Sonar Bangla resonates with Bengal as a historical entity and Bangladesh, both in Commerce and Cricket with its exceptional performance has enabled us to remember its gigantic growth. When one looks at any good ready-made in U.S.A. it is an open secret that Bangladesh with its visible presence in all brick and mortar shops has done miracles in cotton clothing soaring its sales into Billions of dollars. Let us analyze its tax structure which is one of the main pillars for its phenomenal growth.

It is intended to inscribe Bangladesh through Income tax, and other information which will impel an exporter from India to look at Bangladesh as a kind neighbor by setting up even production bases there.

USA is undergoing enormous changes in its tax system which are under final stage within its government and hence, a detailed article will be published as soon as the details emerge out.

All the following information has been collected from the official tax website of Bangladesh Board of Revenue and details are available under” reference” at the end of this article.

Bangladesh Income Tax

For the purposes of computation of income tax, income has been arranged under the following heads:

Bangladesh currency, one Bangladesh taka equals 0.012 US Dollar.

Tax Rate (Assessment Year 2015-16) (As per Finance Act, 2015):

For tax payers other than female taxpayers, senior taxpayers of 65 years and above, retarded taxpayers, and gazette war-wounded freedom fighters, income tax is payable as per the following information:

  • On first up to Tk. 2,50,000/- Nil
  • On next up to Tk. 4,00,000/- 10%
  • On next up to Tk. 5,00,000/- 15%
  • On next up to Tk. 6,00,000/- 20%
  • On next up to Tk. 30,00,000/- 25%
  • On balance amount – 30%

For female taxpayers, senior taxpayers of age 65 years and above, income tax is payable as per the following information:

  • On first up to Tk. 3,00,000/- Nil
  • On next up to Tk. 4,00,000/- 10%
  • On next up to Tk. 5,00,000/- 15%
  • On next up to Tk. 6,00,000/- 20%
  • On next up to Tk. 30,00,000/- 25%
  • On balance amount – 30%

Obviously, for the curious reader enquiring about tax concessions for retarded tax payers, and war wounded soldiers, tax rates are much liberal.

For Companies

It is very important to know the tax structure for various types of companies. What are they?

  • Publicly Traded Company- 25%
  • Non-publicly Traded Company- 35%
  • Bank, Insurance & Financial institutions (Except Merchant bank):
  • Publicly listed and 4th generation Banks & FI -40%
  • Other Banks & FI- 42.5%
  • Merchant bank- 37.5%
  • Cigarette manufacturing company/Others- 45%
  • Mobile Phone Operator Company- 45%
  • Publicly traded mobile company- 40%

Further, there has been a tax rebate for investment for resident/non- resident Bangladeshi only which is amount of allowable investment – actual investment or 30% of total (taxable) income or Tk. 1,50,00,000/- whichever is less. Tax rebate amounts to 15% of allowable investment.

Some of the kinds of investment mentioned in official web sites included:

Life insurance premium up to 10% of the face value.

  • Contribution to Provident Fund to which Provident Fund Act, 1925 applies.
  • Self- contribution and employer’s contribution to Recognized Provident Fund.
  • Contribution to Superannuation Fund.
  • Contribution up to TK 60,000 to deposit pension scheme sponsored by any scheduled bank or a financial institution.

Nearly 17 more types of investment have also been given in official web site. A serious- minded person can easily refer to the official website for clarification and guidance.

Now that we start learning the basics, various other types of questions do arise and need quick answer.

Some of the frequently asked questions and the relevant answers are:

  • What is the last date for submission of tax returns for the corporate tax payers? Official sources indicate “By fifteenth day of July next following the income year or, where the fifteenth day of July falls before the expiry of six months from the end of the income year, before the expiry of such six months”.
  • What about an individual? Simply put, “Unless the date is extended, by the Thirtieth day of September next following the income year”
  • What about “Submission of withholding tax return and time to submit?” Any person making payment like tax deduction at source, must file a separate return as per the following dates:
  • 15th day of October, January, April and July. Or extended date up to 15 days by DCT. Statement of TDS, Copy of Treasury challan /pay-orders should be submitted with the return.
  • What about “Consequences of Non-Submission of Return and Return of withholding tax?”
  • Imposition of penalty amounting to 10% of tax on last assessed income subject to a minimum of Tk. 1,000/-

In case of an individual assessee whose income was not assessed previously Tk. 5,000/-

  • In case of an individual assessee whose income was assessed previously, fifty per cent (50%) of the tax payable on the last assessed income or Tk. 1,000/-, whichever is higher.
  • In case of a continuing default by any type of assessee, a further penalty of Tk. 50/- for every day of delay.

What is a “TIN?” Under the rules, if the minimum tax- free income exceeds the limit, the tax payer is expected to obtain a 12- digit number called “TIN” to be used for filing of returns and for communication purposes. Misuse of some one’s TIN invites financial as well as imprisonment depending upon the degree of misuse.

Who would be required to submit the income tax returns?

  • If the total income of any individual exceeds Tk 2,50,000. With the exception of following categories with varying amounts:
  • Amounts in Tk: Female tax payers, senior male tax payers of 65 years and above – 3,00,000
  • For retarded tax payer – 3,75,000
  • For any gazetted war wounded freedom fighter – 4,25,000.
  • If any person was assessed for tax during any of the preceding three years immediately preceding the income year.

Business class or other class of tax payers who are required to file tax returns

  • A person who lives in any city corporation/divisional HQ/district HQ and owns motor car/owns membership of a club registered under VAT Law.
  • If any person runs a business or profession having trade license and operates a bank account.
  • Any professional registered as a doctor, lawyer, income tax practitioner, Chartered Accountant, Cost & Management Accountant, Engineer, Architect and Surveyor etc.
  • Member of a Chamber of Commerce and Industries or a trade Association.
  • Any person who participates in a tender.
  • Candidate for City Corporation, or Parliament elections.
  • Any company registered under the Company Act, 1913 or 1994.
  • Any Non-government organization (NGO) registered with NGO Affairs Bureau.

Now that we learnt some details of income tax and who would be required to file the tax return, how will the income tax authorities review the returns and clear them because any business man wants to run the business smoothly with least interference from the government authorities.

Assessment Procedures:

For a normal return, assessment is made after giving an opportunity of hearing.

For returns submitted under Universal Self- Assessment Scheme, the acknowledgement slip is considered to be an assessment order of the Tax authorities.

Under Universal Self- Assessment scheme, the returns may be subject to “process and audit” if such return shows at least twenty per cent higher income than return of the immediately preceding assessment year and it has the following enclosure:

(a) is accompanied by corroborative evidence in support of income exempted from tax;

(b) does not show receipt of gift during the year;

(c) does not show any income chargeable to tax at a rate reduced under section 44; or

(d) does not show or result any refund.

The guidelines given by Bangladesh authorities rank among the best among other countries who have also issued detailed guidelines. Simple, easily explained and with an intention to help the tax payer. I do appreciate the authorities for their noble job.

In Bangladesh withholding taxes are usually termed as’ Tax deduction and collection at source’. Under this system both private and public limited companies or any other organization specified by law are legally authorized and bound to withhold taxes at the point of making payment and deposit the same to the Government authorities. The taxpayer receives a certificate from the withholding authority and gets credits of tax against assessed tax on the basis of such certificate.

Some of the situations requiring tax deduction at source, (as we call in India) are as under:

  • Salaries
  • Discount on the real value of Bangladesh bank bills
  • Interest on securities
  • Fees for doctors
  • Royalty or technical know-how fee
  • Fees for professional or technical services
  • Catering fee services
  • Cleaning service
  • Contract or toll manufacturing
  • Credit rating agency

The list goes on for a total of 58 heads under which ‘Tax deduction and collection at source’ has to be undertaken. A list like this creates a systematic working at places where tax deduction has to be undertaken.

Bangladesh is well known for its business- friendly atmosphere which enabled even Indian exporters to transfer their manufacturing bases there from India.

What are the major areas of final settlement for tax liability?

A list of 26 areas has been given in the web site but some of them have been given below:

  • Rental power companies (Sec 52N);
  • Salaries of foreign technician of Diamond cutting industry (Sec 52O);
  • International gateway service (IGW) and Interconnection Exchange (ICX) in respect of international Phone calls (Sec 52R);
  • Import of goods, not being goods imported by an industrial undertaking as raw material for its own consumption (Sec 53);
  • Shipping business of a resident (Sec 53AA)
  • Export of all kind of goods including readymade garments (Sec 53BB & 53BBBB);
  • Transaction by a member of a Stock Exchange (Sec 53BBB);
  • Auction purchase (Sec 53C);
  • Cash subsidy (Sec 52DDD);
  • Real estate or land development business (Sec 53FF);
  • Insurance agent commission (Sec 53G);
  • Payment on account of survey by surveyor of a general insurance company (Sec 53GG)

Tax Recovery System:

  • In case of non-payment of income tax demand, the following measures can be taken against an errand taxpayer for realization of tax: –
  • Imposition of penalty.
  • Attachment of bank accounts, salary or any other payment.
  • Filing of Certificate case to the Special Magistrate/Collector of District.

The recovery system does not raise anybody’s eyebrows since similar system has been in vogue in most of the countries which have adopted British system of collection of taxes and other systems.

Advance Payment of Tax:

Every taxpayer is required to pay advance tax in four equal installments falling on 15th September; 15th December; 15th March and 15th June of each year if the latest assessed income exceeds Taka four lakh. Penalty is enforced for non- payment of any installment of advance tax.

The writer was tempted to write this article with the main objective of informing how an once poor country like Bangladesh has emerged as a power house of export of garments far surpassing many leading countries in the world. Objectively looking at the incentives offered for tax payers codified under pages 24-29 gives the main reasons for the enormous growth of Bangladesh economy.

Tax incentives:

Tax holiday: Tax holiday is allowed for industrial undertaking and physical infrastructure facility established between 1st July 2011 to 30th June 2019 in fulfillment of certain conditions which may be known at the time of real implementation.

Industrial Undertaking eligible for Tax holiday:

(a) active pharmaceuticals ingredient industry and radio pharmaceuticals industry;

(b) automobile manufacturing industry;

(c) barrier contraceptive and rubber latex

(d) basic chemicals or dyes and chemicals;

(e) basic ingredients of electronic industry (e.g. resistance, capacitor, transistor, integrator circuit);

(f) bi-cycle manufacturing industry;

(g) bio-fertilizer; (will get tax holiday even it is set up in district of Dhaka, Narayanganj, Gazipur, Chittagong, introduced in FA 2012)

(h) biotechnology;

(i) boilers;

(j) brick made of automatic hybrid Hoffmann kiln or Tunnel Kiln technology;

(k) compressors;

(l) computer hardware;

(m) energy efficient appliances;

(n) insecticide or pesticide;

(o) petrochemicals;

(p) pharmaceuticals;

(q) processing of locally produced fruits and vegetables;

(r) radio-active (diffusion) application industry (e.g. developing quality or decaying polymer or preservation of food or disinfecting medicinal equipment);

(s) textile machinery; (q) tissue grafting;

(t) tire manufacturing industry; or any other industry which may be notified by the government.

Any curious mind would venture to ask whether any infra structure activity is also eligible for tax incentive?

Yes, the original list consists of the following infrastructure with the caveat that more can be added by government authorities, if needed.

  • deep sea port;
  • elevated expressway;
  • export processing zone;
  • flyover;
  • gas pipe line,
  • Hi-tech park;
  • Information and Communication Technology (ICT) village or software technology zone; Information Technology (IT) park;
  • large water treatment plant and supply through pipe line;
  • Liquefied Natural Gas (LNG) terminal and transmission line;
  • mono-rail;
  • rapid transit;
  • renewable energy (e.g. energy saving bulb, solar energy plant, windmill);
  • sea or river port;
  • toll road or bridge

Are there more exemptions like capital gains, income of provident fund trustees, service charge of micro managing finance companies, a concept which originated from Bangladesh, and others?

  • The list contains 20 of the exemptions. Other than those mentioned in previous para, some more like:
  • Any amount of income received as pension;
  • Gratuity received up to Tk. 2.5 crore;
  • Income from dividend amounting to Tk. 25,000 received from a publicly traded company;
  • Income from dividend of a mutual fund or a unit fund up to taka 25000;
  • An amount equal to 50% of the income derived from export business is exempted from tax;
  • Any income, not exceeding two lakh Taka chargeable under the head “agricultural income” of an assessee, being an individual, whose only source of income is agriculture;
  • Income from Information Technology Enabled Services (ITES) or Nationwide Telecommunication Transmission Network (NTTN) business is exempted up to 30th June, 2024;
  • Income derived from export of handicrafts is exempted from tax up to 30th June, 2019;
  • Income of any private Agricultural College or private Agricultural University derived from agricultural educational activities;
  • Income derived from any Small and Medium Enterprise (SME) engaged in production of any goods and having an annual turnover of not more than taka thirty lakh is exempt from tax;
  • Any profits and gains under the head “Capital Gains” arising from the transfer of stocks or Shares of a public company as defined in †Kv¤úvbx AvBb, 1994 (1994 m‡bi 18 bs AvBb) listed in any stock exchange in Bangladesh of an assessee being a non-resident subject to the condition that such assessee is entitled to similar exemption in the country in which he is a resident.

Infrastructure without mention of power production is highly unexpected.

Yes, power sector gets the following tax exemption which is highly tempting for any serious investor.

Private power generation company that starts its commercial production after 30 June, 2016 will enjoy the following tax exemption:

Period of Tax exemption Rate of tax exemption
Five years beginning from commencement of commercial production 100%
Next three years 50%
Next two years 25%

For manufacturing industries in general, to ensure sustainable industrialization without disturbing the civic amenities, tax rebates ranging between 10% – 20% are given for commencing commercial production during the years 2014-2019 for a period of 10 years from the date of commencement.

Bangladesh has signed avoidance of double taxation agreement with 32 countries including India from the years 1978 till 2014.

Conclusion

It can easily be seen from the above article that the writer is biased towards the enormous growth made by Bangladesh which emerged out of the death of thousands of its citizens and causing untold miseries, taxes and disruption to neighbor like India (the writer was equally affected by the creation of Bangladesh, the huge inflation that engulfed India thereafter and the disruption in Indian economy). But it is a delight to see the blossom of Bangladesh which has set the tone for emergence and economic revival of any new country which would follow its model. How many tax websites of countries narrate many of their pages for tax incentives for industries, infrastructure or other incentives for its citizens towards patronizing industries?

Simply mesmerized by Bangladesh, the writer, like any other peace- loving citizen of the world, would also look forward for its enormous growth in future too.

Reference:

National Board of Revenue, Bangladesh

http://nbr.gov.bd/form/income-tax/eng

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One response to “U S Taxation Vs Bangladesh taxation – Income tax, tax incentives and other information”

  1. S k bhan says:

    Dear mr subramanium
    Your nice article explains the taxation system in Bangladesh and how it helps the country to grow as a great exporter of textiles and other items.
    India has many things to learn from Bangladesh like how they handled their health system,,reduced their infant mortality rates etc
    The article is well presented and quite informative. I am pleased that my Dosa eating friend and tea mate has turned out to be an education guru. Pl keep me sending all articles .

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