Fiscal Incentives for Stock Mark Market et Development in Bangladesh Guideline: SEC is the regulator: No tax DSE and CSE are the trading place: No tax They are no longer physical trading place as it goes to online and brokerage houses are allowed to do substandard for Stock Market Development in Bangladesh, it is necessary to increase the number of company. For bank, there is no difference in listing, but Mobile Phone Company has 45% to 35%. For others 27.5% to 37.5%, but condition is 30 days, when commerce will be there, then dividend will be paid instantly. Publicly Traded Company Dividend declared by less than 10% or failure to pay declared dividend SEC stipulated time (30 days from 9.2.10) 0 Other situation Other company Minimum Tax irrespective of profit or loss: Taka 5,000 If dividend paid at more than 20%, 10% rebate on applicable tax.
27.5% within 37.5% 37.5%
Income from Mutual fund is totally tax exempted. Part A 6 th Schedule. 208. Because they have obligation to pay all the income (95%) directly except management expenses (5%). They can’t retain the income and reinvest it because their prime purpose is not to do business. There is exemption in head Exemption of Dividend from Mutual Fund or Unit Fund: Any income from dividend of a mutual fund or a Unit fund where such dividend does not exceed taka 25000. So if the income from dividend of a mutual fund is less than 25000 then there is no tax on that but if it exceeds 25000tk then the total income is taxable. Mobile phone operator companies Types Type s of Income Incom e
Tax Rate
1. Capital gain from: 0
Transfer of stocks & shares of non-listed private limited company 1 Tran ransfer of other capital assets 2. Dividend income
10% 15% 20%
Resident/non-resident Bangladeshi Company @ 20% Income fr from Di Dividend
U/S 54 54
Resident/non-resident Bangladeshi Person other than Company @ 10%
For example: In EPZ there is Korean company. If Korean company gives dividend, that dividend is not taxable is Bangladesh, it is taxable in Korea. Also he is given stock dividend. According to the definition of income, it is said that stock dividend is not an income. Other Industrial Companies: Types of Income Capital gain from: 0 Transfer of stocks & shares of non-listed private limited company company 1 Transfer Transfer of other capital capital assets assets Dividend income Other income Publicly traded company Dividend declared by less than 10% or failure to pay declared dividend within SEC stipulated time (30 days from 9.2.10) Other situation
Tax Rate 10% 15% 20%
3. Other income
Company being converted into a publicly traded through transfer of at least 10% shares through stock exchanges, of which maximum 5% may be throughPrere-IPO Placement Tax rate is 35% Other company Tax rate is 45% Minimum Tax irrespective of profit or loss: Taka 5,000 Non-Corporate Non-Corporate Taxpayers:
Resident individual assesse, non-resident Bangladeshi, association of persons, firm and other artificial juridical persons 5% tax on Capital gain on transfer of shares of:
a sponsor sponsor shareholder shareholder or director director of a listed company company [source tax u/s 53M and settled tax u/s 82C] a sponso sponsorr shareh sharehold older er or directo directorr of bank, bank, financ financial ial instit instituti ution, on, mercha merchant nt bank, bank, insura insurance nce comp compan any, y, leas leasin ing g comp compan any, y, port portfo foli lio o mana manage geme ment nt comp compan any y and and stoc stock k deale dealerr comp compan any y [proposed] other shareholder or director of a listed company having more than 10% of share capital of a company at any time in income year [proposed]
Placement Shareholder: (106: Transfer of Government) Types of Income
Tax Rate
Capital gain from transfer of shares of listed company [proposed]
10%
If a company raises its share capital through book building 3% 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 [sec. 16E] (Source tax u/s 53L and settled tax u/s 82C) When the company will submit its’ return?
It is mandatory for the company whether it incurs loss or gain. For others the date is 13 th September. For company, the date is by 15 th July or within 6 months whichever is earlier. (Sec. 75) According to 19 (11G), rule 24 company’s return form is different. Assessment: Two types of assessments. One is universal self-assessment and other is normal assessment. In universal self-assessment, there is less hassle in general. When the tax will be given?
For company, they have obligation advance quarterly tax payment. If they have total income of 400000 tk., then they have to pay advance tax, (Sec 68). And the regular payment is before filing the return. Its’ obligation is 15 th July or within 6 months before the income year ends whichever is earlier. But maximum companies follow the financial year, because in 15 th July the account has not closed yet. For this, there is opportunity to take time. It has rule like at first you need to apply for 3 months and after that you can apply for another 3 months. In total, you will get 6 months for return submission. If the assessment is not completed, you cannot submit the revised return. Tax holiday: tax rate is zero on business income, but if he has other income, tax will be imposed on that. He has to submit the return. Advance payment of tax: two types of rules. First one is on his assessed income of previous year. Suppose Suppose assessed income income is 1 crore tk. If he pays (1/4) of 1 crore quarterly, quarterly, then there will be no problem. If he says that in this year, income will go down to 80 lacks, he has to pay tax on that quarterly. But here is a problem. Like if his estimated income fluctuates widely with the actual, suppose his income becomes 1.5 crore, he has to pay tax on 1.5 crore with interest payment calculated from the very beginning (1 st April). In this case, if he has already given tax on 1 crore taka earlier, then no question will be asked. The rule of advance tax is at least 75% of tax should be given. Tax recovery: When the person does not pay tax, then the question of recovery comes. In this regard, at first tax authority will do the assessment. If difference is there, they will issue notice of demand of how to recover tax. {Rule 58 (192 to 246)}
Corporate Taxation in Bangladesh Corporate tax or company tax refers to a tax imposed on entities that are taxed at the entity level in a particular jurisdiction. Such taxes may include income or other taxes. The tax systems of most countries impose an income tax at the entity level on certain type(s) of entities (company or corporation). Many systems additionally tax owners or members of those entities on dividends or other distributions by the entity to the members. The tax generally is imposed on net taxable income. Net taxable income for corporate tax is generally financial statement income with modifications, and may be defined in great detail within the system. The rate of tax varies by jurisdiction. The tax may have an alternative base, such as assets, payroll, or income computed in an alternative manner. Most Most income income tax system systemss provid providee that that certain certain types types of corpor corporate ate events events are not not taxabl taxablee transactions. These generally include events related to formation or reorganization of the corporation. In addition, most systems provide specific rules for taxation of the entity and/or its members upon winding up or dissolution of the entity. In systems where financing costs are allowed as reductions of the tax base (tax deductions), rules may apply that differentiate between classes of member-provided financing. In such systems, items characterized as interest may be deductible, subject to interest limitations, while items characterized as dividends are not. Some systems limit deductions based on simple formulas, such as a debt-to-equity ratio, while other systems have more complex rules. Some systems provide a mechanism whereby groups of related corporations may obtain benefit from losses, credits, or other items of all members within the group. Mechanisms include combined or consolidated returns as well as group relief (direct benefit from items of another member). Most systems also tax company shareholders on distribution of earnings as dividends. A few syst system emss prov provid idee for for part partia iall inte integr grati ation on of enti entity ty and and memb member er taxa taxati tion on.. This This is ofte often n accomplished by "imputation systems" or franking credits. In the past, mechanisms have existed for advance payment of member tax by corporations, with such payment offsetting entity level tax. Many systems (particularly (particularly sub-country sub-country level systems) impose a tax on particular corporate attributes. Such non-income taxes may be based on capital stock issued or authorized (either by by numb number er of share sharess or valu value), e), total total equi equity ty,, net net capit capital, al, or othe otherr meas measur ures es uniq unique ue to corporations. Corporations, like other entities, may be subject to withholding tax obligations upon making certain varieties of payments to others. These obligations are generally not the tax of the
corpor corporati ation, on, but the syste system m may impose impose penalti penalties es on the corpor corporatio ation n or its officer officerss or employees for failing to withhold and pay over such taxes. 1
Taxation of Corporations: Corporations may be taxed on their incomes, property, or existence by various jurisdictions. Many jurisdictions impose a tax based on the existence or equity structure of the corporation. For example, Maryland imposes a tax on corporations organized in that state based on the number of shares of capital stock issued and outstanding. Many jurisdictions instead impose a tax based on stated or computed capital, often including retained profits. In Bangladesh, the principal direct taxes are personal income taxes and corporate income taxes, and a value-added tax (VAT) of 15% levied on all important consumer goods. The top income tax rate for individuals is 25%. For the 2004/05 tax year (July 1 2004–June 30 2005) the the top top corp corpor orat atee rate rate was 45%. 45%. Howe Howeve ver, r, publ public icly ly trad traded ed comp compan anies ies regis registe tered red in Bangladesh are charged a lower rate of 30%. Banks, financial institutions and insurance companies are charged the 45% rate. All other companies are taxed at the 37.5% rate. Effective 1 July 2002, the VAT rate on computer hardware and software was reduced to 7.5%, and certain agricultural equipment and electricity supplied to the agricultural sector was exempted from VAT altogether. VAT on the transfer of land is also to be abolished. Essential agricultural implements and irrigation pumps had previously been excluded from certain taxes. Any income income collec collected ted or gained gained by a compan company y doing doing busine business ss in Bangla Banglades desh, h, whethe whether r resident or not is taxable. Corporate tax rates for industrial companies whose shares are publicly traded are 35% and the rate of those whose shares are not publicly traded is 40%. A tax rate 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).
Statutory Definition of Company: Under Section 2(20), Company means a company as defined in the companies Act, 1913 (vii of 1913) or company act 1994 and includes – a) A body corporate established or constituted by or under any law for the time being in force; b) Any nationalized banking or other financial institution, insurance body and industrial or business enterprise; bb) an association or combination of persons, called by whatever name, if any of such persons is a company as defined in the companies act, 1913 (vii of 1913) or company act, 1994. c) Any foreign association or body not incorporated by or under any, which the board may, by general or special order, declare to be a company for the purposes of this ordinance. 1
From Wikipedia, the free encyclopedia
Residential Status: Residential status may be resident [defined u/s 2(55), ITO] or non-resident [defined u/s 2(42), ITO]. Under section 17, resident assessee (taxpayer) has to pay income tax on total global income including foreign income, but non-resident taxpayer has to pay income tax only on his total domestic domestic (Bangladeshi) (Bangladeshi) income as determined determined u/s 18 (income deemed to accrue or arise in Bangladesh). Under section 2(55), an individual is to be a resident if his period of stay in Bangladesh is at least 182 days in the concerned income year, or at least 90 days in the concerned income year, and at least 365 days in the preceding 4 income years. A partnership firm is considered as resident, if the control and management of its affairs situated wholly or partly in Bangladesh in the concerned income year. A company will be a resident, if control and management of its affairs situated wholly in Bangladesh in the concerned income year. Otherwise, a taxpayer will be treated as non-resident [u/s 2(42)]. 2(42)] .2 3
Tax Rate for Corporate Taxpayers: Types of Company
*
Bank , insurance, financial institutions
Other company**
Type of Income
(1) Capital gain arising out of
- Transfer of stocks & shares of private limited company [S.R.O. No. 220 Ain/Aykar/2004 dated 13.07.2004] - Transfer of other capital assets
(2) Dividend income (3) Other - Both for publicly traded and not publicly income traded company - Transfer of stocks & shares of private (1) Capital limited company [S.R.O. No. 220gain Ain/Aykar/2004 dated 13.07.2004] arising out of - Transfer of other capital assets (2) Dividend income - For publicly traded company * Dividend declared by less than 10% or failure to pay declared dividend (3) Other within SEC stipulated time income * Other situation - For other company
*
Tax Rates for AY 2006200707 08
10%
10%
15% 15%
15% 15%
45%
45%
10%
10%
15% 15%
15% 15%
40% 30%
40% 30%
40%
40%
Under section 16C, a bank company, if shows, in the return, profit exceeding 50% of the aggregate sum of capital and reserve, shall pay tax @ 15% of such excess profit as additional tax. ** Under section 16B, a listed company other than a banking or insurance company, company, if has not issued, declared or distributed dividend or bonus share equivalent to at least 15% of paid-up capital within six months immediately following any income year, shall pay tax @ 5% of “undistributed profit” (accumulated profit including free reserve) as additional tax.
Submission of Return:
2
Tax Planning in Business: Bangladesh Perspective by Swapan Kumar Bala, FCMA
3
Tax Planning in Business: Bangladesh Perspective by Swapan Kumar Bala, FCMA
The return under sub-section 2[(1), (1A) and (1B)] shall 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. Signed and Verified(i)
in the case of an individual, by the individual himself ; where the individual is absent from Bangladesh, by the individual concerned or by some person duly authorised by him in this behalf; and when the individual is mentally incapacitated from attending to his affairs, by his guardian or by any other person competent to act on his behalf ;
(ii)
in the case of Hindu undivided family, by the Karta, and, where the Karta is absent from Bangladesh or is mentally incapacitated from attending to his affairs, by any other adult member of such family ;
(iii) in the case of a company or local authority, by the principal officer thereof ; (iv) in the case of a firm, by any partner thereof, not being a minor; (v)
in the case of any other association, association, by any member member of the association association or the principal principal officer thereof ; and
(vi) in the case of any other person, by that person or by some person competent to act on
his behalf.
Assessment: Provisional Assessment(1) The Deputy Commissioner of Taxes may, at any time after the first day of July of the year for which the assessment is to be made, proceed to make, in a summary manner, a provisional assessment of the tax payable by the assessee on the basis of the return and the accounts and documents, if any, accompanying it and where no return has been filed, on the basis of the last assessment including an assessment under this section.
(2)
In making making a provisional provisional assessmen assessmentt under this this section, section, the Deputy Deputy Commission Commissioner er of Taxes shall-(a) rectify any arithmetical errors in the return, accounts and documents; (b) allow, on on the basis basis of the the information information availabl availablee from the return, return, accoun accounts ts and documents, such allowances as are admissible under the Third Schedule and any loss carried forward under section 38 or 39 or 41. (3) For the purpo purposes ses of payment payment and and recovery, recovery, the tax tax as determined determined to be be payable payable upon pro provi visi sion onal al asse assess ssme ment nt shal shalll have have effec effectt as if it were were dete determ rmin ined ed upon upon regul regular ar assessment.
(4)
The tax paid or deemed to have been paid under Chapter VII, in respect of any income provisionally assessed under sub-section (1), shall be deemed to have been paid towards the provisional assessment.
(5)
Any amount amount paid or or deemed to have have been paid paid towards towards provision provisional al assessment assessment under under this section shall be deemed to have been paid towards regular assessment; and the amount paid or deemed to have been paid towards provisional assessment in excess of the amount found payable after regular assessment shall be refunded to the assessee.
(6)
Nothing Nothing done done or suffered suffered by reason reason or in consequen consequence ce of any provision provisional al assessment assessment made under this section shall prejudice the determination on merit of any issue which may arise in the course of regular assessment.
(7)
There shall be no right of appeal against a provisional provisional assessment assessment under this section. section.
Universal Self-Assessment: (Sec. 82BB) Two new sub-sections 4 and 5 have been added to this section. Sub-sec 4, no question as to the source of investment by a new assessee deriving income
from business or profession shall be made when he shows a minimum income of 25% of invested capital and pays tax before filing of return. Sub-sec. 5, initial capital investment shall not be transferred or let out within five years from
the end of the assessment year in respect of which return of income has been filed under this section.
Tax Payment: Deduction at Source and Advance Payment of Tax(1)
Notwithstand Notwithstanding ing that that regular regular assessment assessment in respec respectt of any income income is to be be made later later in any assessment year, and without prejudice to the charge and recovery of tax under this Ordinance after such assessment, the tax on income shall be payable by deduction or collection at source, or by way of advance payment.
(2)
any sum deducte deducted d or collected, collected, or paid paid by way of of advance advance payment payment shall, shall, for the purpos purposee of computing the income of an assessee, be deemed to be the income received, and be treated as payment of tax in due time, by the assessee.
Payment of Tax On The Basis Of Return1)
Every person who is required to file a return under section 75 shall, shall, on or before
the date on which he files the return, pay the amount of the tax payable by him on the basis of such return as reduced by the amount of any tax deducted from his income or paid by him. 2)
Any Any amou amount nt pai paid d unde underr subsub-se sect ctio ion n (1) (1) shal shalll be deem deemed ed to to have have bee been n paid paid tow toward ardss
the sum as may be determined to be payable by him after regular assessment.
3)
A pers person on who who,, with withou outt reaso reasona nabl blee cause cause,, fails fails to to pay pay the the tax as as requ requir ired ed by by subsub-
section (1) shall be deemed to be an assessee in default.
