order Sub-section 1 of the section 8 has been amended by 3% instead of 4% of turnover tax rate. Sub-section (1k) of the section 9 has been deleted.
48
Provision of subsection 2 of the section 15 has been replaced as follows: Provided that where aforesaid business is conducted centrally by any person and the accounts and records thereof are maintained centrally, he may be registered centrally willingly or under stipulated rule
Section 36A has been newly inserted as follows: VAT Reward Certificate- The person who has been submit all the return of VAT of previous income year eligible to get the reward certificate of VAT and for that the person can apply directly or through online for this certificate but all rules, condition, and eligibility lies on the board
Sub-section (2)(bbb) of section 37 has been inserted after sub-section (2)(bb)as : If any registered or register-able person tries to abate VAT without showing the details of inputs in Mushak 16: purchase book
The last part of sub-section (2) and sub-section (6) of section 37 and sub-section (2) of Section 38 has been amended as: One and a half in place of two and a half
Previously an appeal was required to be settled within 9 Months of the date of filing appeal under section 42. Now an appeal can be filed within 1 year of the date of filing the appeal under section 42. Tax rate 3% has been inserted in place of 4% of Sub-rule (1) of the rule 4. Sub-rule (3) has been inserted after the sub-rule (2) of rule 11 as follows: If any registered entity open any extra bank account not mentioned in Mushak 6, the detailed information regarding the bank account will have to be communicated to concerned VAT office within 14 days
Rule 18B and 18C has been replaced in old rule 18B and 18C: Rule 18B: Certificate of VAT deducted at source VAT deducted at source will have to be deposited to government exchequer within 15 working days by the deducting authority. The deducting authority shall have to provide a certificate in Form Mushak 12 Kha which should be three copies and 1st copy with carbon copy to service or goods provider, 2nd copy to concerned VAT circle and 3rd copy keep it with deducting authority for 6 years
49
Rule 18C: Advance VAT at import stage 1) In case of supply of imported goods by commercial importer advance VAT shall collected at import stage. 2) At import stage VAT shall be deducted at source @ 3% as advance VAT. 3) The registered person from whom advance VAT is collected at import stage shall submit VAT return after negative adjustment of the advance VAT at import stage on the basis of bill of entry, if non existing bill of entry above adjustment will not possible. 4) VAT can negatively be adjusted only in the tax period at which advance VAT was collected. 5) VAT will be determined @ 15% on total sales for sales after import. Rule 18D: Maintenance of accounts and issuance of certificate This rule is deleted as such Mushak 18 A form is not required to submit on monthly basis. VAT has been waived on the amount of rent paid by private university, provided that the university shall relocate its campus to own premise within March 2013. VAT at production stage shall be waived if the manufacturer of motor cycle adds 30% value addition with local production of 10% of spare parts. VAT shall be waived at the import stage of machineries and spare parts used by refrigerator and freezer manufacturer. Jewellery made by diamond or other valuable stones shall be included in the definition of Goldsmith & Silversmith and Gold & Silver Jeweller and Gold Purifier. VAT has been increased to 4.5% from 1.5%. Tariff value on mobile SIM card has been decreased to Tk.600 from Tk.800. If any registered person pays VAT equal to or more than Tk. 5 million then he is required to maintain books of account for VAT through software recommended by the Board. New sections have been inserted relating to Alternative Dispute Resolution. The main features of Alternative Dispute Resolution are as follows: Notwithstanding anything contained in any regulations of this Act, if any appeal is under process with the Value Added Tax Authority or Appellate Authority or for any dispute under section 41C, the aggrieved person may apply for alternative dispute resolution in the manner set by the Rules made for this section.
50
The Board may, by notification in the official Gazette, declare the name of the Commissionerate and effective date for resolving the disputes alternatively.
The issues stated below are within the scope of alternative dispute resolution: - dispute relating to value approval of taxable goods under the VAT Act 1991 whether arising prior or after introduction of alternative dispute resolution and the proceeding is pending with the Value Added Tax Authority or Appellate Authority or any court including Bangladesh Supreme Court; VAT related dispute arising from the issuance of demand notice or show cause notice or any other notice and the proceeding is pending with the Value Added Tax Authority or Appellate Authority or any court including Bangladesh Supreme Court.
Provided that litigation relating to forgery or criminal offence or evasion of VAT or supplementary duties by making false statement or declaration or submitting counterfeit or false documents and any other dispute relating to important legal matter and explanation thereof that is required to be settled under general legal process in the public interest shall be excluded from Alternative Dispute Resolution. Time limit for resolving the dispute or negotiationwhen the application is made to the same Commissionerate in which the dispute originally arises within 30 working days of the application; when the application is made to the Commissioner (Appeal), Appellate Tribunal or any other court within 60 working days of the application.
VAT @3% has been waived for rubber purchased on auction as a raw material for industrial production. New Rules have been issued for the purpose of using stamp and banderol for cigarettes packets. The following goods are newly exempted from VAT at manufacturing/production stage: Hand made biscuit pricing Tk.100 per kg; Cake pricing Tk.100 per kg; Plastic made (except melamine); badna (a kind of small pitcher with a slender spout), soap case, baby potty, tissue holder, bed-pan, baby bath-tub, spice tray, tea tray, ice tray, ice scoop, salad cutting board, low seat or tool, dish rack, dustbin, padlebin, dustpan, glass stand, hanger, hand fan; LPG cylinder; Kitchen or household crockery (except pressure cookers or its spare parts) made by aluminium, M.S sheet, tin or steel; Jute fibre separator; USG applicator made by Bangladesh Machine Tools Factory.
51
9.2
Truncated rate
In case of services/supply falling under truncated category, VAT will have to be deducted at source at truncated rate. The following service codes will fall under truncated rates: Sl. Particulars Service Rate of no. code VAT a) Restaurant: S001.20 (i) Non-air conditioned 6% (ii) Air conditioned 15% b) Motor vehicles garage and workshop S003.10 4.50% c) Dockyard S003.20 4.50% d) Construction firm S004.00 5.50% e) Land developer S010.10 1.5% f) Building construction firm S010.20 1.5% g) Producer of film or Photo studios/shops? S019.00 4.5% Furniture distributors: S024.00 i) Manufacturing stage S024.00 6% ii) Distribution stage S024.00 3% h) Goldsmith and Silversmith S026.00 4.50% i) Consultancy and supervisory firm S032.00 4.50% j) Medical Institutions S029.10 2.25% k) Dental care centre S029.20 2.25% l) Pathological Laboratory S029.30 2.25% m) Audit and accounting firm S034.00 4.50% n) AC Bus service S036.10 5.0025% o) Procurement provider S037.00 4% p) Security service S040.00 4.5% q) Legal advisor S045.00 4.5% r) Transport contractor: S048.00 s) i) Transportation of petroleum products S048.00 2.25% t) ii) Others S048.00 4.50% u) Transportation service provider S049.00 4.50% v) Electricity distributor S057.00 5.0025% W) Buyers of auctioned goods S060.00 1.50% x) Cleaning and maintenance services of floors, S.065.00 2.25% compounds, etc. y) Immigration advisor S067.00 4.5% z) Coaching centre S068.00 4.5% aa) English medium school S069.00 4.5% ab) Private medical and engineering college S070.20 4.5% ac) Event management firm S071.00 4.5% ad) Human resource management S072.00 4.5% ae) Seller of own branded readymade garments S078.00 5.0025%
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The following service codes will fall under withholding VAT: Sl. no. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. Heading Service Code S002 S002.00 S003 S003.10 S003 S003.20 S004 S004.00 S007 S007.00 S008 S008.10 S009 S009.00 S010 S010.10 S010 S010.20 S014 S014.00 S020 S020.00 S021 S021.00 S024 S024.00 S028 S028.00 S031 S031.00 S032 S032.00 S034 S034.00 S037 S037.00 S040 S040.00 S045 S045.00 S048 S048.00 S049 S049.00 S050 S050.10 S050 S051 S052 S053 S054 S058 S060 S065 S050.20 S051.00 S052.00 S053.00 S054.00 S058.00 S060.00 S065.00 Service Provider Decorators & Caterers Motor Car garage and workshop Dockyard Construction firm Advertising firm Printing Press Auction firm Land developer Building construction firm Indenting firm Survey firm Plant or Capital Machinery rental firm Furniture Distributors Courier & Express Mail Service Repair & maintenance service firm Consultancy and Supervisory firm Audit & Accounting firm Procurement Provider Security Service Legal Adviser Transport Contractor Transportation Service Provider Architect, Interior designer or interior decorator Graphic Designer Engineering firm Sound & Lighting accessories provider Board meeting participants Advertisement through satellite channel Chartered Air or Helicopter rental firm Buyer of auctioned goods Cleaning & maintenance services of floors, compounds etc. Rate of VAT 15% 4.5% 4.5% 5.5% 15% 15% 15% 1.5% 1.5% 15% 15% 15% 6% 15% 15% 4.5% 4.5% 4% 4.5% 4.5% 2.25% 4.5% 15% 15% 15% 15% 15% 15% 15% 1.50% 2.25%
53

02 2011 - Provisions of ITO 1984 As Amended Upto FA 2011 and Changes Brought in by The FA 2011 in Respect of VAT Act and Rules

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02 2011 - Provisions of ITO 1984 As Amended Upto FA 2011 and Changes Brought in by The FA 2011 in Respect of VAT Act and Rules

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Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

About Rahman Rahman Huq (RRH)

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

Tax rate Nil 10% 15% 20% 25%

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

However, this shall be treated as advance payment of tax of the assessee.

Corporate tax rates

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

42.5% 42.5% 35% 45%

Reduced rates of Corporate Tax applicable to certain industrial companies

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

Capital gains tax

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

Tax on dividend/remittance of profit

Applicability of tax rates

Charge of minimum tax

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

Personal income tax

Filing of tax return

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

Requirement of taxpayer's Identification Number (TIN)

Important provisions of ITO 1984 as amended up to

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Issuance of TIN without application and re-registration

Penalty and prosecution for non-compliance

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

Penalty for using fake Tax-payer's Identification Number

Punishment for improper use of Tax-payer's Identification Number

Punishment for obstructing an income tax authority

Universal self assessment (Section 82BB)

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

Submission of statement of Assets & Liability and Life Style

3.10 Tax Clearance Certificate

3.11 Tax rebate on investment

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

3.12 Withdrawal of certain exclusions from total income

3.13 Withdrawal of tax exemptions of certain individual and organizations

3.14 Deemed income

Important provisions of ITO 1984 as amended up to

Rahman Rahman Huq Chartered Accountants

3.15 Deduction from income

3.17 Investment in share market

so, such withdrawal or transfer shall be deemed as income of the assessee.