Bangladesh-Tax-Handbook-2017-2018 Final PDF

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Bangladesh-Tax-Handbook-2017-2018 Final...

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BDO IS THE LEADER FOR EXCEPTIONAL CLIENT SERVICE

BDO International Limited is a UK company limited by guarantee. It is the governing entity of the international BDO network of independent member firms (‘the BDO network’). Service provision within the BDO network is coordinated by Brussels Worldwide Services BVBA, a limited liability company incorporated in Belgium with its statutory seat in Zaventem. Each of BDO International Limited, Brussels Worldwide Services BVBA and the member firms of the BDO network is a separate legal entity and has no liability for another such entity’s acts or omissions. Nothing in the arrangements or rules of the BDO network shall constitute or imply an agency relationship or a partnership between BDO International Limited, Brussels Worldwide Services BVBA and/or the member firms of the BDO network. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

https://www.bdo.global/en-gb/home

Bangladesh Tax Handbook 2017 - 2018

Foreword Taxation is an arena that impacts every walk of life–from individuals to big corporates and conglomerates. Being up to date on relevant taxation laws gives anyone an upper hand in ensuring legal compliance along with avoidance of excessive taxation. The Bangladesh Tax Handbook 2017 - 2018 summarizes the salient features of the laws and rules of Income Tax, Value Added Tax and Gift Tax and any changes brought to them through the Finance Act, 2017 (effective from 1 July 2017). It has been our humble effort to express the intricate provisions of various taxation laws in layman’s words to make it easily comprehendible. This publication is intended to provide general guidance, rather than a comprehensive one, on matters of conventional interest of our valued clients, business houses and potential investors. We have given our every effort to ensure correctness of information and accuracy of presentation of the matters presented in this book. However, readers should always seek professional advice before acting on any information provided in this tax handbook. For further information and assistance or professional advice please feel free to contact our office.

Editorial Board Baizid Md. Faiaz, MBA Sushmita Noor, BBA Advisory Board Nurul Haque, FCA Faruk U. Ahammed, FCA Nehal Ahmed, FCA Md. Shamsur Rahman, FCA Md. Roknuzzaman, ACA

Business Consulting Services Contact us Phone : +880-9611002202, +880-2-8413114 Fax : +880-2-8417979 E-mail : [email protected] www.bdo.com.bd/bcs

All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission of the publisher.

Table of Contents MAJOR CHANGES IN 2017 - 2018 .............................................................. 1 1.

Major changes in Income Tax .............................................................. 3

2.

Major changes in Value Added Tax (VAT) ................................................15

SUMMARY OF INCOME TAX ..................................................................... 17 3.

Important definitions ......................................................................19

INCOME ........................................................................................... 21 4.

Residential status ..........................................................................21

5.

Scope of total income .....................................................................21

6.

Heads of income ............................................................................22

7.

Income from salary .........................................................................22

8.

Interest on securities ......................................................................25

9.

Income from house property .............................................................25

10. Agricultural income ........................................................................26 11. Income from business or profession .....................................................28 11.1 Admissible deductions ..............................................................28 11.2 Deductions not admissible in certain circumstances ...........................31 11.3 Normal depreciation allowance ...................................................33 11.4 Initial depreciation allowance .....................................................34 11.5 Accelerated depreciation allowance .............................................35 11.6 Amortization of license fees .......................................................35 12. Capital gains ................................................................................36 13. Income from other sources ...............................................................37 14. Deemed income ............................................................................38 TAX RATE STRUCTURE .......................................................................... 41 15. Personal tax rate structure ...............................................................41 15.1 Tax on capital gain...................................................................42 15.2 Other tax rates ......................................................................42 15.3 Surcharge on individual assessee ..................................................42 15.4 Tax on non-resident assessee ......................................................43

Bangladesh Tax Handbook 2017 – 2018

16. Corporate tax rate structure .............................................................43 16.1 Additional tax ........................................................................44 17. Minimum tax ................................................................................45 17.1 Based on class of assessee ..........................................................45 17.1.1 Individual, HUF, Firm, AOP, AJP ...........................................45 17.1.2 Company and Firm ..........................................................46 17.2 Based on source of income .........................................................46 17.3 Determination of income, tax liability and minimum tax .....................48 18. Tax deducted at source ....................................................................51 19. Set-off and carry forward of losses ......................................................64 20. Carry forward of depreciation allowance ..............................................65 FILING OF RETURN & PAYMENT OF TAX ..................................................... 66 21. Filing of return of income .................................................................66 21.1 Schedules and documents to be submitted with return of income ..........68 22. Filing of revised return ....................................................................69 23. Return of withholding tax .................................................................69 24. Payment of tax on the basis of return ..................................................70 25. Payment of tax deducted at source .....................................................70 26. Advance payment of tax ..................................................................71 26.1 Advance tax based on income .....................................................71 26.2 Advance tax on cigarette manufacturers ........................................71 26.3 Advance tax on private motor car owners .......................................71 27. Mode of payment ...........................................................................72 ASSESSMENT ......................................................................................73 28. Provisional assessment ....................................................................73 29. Assessment on correct return ............................................................73 30. Universal self-assessment .................................................................73 31. Spot assessment ............................................................................74 32. Assessment after hearing .................................................................74 33. Assessment on the basis of report of a Chartered Accountant ......................75 34. Best judgement assessment ..............................................................75 35. Other assessments .........................................................................75

Bangladesh Tax Handbook 2017 – 2018

TAX INCENTIVE ................................................................................... 76 36. Tax exemption ..............................................................................76 37. Reduced rate of tax ...................................................................... 103 38. Tax rebate ................................................................................. 108 39. Conditions for tax exemption for newly established industrial undertakings and physical infrastructure facilities ....................................................... 111 40. Investment allowances eligible for tax credit ....................................... 111 41. CSR activities eligible for tax credit .................................................. 113 42. Special tax treatment ................................................................... 114 43. Avoidance of double taxation .......................................................... 115 TRANSFER PRICING.............................................................................116 44. Transfer pricing ........................................................................... 116 44.1 Computation of arm’s length price ............................................. 116 44.2 Maintenance and keeping of information, documents and records ....... 117 44.3 Submission of statement of international transaction ...................... 118 44.4 Report from an accountant to be furnished ................................... 118 44.5 Procedure from record keeping to submission of return .................... 119 44.6 Assessment procedure ............................................................ 120 OFFENCES, PENALTIES & PUNISHMENTS ...................................................121 45. Offences, penalties & punishments .................................................... 121 SUMMARY OF VALUE ADDED TAX ............................................................125 46. Taxes imposed under VAT Act, 1991 ................................................... 127 47. Goods and services chargeable to VAT ................................................ 127 48. Persons responsible to pay VAT ........................................................ 127 49. VAT deduction at source ................................................................. 128 50. Deposit of deducted VAT ................................................................ 128 51. Scope of VAT and specified rates ....................................................... 129 SUMMARY OF GIFT TAX ........................................................................133 52. Gift tax .................................................................................... 135 53. Exemption from gift tax ................................................................ 135 54. Rates of gift tax .......................................................................... 136 55. Return of gift tax ......................................................................... 136 Bangladesh Tax Handbook 2017 – 2018

MAJOR CHANGES IN 2017 - 2018

Business Consulting Services, a Bangladeshi registered partnership firm, is a member of BDO International Limited, a UK company limited by guarantee.

1.

Major changes in Income Tax 1.1

Personal tax rate structure [Finance Act, 2017] There has not been much change in the 6 tier income slabs and tax rate structure applicable for individual assessee (including non-resident Bangladeshi), Hindu undivided family, partnership firm, association of persons and artificial juridical person applicable for the Income Year 2016 - 2017 and Assessment Year 2017 - 2018. The only change made is the increase in the exemption limit for persons with disability from Tk. 375,000 to Tk. 400,000. The following table shows a comparative analysis of the personal tax rate structure between Assessment Years 2017 - 2018 and 2016 – 2017 – Assessment Year: 2017 - 2018

Assessment Year: 2016 – 2017

(Income Year: 2016 - 2017)

(Income Year: 2015 - 2016)

Income

Rate of tax

Income

Rate of tax

On the first Tk. 250,000 of total income of male assesse

Nil

On the first Tk. 250,000 of total income of male assesse

Nil

On the first Tk. 300,000 of total income of female assesse

Nil

On the first Tk. 300,000 of total income of female assesse

Nil

On the first Tk. 300,000 of total income of persons aged 65 years & above

Nil

On the first Tk. 300,000 of total income of persons aged 65 years & above

Nil

On the first Tk. 400,000 of total income of person with disability

Nil

On the first Tk. 375,000 of total income of person with disability

Nil

On the first Tk. 425,000 of total income for gazetted war wounded freedom fighters

Nil

On the first Tk. 425,000 of total income for gazetted war wounded freedom fighters

Nil

On the next Tk. 400,000 of total income

10%

On the next Tk. 400,000 of total income

10%

On the next Tk. 500,000 of total income

15%

On the next Tk. 500,000 of total income

15%

On the next Tk. 600,000 of total income

20%

On the next Tk. 600,000 of total income

20%

On the next Tk. 25% 3,000,000 of total income

Bangladesh Tax Handbook 2017 – 2018

On the next Tk. 3,000,000 25% of total income

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1.2

Assessment Year: 2017 - 2018 (Income Year: 2016 - 2017)

Assessment Year: 2016 – 2017 (Income Year: 2015 - 2016)

Income

Rate of tax

Income

Rate of tax

On the balance of total income

30%

On the balance of total income

30%

Non-resident individual foreigner assessee

30%

Non-resident individual foreigner assessee

30%

Surcharge on individual assessee [Finance Act, 2017] The surcharge on tax applicable for individual assessees has remained unchanged for Assessment Year 2017 – 2018. However, surcharge has been introduced on assessees engaged in manufacturing biri, jorda, gul and or tobacco products at 2.5% on income from such business. Such surcharge will be imposed on all classes of assessee (individual, company etc.) An individual assessee engaged in the business of manufacturing biri, jorda, gul or other tobacco products and having net wealth exceeding Tk. 2.25 crore will have to pay both of the above surcharges.

1.3

Corporate tax rate [Finance Act, 2017] The corporate tax rate structure has remained unchanged for Assessment Year 2017 – 2018. Chapter 16 Corporate tax rate structure elaborates the applicable rates.

1.4

Definitions [Section – 2] ff Dividend [Section – 2(26)]: Section – 2(26) has been amended including any distribution of profit of a mutual fund or an alternative investment fund within the scope of dividend ff Income year [Section – 2(35)]: The proviso of Section – 2(35) has been amended providing the option of a different income year for a subsidiary, sub-subsidiary, branch office or liaison office of a parent company incorporated outside Bangladesh, for the purpose of consolidation of accounts with the parent company, upon approval of the Deputy Commissioner of Taxes ff Tax day [Section – 2(62A)]: Section – 2(62A) has been amended specifying that the tax day for a company, for whom 15th day of the 7th month following the income year falls before 15th September of the assessment year, to be 15th September of the assessment year

Bangladesh Tax Handbook 2017 – 2018

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1.5

Un-explained investments, etc., deemed to be income [Section – 19] 2 changes have been made in Section – 19. A summary of the changes is given below – ff Section - 19(28): A proviso regarding loan or gift received from spouse or parents has been added. If any person receives a loan or gift from spouse or parents, such loan or gift will not be treated as income of such person provided that a banking or formal channel is involved in the process. Reflection of the loan or gift in the bank statement of either the receiver or the provider will be considered as involvement of a banking channel. Utilization of cash received as gift or loan to acquire any formal asset (such as FDR, savings instrument, apartment etc.) will be considered as involvement of a formal channel. However, the formal asset acquired has to be specific. Declaration or affidavit for cash gift / loan and reflection of it in the returns of income of the receiver and the provider would not be sufficient in this regard and the cash gift / loan will be treated as income of the receiver. ff Section - 19(31): Section – 19(31) has been replaced. Amended return of income filed under Section – 82BB has been brought within the scope of this section. Thus any additional income subject to tax exemption or reduced tax rate as shown in any revised or amended return filed under Section – 78, 82BB and 93 compared to the original return will be deemed as income from other source.

1.6

Salary paid to employees failing to file return of income [Section – 30(aaaa)] A new clause (aaaa) has been added making an employer responsible to appraise the obligation of its employees to file return of income. If an employee who is required to but has not filed return of income or has not obtained time extension either, any salary paid to such employee after his / her tax day will not be admissible as deduction from income from business or profession of the employer.

1.7

Overseas travelling expenditure for services provided to the Government [Section – 30(k)] A new proviso has been added withdrawing any limit on overseas travelling expenditure of an assessee engaged in providing services to the Government, making full of such expenditure deductible from income from business or professions. However to be entitled for the deduction, such overseas travelling has to be a key requirement of the services provided directly to the Government.

Bangladesh Tax Handbook 2017 – 2018

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1.8

12-Digit TIN required for certain cases for expenses to be deductible [Section – 30(o)] A new clause has been added making any payment made to certain persons, who are required to but have not obtained 12-digit TIN, inadmissible as deduction from income from business or profession of the assessee. This clause will be applicable for payment to the following persons – ff Agent or distributor of any company ff Person receiving commission, fee or other sum for money transfer through mobile banking or other electronic means and recharge of mobile phone account ff Resident person providing advisory or consultancy service, catering service, event management service, manpower supply service or security service to a company

1.9

Deduction at source from payment...