Tax Structure ( Tax System )

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WHAT INVESTORS SHOULD KNOW   

Tax implications in each country are an important consideration for an investor. Here is an overview of taxation in Bangladesh.  

What is the tax structure for individual tax payers?   

If an individual has been in Bangladesh for a period/period totaling 182 days or more in the income year, he/she is considered a resident. In case an individual has been in the country for 90 days in the income year and 365 days in four years preceding this year, he/she will also be considered a resident.   

Each individual is entitled to an investment tax credit of 15 percent of the total income or Tk 100,000 whichever is less. Incomes from small and cottage industries are entitled to a 5 to 10 per cent tax rebate depending on the production volume.   

On the first Tk. 60,000.00 of total income - no tax obligation

On the next Tk. 40,000.00 of total income - 10%

On the next Tk. 50,000.00 of total income - 15%

On the next Tk. 1,50,000.00 of total income - 20%

On the balance of total income - 25%

What is the percentage of corporate tax levied?

Any income collected or gained by a company doing business in Bangladesh, whether resident or not is taxable. Corporate tax rates for industrial companies whose shares are publicly traded is 35% and the rate of those whose shares are not publicly traded is 40%.   

Tax rates on income of all other companies including banks, financial institutions, insurance companies and local authorities is 45%. Companies enjoying tax holiday are required to invest only 25% to 30% of their income in other activities as per rules of the National board of Revenue (NBR).  

How is the period for assessment determined?   

Income tax is levied on all companies and individuals for the previous year and payable for the year of assessment of fiscal year (July to June). If a company adopts an accounting period different from the fiscal year, the business period is a 12 month accounting period preceding the year of assessment. Taxable income is calculated after adjusting for incurred expenses in the production of income. 

Returns filed received by or due to foreign technician under contract if it is accompanied by audited accounts and certified by a chartered accountant as to the correctness of the total income of the assessee.   

Salary income received by or due to a foreign technician under contract of service approved by the NBR is fully exempted from paying tax (subject to prescribed conditions and limitations) for a period of three years from the date of his arrival in Bangladesh.   

Expenditure incurred by an employer in respect of remuneration of a foreign technician is also fully exempted from income tax (subject to stipulated conditions).   

Expenditure incurred as a remuneration payable to a foreign technician by a Bangladeshi firm carrying on the business of consultant and engineers in Bangladesh is fully exempted from tax (subject to prescribed conditions and limitations). 

Who is entitled to a Tax Holiday?   

Tax holiday is allowed to industries subject to the relevant rules and procedures set by the National Board of Revenue (NBR) for the following period according to the location of the establishment.   

In Dhaka and chittagong Divisions (excluding 3 hill districts): 5 years. In other divisions (including 3 hill districts of chittagong Division): 7 years.   

The period of such tax holiday will be calculated from the month of commencement of commercial production. The eligibility of tax holiday to be determined by the NBR and the time of the commencement of commercial production is certified by the respective sponsoring agencies. The industrial establishment should be registered under the companies Act. 1994.   

Tax holiday facility can be availed by industries coming into commercial production within 30 June 2000 A.D. 

What are the other tax incentives in Bangladesh?   

Other tax incentives: Exemption of tax on interest of foreign loan. Exemption of tax on Royalty/Technical know-how. Tax exemption on capital gains. Avoidance of double taxation. Liberal investment allowance for tax assessment.   

An accelerated depreciation instead of a tax holiday of a tax holiday is allowed at the rate of 80 per cent of the actual cost of the machinery or plant from the year the plant starts production and 20 per cent for the following year provided the industry is located within a "developed area". the depreciation is 10 per cent if the industry is set up in a location considered less than a "developed area".

  

Corporate tax:

Corporate tax rates for industrial companies whose shares are publicly traded is 35% and the rate of those whose shares are not publicly traded is 40%

Tax rates on other companies:

Tax rates on income of all other companies including banks, financial institutions, insurance companies and local authorities is 45%

Investment requirement by companies enjoying tax holiday:

Companies enjoying tax holidays are required to invest only 25% to 30% of their income in other activities as per rule of N.B.R.

Accepted of returns of public limited companies:

Returns filed by the public limited companies shall be accepted as correct if it is accompanied by audited accounts and certified by a chartered accountant as to the correctness of the total income of the assessee

Salary of foreign technicians:

Salary income received by or due to a foreign technician under contract of service approved by the National Board of Revenue is fully exempted from paying tax (subject to prescribed conditions and limitations) for a period of three years from the date of his arrival in Bangladesh

Tax payable by employer on remuneration of foreign technician:

Expenditure incurred by an employer in respect of remuneration of a foreign technician is also fully exempted from income tax (subject to the stipulated conditions)

Remuneration of foreign technicians employed by the firms of consultancy and engineers:

Expenditure incurred as remuneration payable to a foreign technicians by a Bangladeshi firm carrying on the business of consultant and engineers in Bangladesh is fully exempted from tax (subject to prescribed conditions and limitations)