Important Provisions in Respect of VAT ACT and Rules-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
Chittagong office address:
102 Agrabad C/A (3
rd
floor)
Chittagong, Bangladesh
Tel +880 (2)710 704, 710 996
Fax +880(2) 810 795
Email kpmgrrh@globalctg.net
Internet www.kpmg.com/bd

Rahman Rahman Huq
Chartered Accountants
9 Mohakhali C/A (11
th
& 12
th
Floors)
Dhaka 1212
Bangladesh
Telephone +880 (2) 988 6450-2
Fax +880 (2) 988 6449
Email kpmg-rrh@citech-bd.com
Internet www.kpmg.com/bd

September 2011

Important provisions of ITO 1984 as amended up to
Rahman Rahman Huq Finance Act 2011 and changes brought in by the
Chartered Accountants Finance Act 2011 in respect of VAT Act and Rules

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.

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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.


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Table of Contents

1. Preface ...................................................................................................................................... 4
2. Tax rates ................................................................................................................................... 5
2.1 Tax rates for individual, etc. ...................................................................................................... 5
2.2 Corporate tax rates ..................................................................................................................... 6
2.3 Reduced rates of Corporate Tax applicable to certain industrial companies ............................. 7
2.4 Capital gains tax ........................................................................................................................ 8
2.5 Tax on dividend/remittance of profit ......................................................................................... 9
2.6 Applicability of tax rates ........................................................................................................... 9
2.7 Charge of minimum tax ............................................................................................................. 9
3. Personal income tax ............................................................................................................... 10
3.1 Introduction ............................................................................................................................. 10
3.2 Residence................................................................................................................................. 10
3.3 Taxable Income ....................................................................................................................... 10
3.4 Filing of tax return ................................................................................................................... 10
3.5 Requirement of taxpayer's Identification Number (TIN) ........................................................ 11
3.6 Issuance of TIN without application and re-registration ......................................................... 12
3.7 Penalty and prosecution for non-compliance .......................................................................... 12
3.8 Universal self assessment (Section 82BB) .............................................................................. 13
3.9 Submission of statement of Assets & Liability and Life Style ................................................ 14
3.10 Tax Clearance Certificate ........................................................................................................ 14
3.11 Tax rebate on investment......................................................................................................... 14
3.14 Deemed income ....................................................................................................................... 15
3.15 Deduction from income ........................................................................................................... 16
3.16 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. Corporate tax ......................................................................................................................... 18
4.1 Introduction ............................................................................................................................. 18
4.2 Residence................................................................................................................................. 18
4.3 Taxable income ....................................................................................................................... 18
4.4 Deductions of Income Tax Ordinance 1984 ............................................................................ 19
4.5 Allowable perquisites .............................................................................................................. 19
4.6 Deductions not admissible in certain circumstances ............................................................... 20
4.7 Donations................................................................................................................................. 20
4.8 Amendment in Section 82C (Final tax) ................................................................................... 20
4.9 Amendment in Third Schedule ................................................................................................ 21
4.10 Capital gains ............................................................................................................................ 22


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4.11 Income from other sources ...................................................................................................... 22
4.12 Losses ...................................................................................................................................... 22
4.13 Advance tax payment .............................................................................................................. 22
4.14 Tax filing and tax payment ...................................................................................................... 23
4.18 Penalty for non-compliance ..................................................................................................... 24
4.19 Assessment .............................................................................................................................. 25
4.20 Universal self assessment scheme ........................................................................................... 25
4.21 Appeals .................................................................................................................................... 26
4.22 Submission of certain return .................................................................................................... 27
4.23 Power of search and seizure .................................................................................................... 27
5. Tax incentives ........................................................................................................................ 28
5.1 Partial tax exemption for newly established industrial undertakings ...................................... 28
5.2 Partial tax exemption for newly established physical infrastructure facility ..................... 29
5.3 Income from exports ............................................................................................................... 30
5.4 Export Processing Zones ......................................................................................................... 30
5.5 Dividend income of non-resident shareholders received from companies set-up in
Export Processing Zones ......................................................................................................... 31
5.6 Income from the business of software development and information technology
enabled services (ITES) .......................................................................................................... 31
5.7 Income from poultry farming .................................................................................................. 31
5.8 Incentives for private sector power generation companies...................................................... 31
5.9 Expansion of the area of CSR activity to get tax rebate .......................................................... 32
6. Others amendments .............................................................................................................. 34
6.1 Alternative Dispute Resolution (Section 152F)....................................................................... 34
6.2 Ordinance to override other laws ............................................................................................ 34
7. Tax withholding/deduction/collection A comprehensive list ................................. 35
8. International Tax ................................................................................................................... 46
8.1 Double Taxation Avoidance Agreement ................................................................................. 46
8.2 Double Tax Relief ................................................................................................................... 46
9. Value Added Tax ................................................................................................................... 47
9.1 Important changes brought in the Finance Ordinance 2011 regarding VAT .......................... 47
9.2 Truncated rate .......................................................................................................................... 52


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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.


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2. Tax rates

2.1 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 Tax rate
First Tk 180,000 * Nil
Next Tk 300,000 10%
Next Tk 400,000 15%
Next Tk 300,000 20%
On the balance 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


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such industries then he will be entitled to rebate on income derived from such industries
at the following rates:

Particulars Rate of rebate
If production during the year is more than 15
% but less than 25% compared to previous year
Rebate of 5% on tax payable on
income derived from such
industries.
If production during the year exceeds 25 % as
compared to previous year.
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 Tax payable (Taka)
Upto 1500 CC for each 10,000
Upto 2000 CC for each 15,000
More than 2000 CC for each 30,000
Upto 2800 CC for each Jeep 35,000
More than 2800 CC for each Jeep 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 Rate

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

27.5%

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)

37.5%


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Companies Rate

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.

37.5%

Banks, insurance and other financial institutions 42.5%

Cigarette manufacturing companies (unlisted)

42.5%

Cigarette manufacturing companies, publicly listed in Bangladesh

35%

Mobile phone operator companies

45%
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

35%
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.

3%

2.3 Reduced rates of Corporate Tax applicable to certain industrial
companies

Companies Rate

Textile industries (time extended upto 30 June 2013) 15%
Jute industries (time extended upto 30 June 2013) 15%
Research Institutes recognised under the Trust Act 15%
Private universities, Private medical college, Private dental college,
Private engineering college or Private college engaged in imparting
education on information technology

15%
Exporter of knitwear and woven garment, terry towel, carton and
accessories of garments industry, jute goods, frozen food, vegetables,
leather goods, packed food etc.
*0.60% of
export
proceeds


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Companies Rate

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)
5%

*To be deducted by the banker through whom the export proceeds is received.

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 Capital gains tax

2.4.1 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.


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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 means-
a) 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


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3. Personal income tax

3.1 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


14
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 and-

1. does not have any income which is exempted from tax; or
2. does not have receipt of gift; or
3. does not have loan other than from a bank or financial institution; or
4. 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 items-

a) life insurance premium
b) contribution to approved Provident Fund (both by the employee and employer)
c) contribution to deposit pension scheme amounting to not exceeding taka 60,000
d) donation to a national level institution setup in memory of the liberation war
e) donation to a national level institution set up in memory of father of the nation
f) donation to Prime Ministers Higher Education Fund
g) any sum invested in Bangladesh Government Treasury Bond
h) 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.


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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 1
st
July 2011 to
30
th
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.


17
(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. Corporate tax

4.1 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.


19
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) Payment of salaries if tax is not deducted;
(ii) 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


21
- 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 2%
ii) Road 2%
iii) Fly over 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


23
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 15
th
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.


25
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 and-
a) 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.


26
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 of-
a) 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


27
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. Tax incentives

5.1 Partial tax exemption for newly established industrial
undertakings

Qualifying industrial undertaking set up between 1
st
day of July 2011 and 30
th
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.

Area

Year
Exemption
% of income
Dhaka and Chittagong divisions
excluding Dhaka, Narayangonj,
Gazipur, Chittagonj, Rangamati,
Bandarbon and Khagrachari districts
First and second year 100%
Third and fourth year 50%
Fifth year 25%
Rajshahi, Khulna, Sylhet and Barisal
divisions and Rangamati, Bandarbon
and Khagrachari districts
First, second and third year 100%
Fourth, fifth and sixth year 50%
Seventh year 25%

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.


29
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
Exemption %
of income
For the first five years (first, second, third, fourth and fifth year) 100%
For the next three years (sixth, seventh and eighth year) 50%
For the last two years (ninth and tenth year) 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;


30
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 1
st
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 3
rd
and 4
th
year
c) 25% income will be tax exempted for 5
th
year
d) proper books of accounts must be maintained
e) income tax return has to be submitted as per section 75 of ITO 1984


31
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 1
st
July 2008 to 30
th

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 30
th
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.


32
- 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 1
st
July 2013 or afterwards shall get exemption from income at following rates-

Tax exempted period
Rate of tax
exemption
First 5 years from the commencement of commercial production 100%
Up to next 3 years 50%
Up to next 2 years 25%
- 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


33
The following are the areas of CSR for which company could avail tax rebate
facilities:

a) donation made to natural disaster affected people through government organization
b) 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


34
6. Others amendments

6.1 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 to-
a) 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.


35

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 1
st
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 1
st
July 2005 will
continue to be withheld at 20% and collection will be done at the time of payment of
interest/discount.


36
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:
Rates
Where the payment does not exceed Tk 200,000 Nil
Where the payment exceeds Tk 200,000 but does not exceed Tk 500,000 1.0%
Where the payment exceeds Tk 500,000 but does not exceed Tk 1,500,000 2.5%
Where the payment exceeds Tk 1,500,000 but does not exceed Tk 2,500,000 3.5%
Where the payment exceeds Tk 2,500,000 but does not exceed Tk 30,000,000 4.0%
Where the payment exceeds Tk 30,000,000 5.0%

In case of oil supplied by oil marketing companies:

Where the payment does not exceed Tk 200,000 Nil
Where the payment exceeds Tk 200,000 (up to any amount) 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 non-
government organisation registered with the NGO Affairs Bureau or any trust
registered under the Trusts Act 1882 running any general or specialised hospital or


37
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


38
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 15
th
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.


39

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 apply-

- Person 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 Nil
Where the monthly payment exceeds Tk 20,000 but does not exceed Tk 40,000 3%
Where the monthly payment exceeds Tk 40,000 5%


40
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


41
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:


42
In case of building or apartment situated

Area For resident For non-resident
At Gulshan, Banani, Baridhara, Motijeel and
Dilkusha

Tk 2,000 per
square meter

Tk 8,000 per
square meter

Defense Officers Housing Society (DOHS),
Dhanmondi, Mohakhali, Lalmatia, Uttara,
Bashundhara,Dhaka Cantonment, Karwan
Bazar and Khulshi, Panchlaish, nasirabad
and Agrabad of Chittagong

Tk 1,800 per
square meter

Tk 6,000 per
square meter

In any other areas 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.


43

Collection of tax shall not apply to the following:

i) sale by a bank or any financial institution as a mortgagee empowered to sell;
ii) mortgage of any property to the Bangladesh House Building Finance
Corporation against loan;
iii) mortgage to any bank of any property;
iv) 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)].
v) 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.

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 Nil
Where the monthly payment exceeds Tk 15,000 but does not exceed Tk 30,000 3%
Where the monthly payment exceeds Tk 30,000 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.


44
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%.


45
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 Rate applicable to the company
Non-resident individual 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.


46

8. International Tax

8.1 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. Denmark
17. China
18. Belgium
19. Thailand
20. Poland
21. Philippines
22. Vietnam
23. Turkey
24. Norway
25. USA
26. Indonesia
27. Switzerland
28. Oman (air traffic only)
29. Mauritius
30. Myanmar
31. 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.


47
9. Value Added Tax

9.1 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.


48
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) the registration number of the value added taxpayer;
(b) the total price or commission paid for the service rendered;
(c) the amount of price or commission on which value added tax is assessable;
(d) the amount of value added tax realised or deducted; and
(e) 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.


49
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 1
st

copy with carbon copy to service or goods provider, 2
nd
copy to concerned VAT
circle and 3
rd
copy keep it with deducting authority for 6 years


50

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.


51
- 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 negotiation-

- when 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.


52
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.
no.
Particulars Service
code
Rate of
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,
compounds, etc.
S.065.00 2.25%
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%


53

The following service codes will fall under withholding VAT:

Sl.
no.
Heading

Service
Code
Service Provider

Rate of
VAT
1. S002 S002.00 Decorators & Caterers 15%
2. S003 S003.10 Motor Car garage and workshop 4.5%
3. S003 S003.20 Dockyard 4.5%
4. S004 S004.00 Construction firm 5.5%
5. S007 S007.00 Advertising firm 15%
6. S008 S008.10 Printing Press 15%
7. S009 S009.00 Auction firm 15%
8. S010 S010.10 Land developer 1.5%
9. S010 S010.20 Building construction firm 1.5%
10. S014 S014.00 Indenting firm 15%
11. S020 S020.00 Survey firm 15%
12. S021 S021.00 Plant or Capital Machinery rental firm 15%
13. S024 S024.00 Furniture Distributors 6%
14. S028 S028.00 Courier & Express Mail Service 15%
15. S031 S031.00 Repair & maintenance service firm 15%
16. S032 S032.00 Consultancy and Supervisory firm 4.5%
17. S034 S034.00 Audit & Accounting firm 4.5%
18. S037 S037.00 Procurement Provider 4%
19. S040 S040.00 Security Service 4.5%
20. S045 S045.00 Legal Adviser 4.5%
21. S048 S048.00 Transport Contractor 2.25%
22. S049 S049.00 Transportation Service Provider 4.5%
23. S050 S050.10 Architect, Interior designer or interior
decorator
15%
24. S050 S050.20 Graphic Designer 15%
25. S051 S051.00 Engineering firm 15%
26. S052 S052.00 Sound & Lighting accessories provider 15%
27. S053 S053.00 Board meeting participants 15%
28. S054 S054.00 Advertisement through satellite channel 15%
29. S058 S058.00 Chartered Air or Helicopter rental firm 15%
30. S060 S060.00 Buyer of auctioned goods 1.50%
31. S065 S065.00 Cleaning & maintenance services of floors,
compounds etc.
2.25%

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