Internship Report

University of Dhaka
MBA (Evening Program)
Department of Accounting & Information Systems

Topic: Overview of Taxation System in Bangladesh

Date: 14 January 2018

Submitted To: Submitted By:

Professor Md. Nazim Uddin Bhuiyan FCMA Jayed bin Hasnat

Professor Id: 11326054
Dept. of Accounting and Information Systems Batch: 26
Business Faculty Dept. of AIS
University of Dhaka. Business Faculty
University of Dhaka

Department of AIS
University of Dhaka
 ACKNOWLEDGEMENTS

All gratitude and praises are to almighty Allah, who has enabled me to complete this report. I
am grateful to our course teacher Professor Md. Nazim Uddin Bhuiyan FCMA to provide consistent
advice and guidelines thorough out the period in making this report.
 ABSTRACT

This report highlights The Taxation Systems in the context of business environment in Bangladesh. Provided that the
complexity and the tax law ambiguity prevailing in Bangladesh, this report encompasses the traditional tax planning
devices along with a brief overview of the Scholes-Wolfson paradigm of tax planning strategies.
However, it is not feasible to plan income tax in accordance with Statement of Financial Position and Statement of
profit or loss and other comprehensive income due to unpredictability of income taxes rates on the future years.
And, long term tax planning will require some assumptions, forecasted Balance sheet and profit or loss statements
and consistent monitoring to NBR rules and regulations and make adjustment to the plan in accordance of aforesaid
regulatory bodies rules and regulations.
On the first few chapters various tax laws, rate and provisions are explained briefly in context of Bangladesh. And,
at the end of this report, chapter 11 contains tax liability calculation of two real life companies of different industries.
The fiscal plans are referred to the related tax law provisions which are expected to be useful for the existing and
potential businessmen.
 DECLARATION
I, Jayed Bin Hasnat, a student of department of AIS in University of Dhaka, do hereby solemnly declare that the work
presented in this report has been carried out by myself under the direct supervision of Professor Md. Nazim Uddin
Bhuiyan FCMA, Department of AIS, Business Faculty, University of Dhaka, Dhaka, Bangladesh.
And, it has not been previously submitted to any other university/ college/ organization for an academic
qualification/ certificate/ diploma or degree till date.
 LETTER OF TRANSMITTAL
14 January 2018

Professor Md. Nazim Uddin Bhuiyan FCMA

Professor
Department of Accounting and Information Systems (AIS)
University of Dhaka
Dhaka, Bangladesh.

Subject: Submission of Internship Report.

Dear Sir,
I am pleased to herewith submit the Internship report titled ‘Taxation System Overview in context of Bangladesh’. I
have put my best effort to complete this work successfully. I will be available to interpret in details if any part of
this term report requires to be interpreted.

I herewith, take it as the opportunity to express my appreciation for the courtesy, co-operation and resource
materials extended to us during the period to fulfill all the criteria for this report.

Thanking you,

Yours sincerely,

Jayed Bin Hasnat

ID: 11326054
Dept. of AIS
University of Dhaka
 TABLE OF CONTENTS

Chapter No. Particulars Page No.

1 Introduction 2
2 Tax Planning Under The Scholes - Wolfson Paradigm 3-6
3 Taxation systems in Bangladesh in Brief 7 - 10
4 Company Tax Assessment 11 - 14
5 Admissible and Inadmissible Expenses 15 - 19
6 Capital Gain 20 -22
7 Tax Holiday 23 - 26
8 Corporate Social Responsibility (CSR) 27 -28
9 Withholding Tax 29 - 29
10 Transfer pricing 30 - 34
11 Computation of Tax liability of two companies 35 - 40
12 Epilogue 41 - 41
01
INTRODUCTION
The term ‘tax planning in business’ consists of three main words: tax, planning, and business. Tax is “a
contribution exacted by the state” – Chambers English Dictionary (1992). “The term taxes is confined to compulsory,
unrequited payments to general government” – (OECD, 1988: 37; vide Wilkinson, 1992: 2). Planning is “the process
of determining in advance the factors necessary to achieve a set of goals; designing an effective means of achieving
some future goals (ends)” – Kohler’s Dictionary for Accountants (Cooper and Ijiri, 1984: 383). Business means “the
carrying on of trade or commerce, involving the use of capital and having, as a major objective, income derived from
sales of goods or services” – Kohler’s Dictionary for Accountants (Cooper and Ijiri, 1984: 78). According to section
2(14) of the Income Tax Ordinance (ITO), 1984, “ business” includes any trade, commerce or manufacture, or any
adventure or concern in the nature of trade, commerce or manufacture.

Thus, ‘tax planning in business’ means dealing with the tax matters of a business entity with a view to maximizing
the after-tax rate of return on investments after ensuring voluntary tax compliance.

For this purpose, each business entity has to –

1. ensure that it keeps proper records;
2. deduct tax at source where it is necessary;
3. pay advance tax in time, if applicable;
4. file returns in time;
5. comply with notices received from the tax authorities; and
6. Fully aware of legal remedies where it does not have its rights under the law recognized.

Tax function activities of a business entity are those activities which are concerned with fiscal issues. These
functions are of two types: (1) tax compliance activities, and (2) tax planning activities. Tax compliance
activities are those activities which include the functions or obligations according to the provisions of various fiscal
statutes. Tax planning activities means dealing with the tax matters of a taxpayer with a view to maximizing the
after-tax rate of return on investments after ensuring voluntary tax compliance.

A company is taxable for its total income always as a non-pass-through entity. The shareholders of the company are
taxable for the income of the entity, only if distributed to them as dividend, which is subject to a source-tax at 15%
(u/s 54). At the time of sale/transfer of shares, the shareholder may require to pay tax on capital gain arising from
the sale or transfer. Thus, shareholder-level of tax usually includes tax on dividend distributed and tax on capital
gain on sale/transfer of shares. However, capital gain on transfer of shares of a company established under the
Companies Act 1994 is subject to a reduced rate of 15%, but the capital gain on transfer of stocks and shares of
public companies listed with a stock exchange in Bangladesh is fully exempted as per under section 32(7).

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02
TAX PLANNING UNDER THE SCHOLES-WOLFSON PARADIGM

Myron S. Scholes, the 1997 Nobel Winner in Economics as the co-originator of the Black-Scholes option pricing model
and a partner of Oak Hill Capital Management and Mark A. Wolfson, a managing partner of Oak Hill Capital
Management, have jointly developed a paradigm for tax strategy in 1992 through their book titled “Taxes and
Business Strategy: A Planning Approach”. They have adopted a “contractual perspective” for their paradigm and
suggested three key aspects of tax planning globally:
1. Multilateral Approach: All contracting parties must be taken into account in tax planning, which allows
a global or multilateral, rather than a unilateral, approach.
2. Importance of Hidden Taxes: All taxes (both implicit tax and explicit tax) must be taken into account
considering the global measures of taxes. Implicit tax is the decrease in return due to availing tax favored
investment and explicit tax is the tax deposited in the treasury.
3. Importance of Nontax Costs: All costs of business must be considered, not just taxes.

Thus, the paradigm is based on consideration of ALL PARTIES, ALL TAXES, and ALL COSTS.
According to Scholes and Wolfson, taxing authority is always an uninvited party to all contracts. Taxing authority’s
roles can be seen as follows. Taxing authority –
1. Brings to each of its “forced” ventures with taxpayers a set of contractual terms (tax rules) ;
2. Does not negotiate the contractual terms separately for each venture;
3. Announces a standard set of the above terms taxpayers must accept;
4. Claims a partnership interest in taxpayer’s profit but not at the time of loss;
5. Does not exercise any voting rights in the entity;
6. Does not directly monitor taxpayer’s performance to determine whether taxpayers are violating the
contractual terms;
7. But does conduct audits; and
8. Being a partner in all firms enables the taxing authority to determine when taxpayers are reporting result
far out of line with what other taxpayers are reporting in similar situations (information that is used to
select return for audit).

Types of Tax Plans

Contractual terms that taxing authority imposes on its joint venture are the tax rules, which result from a variety of
socioeconomic forces: (i) finance public projects, (ii) redistribute wealth and (iii) encourage economic activities.
Government ensures objectives of the tax rules by designing to discriminate among different economic activities.
This has been done through two things: progressive taxation (for redistributing wealth) and subsidy (for encouraging
economic activities). Tax rules provide also to arrange taxpayer’s affairs to keep the tax bite as painless as possible.
Thus, progressive taxation, subsidy and provision to arrange taxpayer’s affairs to minimize tax-bite give rise to

Corporate Tax Planning Page 3 of 41

marginal tax rate (MTR) that widely varies: (1) from one contracting party to the next; (2) for a given contracting party
over time; and (3) for a given contracting party over different economic activities.

Changes in tax statutes are a regular and frequent event. At the time of passing the budget, these changes are
almost obvious. Even in the name of revenue, SROs (sometimes cynically referred to as Short Route to Opulence) may
be issued at any time for changing the taxing provisions. All changes in tax regimes involve turning two types of
dials:
1. Levels of tax rates (in case of slab-taxation system, slabs may be changed);
2. Relative tax rates varying:
• Across different tax paying units;
• Across different tax periods for the same taxpayer; and
• Across different economic activities for the same taxpayer and same time period.

Thus, types of income tax planning activities are:

1. Attempts to have income converted from one type to another (ordinary income vs. capital gain,
regular income vs. windfall income, domestic income vs. foreign income, set-off of loss under any head);
2. Attempts to have income shifted from one pocket to another (taxable vs. tax-exempt sources);
and
3. Attempts to have income shifted from one time period to another (delaying recognition of
income, if tax rates are constant or declining over time, instant salary vs. deferred compensation)

In short, the types of income tax planning activities are:

1. Shifting income from one pocket to another
2. Shifting income from one time period to another
3. Converting income from one type to another.

Tax Planning as a Tax-Favored Activity

Tax planning itself is a tax-favored activity because money spent thereon is tax deductible and tax savings arising
from tax planning is effectively tax exempt because they reduce taxes payable and hence, more tax-favored than
tax-exemption. When PTROR (pre-tax rate of return) is equal to ATROR (after-tax rate of return), then it is called
tax exemption (a situation in which an asset escapes explicit taxation).

For example, there are two alternatives with marginal tax rate (MTR) of 15%: Alternative-1: Invest Tk. 10,000 in
fully taxable corporate bonds for one year with a yield of 10% p.a. before taxes. And Alternative-2: Invest Tk.
10,000 in tax planning services to save Tk. 11,0000 in taxes in one year. PTROR (Pre-tax Return/Pre-tax Investment)
for Alternative-1 will be 10% [= (Tk. 10,000x10%)/Tk. 10,000]. And PTROR for Alternative-2 will also be 10% [=(Tk.
11,000 – Tk. 10,000)/Tk. 10,000]. But ATROR (After-tax Return/After-tax Investment) for Alternative-1 will be 8.5%
[={(Tk. 10,000x10%)(1 – 15%)}/Tk. 10,000]. And ATROR for Alternative-2 will be 11.76% [= {(Tk. 11,000 – Tk.
10,000) (1 – 0%)}/{Tk. 10,000(1 – 15%)}]. Thus, Alternative-2 (tax planning) yields higher ATROR and hence, tax-
favored.
Corporate Tax Planning Page 4 of 41
A Brief Highlight on Scholes-Wolfson Tax Strategy
Scholes-Wolfson tax strategy depends on identification of tax clientele, which is based on implicit tax and also the
adoption of tax arbitrage. Implicit tax arises because the pre-tax investment returns available on tax-favored
assets are less than those available on tax-disfavored assets. Taxpayers wish to obtain the tax-favored treatment
offered by the investment bid up the price of the investment lowering the pre-tax return. Thus, a desperate effort to
avoid tax might emphasize only to reduce explicit tax by adopting tax-favored treatments, might reduce the after-
tax return and hence there will be a decrease in after-tax return, which is nothing but an implicit tax. Implicit tax
rate is the difference in pretax returns on a given asset, and the benchmark asset (usually, “fully taxable bonds”
taken as benchmark asset). Say, pretax return on fully taxable bond is 10%, and fully tax-exempted return on
government security is 7%, then implicit tax rate on government security 30% [=(10% – 7%)/10%]. Thus, paying
tax at a rate of 30% on fully taxable bond would result in a return of 7%, the same as the pretax return on tax-
exempt government security. Taxpayers who are indifferent between purchasing two equally risky assets, the
returns to which are taxed differently, are called the marginal investors.

Taxpayers that prefer one investment over another are referred to as the tax clientele for the preferred
investment. Unless investors correctly identify their proper tax clientele, they will not maximize their after-tax rates
of return. Usually to identify the proper tax clientele, one way is to compute the implicit tax on tax-favored
investment based on a fully taxable investment, then clientele of the fully taxable investment will be the taxpayers
having “marginal explicit tax rates” (METR) below the implicit tax found. For example, pretax return on fully taxable
bond is assumed at 10%, and fully tax-exempted return on government security is 7%, then implicit tax rate on
government security is 30% [=(10%–7%)/10%]. The clientele for fully taxable bond are taxpayers with METR below
30%. A taxpayer with 20% METR will earn 8% [=10%(1–20%)] after-tax by investing in fully taxable bond, 1%
greater than in tax-exempt government security.

Tax arbitrage is the purchase of one asset (a “long” position) and the sale of another (a “short” position) to create
a sure profit despite a zero level of net investment. Through tax arbitrage, one can maximize after tax return
effectively without adopting easy and desperate tax-minimization strategies which might introduce significant
nontax costs. There are two types of tax arbitrage: organizational-form arbitrage and clientele-based arbitrage. They
can be briefly explained as follows:
Arbitrage Type of taxpayers Long Position Short Position
Organizational All taxpayers An asset or productive activity An asset or productive activity
form through a favorably taxed through an unfavorably taxed
organizational form organizational form
Clientele High-tax-rate A relatively tax-favored asset A relatively tax-disfavored asset
based taxpayers (one that bears a relatively (one that bears a relatively more
high implicit tax) explicit tax)
Low-tax-rate A relatively tax-disfavored A relatively tax-favored asset
taxpayers asset
But tax arbitrage may be prevented by tax-rule restrictions and frictions. Tax-rule restrictions are the
restrictions imposed by the taxing authority, which prevent taxpayers from using certain tax arbitrage techniques
Corporate Tax Planning Page 5 of 41
to reduce taxes in socially undesirable way (e.g., placing limits by tax authority on taxpayer’s ability to deduct
interest only from the income out of investment by the borrowing) and frictions are the direct transaction costs.
Although tax-rule restrictions and frictions may impede employment of tax arbitrage technique, but these frictions
and tax-rule restrictions that make potential returns to tax planning so high.

Corporate Tax Planning Page 6 of 41

03
TAXATION SYSTEMS IN BANGLADESH IN BRIEF
Coverage:
1. Income Tax Ordinance 1984
2. Income Tax Rules 1984
3. SRO (Statutory Regulatory Order)
4. Circular of NBR
5. Case References
a. ITR (Indian Tax Report)
b. BTD (Bangladesh Tax Decisions)

Direct Tax Vs Indirect Tax:

Impact and incidence of the direct tax are on the same person, but in case of indirect tax impact and incidence can
be shifted to others, which are ultimately borne by the final consumer.
 Direct tax – Income tax, travel tax, gift tax etc.
 Indirect Tax – VAT, turnover tax, Supplementary Duty.

Income Tax Ordinance Vs Income Tax Rules:

Tax Ordinance – made or changed by the parliament
Tax Rules – made by NBR
Govt. can reduce tax burden through SRO but cannot impose tax. Power to impose new tax rested on the
parliament.

Income tax authority is as follows –

1. NBR – Supreme authority headed by the Chairman‘.
2. Chief Commissioner of Taxes (not yet appointed anyone)
3. Commissioner of Taxes (CT);
a. DG (Central Intelligence Cell, CIC);
b. DG (Inspection);
c. CT (Appeal);
d. DG (Training);
Corporate Tax Planning Page 7 of 41
 e. CT (Large Taxpayer Unit);
4. Additional Commissioner of Taxes (ACT);
a. Appellate Additional Commissioner of Taxes (AACT);
b. Inspecting Additional Commissioner of Taxes (IACT);
5. Joint Commissioner of Taxes (JCT);
a. Appellate Joint Commissioner of Taxes (AJCT);
b. Inspecting Joint Commissioner of Taxes (IJCT)
6. Deputy Commissioner of Taxes (DCT)
a. TRO – Tax Recovery Officer;
b. TPO - Transfer Pricing Officer
7. Assistant Commissioner of Taxes;
8. Extra Assistant Commissioner of Taxes; and
9. Inspector of Taxes
Resident status
SL Particulars Status
1. Partial control & Management Non resident
2. Full control & Management Resident

Difference between resident and non resident

SL Particulars Resident Non resident
1. Taxed on Global income Local income
2. Investment allowance Allowable Not Allowable
3. Tax rate Normal rate Direct tax rate

Some Important notes

- A company whether a Bangladeshi company or a foreign company whether it is registered at Registrar of Joint
Stock Companies of Bangladesh or not is resident here in Bangladesh if the control and management of its affairs
is situated fully in Bangladesh during the income year.

- In the classical word, a company cannot eat or sleep but it can keep house and do business and for the purpose
of income tax a company resides where it really keeps house and does business, i.e. where the central
management and control actually abides. While the location of control and management is the sole test of
residence for HUF, Firm and AOP, it is also a test for companies.

- Here controls mean de facto control not merely de jure control. The control and management, the head and
brain, does not reside where there is some ultimate power of control such as the power to alter the articles of
associations by a special resolution or the power to interfere with fundamental finance.

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- A company may be resident in Bangladesh even though its entire trading operations are carried on abroad. If
the management and control is situated here, the company is resident here and it does not in the least matter
where the actual selling and buying of the goods takes place.

Tax Rates for Companies other than Banks, insurance and NBFI

SL Particulars Rates
1. Listed Companies 25%
2. Non listed or non-resident company 35%
3. Mobile Phone Operator 45%
If publically traded 40%
4. Cigarette manufacturers 45%

Some important rates for Company

 Section - 16B; Charge of additional tax:
Notwithstanding anything contained in any other provision of the Ordinance, where---
A. a public limited company, not being a banking or insurance company, listed with any stock exchange in
Bangladesh, has not issued, declared or distributed dividend or bonus share equivalent to at least fifteen
percent (15%) of its paid up capital to its shareholders within a period of six months immediately following
any income year, the company shall be charged additional tax at the rate of five per cent (5%) on the
undistributed profit in addition to tax payable under this Ordinance: or

B. (any person employs or allows, without prior approval of the Board of Investment or any competent
authority of the Government, as the case may be, any individual not being a Bangladeshi citizen to work at
his business or profession at any time during the income year, such person shall be charged additional
tax at the rate of fifty per cent (50%) of the tax payable on his income or taka five lakh,
whichever is higher in addition to tax payable under this Ordinance.

Explanation.- For the purpose of this section, "undistributed profit" means total income with accumulated profit
including free reserve.

 Section - 16CCC; Charge of minimum tax

Notwithstanding anything contained in any other provisions of this Ordinance, every company shall, irrespective of
its profits or loss in an assessment year for any reason whatsoever, including the sustaining of a loss, the setting
off of a loss of earlier year or years or the claiming of allowances or deductions (including depreciation) allowed
under this Ordinance, be liable to pay minimum tax at the rate of zero point three zero (0.30%) per cent of the
amount representing such company's gross receipts from all sources for that year: Provided that such rate of tax
shall be zero point one zero per cent (0.10%) of such receipts for an industrial undertaking engaged in manufacturing
of goods for the first three income years since commencement of its commercial production.

Explanation: For the purposes of this section, 'gross receipts' means-

Corporate Tax Planning Page 9 of 41
(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.

 Special Reduced Corporate tax rates

- Textile Industries: 15%
- Private University: 15%
- Fish farming: 3%
- Jute Industries: 15%
- Selected autonomous bodies:25%
- National level Research institute:15%

Corporate Tax Planning Page 10 of 41

04
COMPANY TAX ASSESSMENT

In the income tax ordinance, 1984, there is no separate status for taxation of a corporate body, But in the context of
Bangladesh, Corporate Taxation means charging of tax on income or profit of companies. Therefore, Corporate Tax
can be termed as company tax, which differs from the tax levied on individuals. Both companies and individuals are
assessed and taxed under the same Income Tax Ordinance 1984.

Definition of Company
Under Section 2 (20) of the income Tax Ordinance 1984, ―Company" means a company as defined in the Company
Act, 1913 (VII of 1913) or Company Act, 1994 (Act No. 18 Of 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;
c) Any 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 (Act No. 18 Of 1994);
d) any association or body incorporated by or under the laws of a country outside Bangladesh"
e) Any foreign association or body, not incorporated by or under any law], which the Board may, by general
or special order, declare to be a company for the purposes of this Ordinance;

Classification of Company:
For preferential tax purpose, Companies are classified into following groups:
1) Bank, insurance and Financial institutions;
2) Merchant Bank;
3) Publicly traded company
4) Non- Publicly traded company
5) Mobile Phone Operator company

Publicly Traded Company

Publicly traded company means a company which fulfills the following conditions:
a) The company is registered in Bangladesh under the Companies Act 1913 or 1994;
b) The company is enlisted with the Stock Exchange before the end of the concerned income year in which
income tax assessment will be made.

Obligations of a Corporate Taxpayer under Income Tax laws

Following the corporate tax compliance obligations as per various sections the Income Tax Ordinance 1984:
1. Obligations of a corporate entity as an assessee (taxpayer);

Corporate Tax Planning Page 11 of 41

 2. Obligations of a corporate entity as a Tax collector on behalf of tax authority;
3. Obligations of related persons of a corporate entity.

 Details of obligation as an assessee

Collection of TIN (Taxpayer Identification Number) certificate u/s 184B, 184A
1. Displaying of TIN certificate u/s 184C
2. Advance income tax payment u/s 64
3. Preparation of tax return u/s 75
4. Payment of tax as per tax as per tax return u/s 74
5. Filling of tax return and statement in prescribed forms u/s 75
6. Filing of revised return if any omission or incorrect statement in previously filed return discovered before
the assessment is made u/s 78
7. Maintenance of accounts and documents u/s 35
8. Production of accounts and documents on receipts of a notice from the DCT u/s 79
9. Compliance with various notice
- Notice of demand u/s 135
- Notice of file return u/s 77
- Notice to produce accounts, statements and documents u/s 79
- Notice to attend hearing u/s 83(1) in case of assessment after hearing
- Notice to file return for re- assessment u/s 93(1)
- Notice to attend hearing u/s 130 in case of imposing penalty u/s 123-128
- Notice calling for information u/s 113

 Details of obligation as a tax collector on behalf of tax authority

1. Collection of Tax Collection A/C Number u/s 184BB
2. Tax deduction /collection at source if applicable and deposit to the treasury u/s 48-63
3. Giving documents of TDS with necessary information u/s 58 and
4. Furnishing annual returns in case of payment of salary before 1st September (u/s 108 and rule 23),
interest (u/s 109 and rule 20) and dividend (u/s 110 and rule 19)

 Details of obligation of related persons of corporate entity

1. Filling a return of any other person for whom the company is assessable [u/s 75 (1B)]
2. Joint liability in case of director of a private limited company (u/s 100)
3. Joint liability in case of Liquidator of a private limited company (u/s 101)

TIN related tax provisions for company

Every company requires 12 digit Tax payer‘s Identification Number (TIN) to mention it in the income tax return. As
per Section 184B, TIN Certificate is mandatory at the time of registration of a company under the Companies Act,
1994 and also it is mandatory in respect of sponsor shareholder directors [Section 184A (1)]. Besides these, in the

Corporate Tax Planning Page 12 of 41

following cases, a company requires mandatory submission of 12 digit TIN Certificate under various clauses of section
184A:
1) Opening a letter of credit for the purpose of import; [Clause(a)];
2) Submitting an application for the purpose of obtaining an import registration certificate (IRC) [Clause(aa)];
3) Renewal of trade license in the area of a city corporation or of a paurashava [Clause(b)];
4) Submitting tender documents for the purpose of supply of goods, execution of a contract or for rendering
services [Clause(c)];
5) Purchase of a land, building or an apartment situated within any city corporation area [Clause(f)];
6) Registration, change of ownership or renewal of fitness of a car, jeep or microbus [Clause(g)];
7) Registration of company under Companies Act, 1994 Under section 184C, a company shall display 12 digit
TIN Certificate Number at a conspicuous place of the company‘s business premises.
Under section 184C, a company shall display 12 digit TIN Certificate Number at a conspicuous place of the
company‘s business premises.

Tax Return
As per section 75 (2) (c), the return must be filed, unless the date is extended, by the fifteenth day of July next
following the income year or where the fifteen day of July falls before the expiry of six months from the end of the
income year, before the expiry of such six months. However, u/s 75(3), on application from the company, the
assessing officer [DCT] may extend the return submission date up to 2 months at his own capacity and further 2
months after taking prior permission from the IJCT.

In case of company though 15th July is the last date of submission of return but every company will get at least 6
months‘ time from the end of the accounting year to submit tax return .

The return should be signed by the principal officer of the company [75(2)(b)(iii)]. As per section 2(48), Principal
Officer‘, means-
a) Managing director, manager, secretary, treasurer, agent or accountant (by whatever designation
known), or any officer responsible for management of the affairs, or of the accounts, of the authority,
company, body or association; and
b) Any person connected with the management or the administration of the company upon whom the
Deputy Commissioner of Taxes has served a notice of his intention to treat him as principal officer.
However, revised return can be filed before the assessment is made if any omission or incorrect statement in the
previously filed return discovered [u/s78].

Documents to be accompanied with return

In the case of company it is mandatory to submit audited statement of accounts at the time of filing return and a
separate calculation sheet is to be submitted if income shown at return differs from audited statement of accounts.

Corporate Tax Planning Page 13 of 41

Submission of life style statement is optional in case of salaried person who will use simple 2 pages prescribed
return form and also for those businessman who will use simple 2 pages another prescribed return form if their
business income does not exceed Tk. 3,00,000.

Time limit for submission of return

There are mainly 2 types of time limit for submission of tax return. One is for companies and other is for all other
types of assesses. Last date of submission of return for company is 15 th July; provided that Provided that when the
15th July falls before the expiry of 6 months from the end of the income year, then return is not required to submit
within 15th July. It is to be submitted within 6 months from the end of the income year

Methods of Accounting and maintenance of Accounts [Sec 35]

Every public or private company as defined in the Companies Act, 1913 (VII of 1913) or 1994 shall, with the return of
income required to be filed under this Ordinance for any income year, furnish a copy of the trading account, profit
and loss account and the balance sheet in respect of that income year certified by a chartered accountant to the effect
that the accounts are maintained according to the BAS and reported in accordance with BFRS [u/s 35(3)]

Corporate Tax Planning Page 14 of 41

05
ADMISSIBLE AND INADMISSIBLE EXPENSES AND OTHER EXEMPTIONS
Admissible Expenditure - u/s 29(1), (2)
1. Rent of office premises and repair expenses provided that is used of business purpose and relevant TDS at 5%
and VDS at 15% is given to government exchequer.
2. Bank interest or share of profit paid by the Banks which rules on Islamic principles.
3. Insurance premiums on Fixed Assets used in Business.
4. Repairs of Fixed Assets used in Business.
5. Depreciation on Fixed Assets as per Third Schedule of Income Tax Ordinance 1984.
6. Land development tax, rent tax or municipal tax
7. Bonus paid to employees including festival bonus.
8. Scientific Expenditure:
- Revenue nature expense related to Business.
9. Provision:
- Bad debt that are established to have become irrecoverable.
- If any amount of the provision for Bad and doubtful debt and interest thereon which has been allowed before
is ultimately recovered, the amount so recovered shall be deemed to be income of the year in which that is
recovered.
10. Employee benefit Expenditure:
- Any sum, in revenue nature, expensed for the establishment of Hospital or Educational institute for the
employees;
- Any sum, in capital nature, expensed for the establishment of Hospital or Educational institute for the
employees and their dependents provided that no charge is made for the services rendered by such Hospital
or Educational institutions and;
- Expenditure incurred for the construction, maintenance or running of training institute for “industrial
worker”
11. Training Expenditure:
- Any sum whether revenue or capital nature incurred for the training of industrial workers;
- Training on NBR approved schemes for Bangladeshi citizens and;
- Government approved training in foreign countries.
12. Subscription fees:
- Fees to recognized Professional institute and;
- Recognized Trade organization.

13. Omnibus Clause:

Corporate Tax Planning Page 15 of 41
 - Any expenditure not being in capital nature or personal expense of the assessee; expensed for the wholly
purpose of the Business.
Inadmissible Expenditure - u/s 30
1. Payment of salary without deduction of TDS in accordance with u/s 50.
2. Any payment where TDS or VDS or both deductions are applicable is paid without respective deductions.
3. Any commission or discount paid by any company to its shareholder Director.
4. Perquisite given to employees more than Tk. 450,000.
5. Travel expense of Employee:
- Overseas travelling up to 1% of Turnover.
- Expenditure on Foreign Travels of Employees, their spouse and dependents for holidaying and recreation
exceeding 3 months Basic salary or ¾ of actual expenditure whichever is less. However, such foreign travel
shall not be oftener than once in every 2 years.
6. Sample Distributions on Turnover
Industry (%)
Turnover
Pharmaceutical other
Upto 5 crore 2 1.5
On 5 crore to 10 crore 1 0.75
More than 10 crore 0.50 0.375
7. Entertainment Expenditure
Range of Profits Rate Remarks
On the first 10 Lakh 4% This should be calculated firstly by adding the respective
On the remaining balance 2% entertainment expense with the disclosed profit. After
that, rates should be applied for calculating admissible
portion of entertainment expenditure.
8. On Profit
S/L Particulars Rates on Profits
1. Foreign Company – HO expenditure 10%
2. Royalty and Technical Knowhow fees 8%
3. Incentive Bonus 10%
9. Gross salary or remuneration paid to employees without Bank transfers or cross cheque amounting more than
Tk. 15,000.
10. Any cash payment above Tk. 50,000 other than Bank transfers or cross cheque except for the followings:
- Payment of Raw Materials purchase;
- Employee salary or remunerations unless restricted otherwise and;
- Any payment for Government obligations.

Corporate Tax Planning Page 16 of 41

11. Any payment on account of house rent other than Bank transfers or cross cheque. However in the case of
individual assessee, if the house rent is more the Tk. 25,000 per month then the owner shall have to maintain a
Bank account and deposit entire rent to the account and shall maintain a register about tenants, House rent
received date, sign etc.
Tax Holiday: u/s 46B and 46C
This is a period (5 years or 10 years depending on location of the industry) for which the company is allowed
exemption of tax on its income from business and profession.

Other Tax Exemptions

- Industries set up in EPZ will enjoy tax exemption from the moth of commercial production.
- Income from computer software business run by Bangladeshi resident is tax exempted up to 30/06/2019
[Para-33]
- Income from private power generation company up to 15 years from its commercial production [SRO no.
36-ain/97 dated 03/02/1997]
- Any income from the export of handicrafts for the period from 1st day of July, 2008 to the 30th day of June,
2015 (para-35)

Accelerated Depreciation
In case of machinery or plants set up in Bangladesh between 01/07/2014 and 30/06/2019 and not having been
previously used in Bangladesh, accelerated depreciation subject to some conditions will be allowed as follows:
[paragraph 7B of 3rd Schedule].
SL Years At Actual Cost (%)
1 First Year 50%
2 Second year 30%
3 Third year 20%
Conditions for eligibility:
- Applicants must be a Bangladeshi company
- Applicant is an industrial undertaking
- Declaration not to enjoy any other tax exemption benefit
- Application is made notice to NBR within 6 months from the end of the month of commercial production
- Any other depreciation allowance will not be allowable

Initial Depreciation
In case of machinery or plants set up in Bangladesh after 30/06/2002 and not having been previously used in
Bangladesh, initial depreciation subject to some conditions will be allowed as follows:-[paragraph 5A of 3rd Schedule]
- In the case of building………………10% of actual cost
- In the case of plant, machinery…………25% of actual cost

Corporate Tax Planning Page 17 of 41

Perquisite
Perquisite to any employee to any year is allowed up to Tk. 450,000. Excess amount given by the employer will be
disallowed by NBR. Reference: u/s 2(45) of ITO 1984.
Perquisite means any payment made to an employee by an employer in the form of cash or any other form excluding
–
1. Basic Salary,
2. Festival Bonus,
3. Incentive Bonus,
4. Arrear Salary,
5. Advance Salary,
6. Leave Encashment or Leave Fair Assistance
7. Overtime.
8. contribution to recognized provident fund,
9. Approved pension fund,
10. Approved gratuity fund and;
11. Approved superannuation fund.
Perquisite consists of following heads for employee of the company. For the extent of perquisites, allowances and
benefits includable as the income of employee’s of the company has been prescribed in Income Tax rules 33A to 33J
in the following manner.
House rent allowance 33A
Rent (33A- 33B)
Rent free accommodation 33B
Cash conveyance allowance with no transport 33C
Conveyance (33C – 33E) Car facility partly/wholly for personal use 33D
Both facility- Cash Allowance and car facility 33E
Travel Local/Abroad 33G
Entertainment Entertainment Allowance 33H
Medical Medical Allowance 33I
Other Benefits For employees and directors 33J

Deduction of tax at source from salaries (Section 50+Rule-13)

The employer including Govt. (govt. Employees are taxed on their basic salary, festival allowance and bonus) shall
deduct tax at source at the time of paying salaries at an average rate applicable to the estimated total income of the
employee. At the time of making such deductions, the amount to be deducted may be increased or decreased for the
purpose of adjusting any excess or deficiency arising out of any previous deductions or failure to make deductions.

Corporate Tax Planning Page 18 of 41

The employer‘s liability to deduct tax is absolute and is not affected by any private arrangement whereby the
employee has undertaken to discharge his own tax liability.
However employer will not deduct tax at source or will deduct tax at a lower rate or amount in case an employee
can produce a certificate issued by the DCT to do so.

The amount deducted shall be deposited to the credit of the Govt. within 2 weeks from the end of the month of
deduction. However DCT can, with the prior approval of the IJCT, permit an employer to pay the tax deducted at
source under the head salaries quarterly on: -
a) 15th September
b) 15th December
c) 15th March; and
d) 15th June

Corporate Tax Planning Page 19 of 41

06
CAPITAL GAIN
Reference: u/s 31, 32 and Para 2 of Second Schedule of ITO 1984.
Capital gains in the hand of company other than disposal of share will be taxed at flat rate of 15% regardless of
the period of holding of the fixed asset from the date of its acquisition.

Capital Asset Transfer Capital Gain Capital Gain tax

u/s – 2(15) of ITO Sale or exchange As per under Para 2 of Second

1984 section– 31, 32 of Schedule of ITO 1984
u/s – 2(66) of ITO ITO 1984
1984

Computation of capital gain- u/s 32

A. The income under the hear capital gains shall be computed after making the following deductions from the full
value of the consideration received or accruing from the transfer of the capital asset or the fair
market value [whichever is higher]
Deductions are listed below:

- Any expenditure incurred solely in connection with the transfer of the capital asset
- The cost of acquisition of the capital asset and any capital expenditure incurred from any improvements in
this regard but excluding any expenditure in respect of which any allowance is admissible under any
provisions of under sections 23, 29 and 34 of ITO 1984.
B. Cost of acquisition of the capital assets means-

- If it is by purchase, then the actual cost of acquisition

- Where it becomes the property of the assessee-
i. Under a deed of gift, bequest or will; or
ii. Under transfer on a recoverable or irrecoverable trust; or
iii. On any distribution of capital assets on the liquidation of a company; or
iv. On any distribution of capital assets on the dissolution of a firm or other association of persons
or the partition of a Hindu undivided family.

Corporate Tax Planning Page 20 of 41

 Where the capital asset became the property of the assessee by succession, inheritance or devolution, the actual
cost of acquisition of the capital asset to the capital asset to the assessee shall be the fair market value of the
property prevailing at the time the assessee became the owner of such property.

Fair market value is DCT will determine value

higher than the taking approval from IJCT
consideration by more
than 15%

If DCT determines
different value than the
value stated by the
transferor
Fair value is higher than Government may offer to
the consideration by buy the capital asset
more than 25%

Transfer of capital asset used in the Business

A capital gain arising from the transfer of a capital asset being buildings or lands which immediately before the
date on which transfer took place was being used by the assessee for the purpose of his business or profession
shall be exempted from payment of the capital gains tax upon fulfillment of the following conditions listed below:
1. A new capital asset for the purpose of his business or profession has to be purchased within a period
of one year before or after the date of transfer;
2. The declaration shall have to be filed for exemption before the assessment made.
3. When the capital gain is greater than the cost of the new asset, the capital gain up to the extent of cost of
acquisition of the new asset shall be exempted and the excess balance shall be charged to gain tax. And,
cost of the new asset shall be taken nil, so no depreciation will be charged as per NBR.
4. When the capital gin is equal or less than the cost of the new asset, no tax shall be charged on the capital
gain.
The time limit for purchase of the new asset can be extended by the DCT with prior permission of the IJCT.

Corporate Tax Planning Page 21 of 41

Tax Exempted Capital Gain
1. Capital gain arises from transfer of government securities are exempted from tax.
2. When buildings and lands are transferred to a new company for setting up an industry and the whole amount
of capital gain arising out of such transfer is invested in the equity of the said company, then the capital
gain shall not be charged to tax in the year of transfer.

Special tax rates on Capital Gain from sale of share

1. In case of company or firm at 10%
2. In case of placement shareholder or sponsor shareholders at 5%
3. If any person holds more than 10% of share of a company than gain on sale of such share is taxable at
5%
4. In case of individual the aforesaid case is tax-free.

Corporate Tax Planning Page 22 of 41

07

TAX HOLIDAY
Tax holiday has been started to allow as a tax incentive for industrialization in this region since 1959 by introducing
new section 15BB in the then Income Tax 1922. In 1972, the tax holiday system was withdrawn by repealing section
15BB. But the incentive was re-introduced by incorporating section 14A in the Income Tax 1922 by the Finance Act
1974 with effect from the assessment year 1974-75 for industrial undertakings (established on or after 1st July 1973
having subscribed and paid up capital not less than Tk. 1,00,000 and not more than Tk. 35,00,000) and also for tourist
industries (established on or after 1st January 1976 having subscribed and paid up capital not less than Tk. 1,00,000
and not more than Tk. 10,00,00,000) with the tax holiday period of 9 years for the prescribed areas and of 5 years
for other areas.

With the introduction of the Income Tax Ordinance 1984, the provision of the tax holiday has been maintained under
section 45 and 46 primarily. The provision was applicable for industrial undertakings (established between 01 July
1974 and 30 June 1985) and tourist industries (established between 01 July 1976 and 30 June 1985) having subscribed
and paid up capital not less than Tk. 1,00,000 for any industries. The tax holiday incentive was first extended for the
industries up to 30 June 1990 by Finance Act 1985, then up to 30 June 2000 by the FA 1989. But subsequently through
FA 1991 the incentive was restricted for the industries established within 30 June 1995 with an apparent intention
of withdrawing the tax holiday incentive since 1995-96.

New section 46A has been introduced through FA 1995 allowing the tax holiday incentive for industrial undertakings,
tourist industries and physical infrastructure facilities established between 01 July 1995 and 30 June 2008 with
having subscribed and paid up capital not less than Tk. 1,00,000. It is extended for another 3 years through inserting
section 46B with some minor changes and again for 2 years through inserting section 46C with having subscribed
and paid up capital not less than Tk. 20,00,000. Tax holiday facility has further been extended up to 30 June 2024
through the Finance Act 2015.

Type of Industries eligible for tax holiday

1. Industrial undertaking
2. Physical infrastructure facility
Industrial Undertaking Physical infrastructure
1. Active ingredient industry and radio 1. Deep sea port
pharmaceuticals industry 2. Elevated expressway
2. Automobile manufacturing industry [FA-2015] 3. Export processing zone
3. Barrier contraceptive and rubber latex 4. Flyover
4. Basic chemicals or dyes and chemicals 5. Gas pipe line
5. Basic ingredients of electronic industries (e.g. 6. Hi-tech park
resistance, capacitor, transistor, integrator, circuit) 7. ICT village or software technology zone
6. Bi-cycle manufacturing industry [FA-2015] 8. IT park
7. Bio-fertilizer 9. Large water treatment plant and supply through
8. Biotechnology pipe line

Corporate Tax Planning Page 23 of 41

 9. Boilers 10. Liquefied Natural Gas terminal and transmission
10. Brick made of Automatic Hybrid Hoffmann Kiln line
Technology 11. Mono-rail
11. Compressors 12. Rapid transit
12. Computer hardware 13. Renewable energy (e.g. energy saving bulb, solar
13. Energy efficient appliances energy plant, windmill)
14. Insecticide or pesticide 14. Sea or river port
15. Petro-chemicals 15. Toll road or bridge
16. Pharmaceuticals 16. Underground rail
17. Processing of locally produced fruits and vegetables 17. Waste treatment plant
18. Radio-active (diffusion) application industry (e.g. 18. Any other category of industries as the Govt. may
developing quality or decaying polymer or notify in the official Gazette.
preservation of
19. food or disinfecting medicinal equipment)
20. Textile machinery
21. Tissue grafting
22. Tyre manufacturing industry or[FA-2015]
23. Any other category of industries as the Govt. may
notify in the official Gazette.
Conditions for Eligibility
Some conditions are required to be fulfilled for tax holiday under section 46B and 46C of the Income Tax Ordinance,
1984. These are as follows:
a) The undertaking must be owned and managed by either a body corporate established by or under an act of
parliament with its head office in Bangladesh; or
a company as per Companies Act 1913/1994 with its registered office in Bangladesh having subscribed and paid-up
capital of not less than Tk. 20,00,000 on the date of commencement of commercial production or operation.
b) The undertaking is not formed by splitting up or by reconstruction or reconstitution of business already in
existence or by transfer to a new business of any plant and machinery used in business, which was being
carried on in Bangladesh at any time before the commencement of the new business.
c) The undertaking must be approved by the NBR for the purpose of tax holiday.
d) The undertaking shall have to obtain clearance certificate from the Directorate of Environment for the
relevant income year.

Application procedure and its disposal by the NBR

a) Tax holiday application is to be submitted to the NBR within 6 months from the end of the month of commercial
production or operations in the form prescribed in Rule 59A, in duplicate, duly signed and verified by the MD or
Director of the company.
b) NBR shall give its decision within 45 days from the date of receipt of the application by the Board. Otherwise,
the undertaking shall be deemed to have been approved.
c) NBR shall not reject any application unless the applicant is given a reasonable opportunity of being heard.
d) If NBR rejects any tax holiday application, the undertaking can submit a review application to the Chairman of
the Board within 4 months from the date of the receipt of the rejection letter. The Chairman then will either
Corporate Tax Planning Page 24 of 41
 review himself or will constitute a committee consisting of 3 members of the NBR who will review its previous
decision and pass such order as it thinks fit. There is no time limit for disposal of the review application. The
decision of the review committee of the NBR as final and conclusive and there is no scope to submit further
review application.

Withdrawal and Cancellation of tax holiday

a) Any undertaking after getting tax holiday from the NBR can write to the NBR for cancellation of tax holiday
within 1 year from the date of granting such tax holiday.
b) NBR may also cancel/suspend fully/partly any tax holiday in the public interest.
c) The DCT in the course of assessment may also withdraw the tax holiday from the relevant assessment
year if he is satisfied that one or more of the required conditions are not fulfilled.
d) Tax holiday shall be deemed to have been withdrawn for the assessment year in which the following
transaction are made:
I. If the company is engaged in any commercial transaction with another company having one or
more sponsor shareholders.
II. If the DCT finds that the company has purchased or sold goods at higher/lower price than the
normal market price with the intention to reduce the income of another undertaking/company.

Conditions to be fulfilled after submitting tax holiday application

a. The profits and gains of the tax holiday company shall be computed separately.
b. Any loss during the tax holiday period cannot be carried forward beyond the tax holiday period.
c. Only normal depreciation is applicable for tax holiday enjoying companies.
d. 30% + 10% = 40% year wise tax holiday income is to be reinvested. 30% is to be reinvested in
the same company or in a new industry within the tax holiday period or maximum within 1 year
from the end of the tax holiday period. Another 10% is to be reinvested in the shares of listed
company in each year within 3 months from the end of the income year. Otherwise income of the
year or years will subject of tax. However, the quantum of reinvestment will be reduced by the
amount of dividend if declared by the company.
e. The income of the tax holiday company under the following heads are taxable:
I. Capital gain
II. Any income arising from the disallowance u/s 30
III. Dividend is taxable at the hand of shareholders.

Documents to be submitted with tax holiday application

The following documents are to be submitted along with tax holiday application:
a. An attested copy of certificate of incorporation;
b. An attested copy of the Memorandum of Association and Articles of Association of the company;
c. A certificate of commencement of business;
d. In case the company has already commenced business, certified copy of the audited balance sheet
and profit and loss accounts for the period for which accounts have been prepared;
e. In case of industrial undertaking/physical infrastructure facility for which approval is sought has
been acquired for another party, an attested copy of the agreement between the applicant company
Corporate Tax Planning Page 25 of 41
 and the seller enter into for the acquisition of the industrial undertaking/physical infrastructure
with list and value of assets acquired;
f. A certificate to the effect that the industrial undertaking/physical infrastructure facility has not
applied or shall not apply for accelerated depreciation allowance under paragraph 7 or 7A of the
Third Schedule to the Ordinance.

Period of Tax Holiday for industrial undertaking

Period of Tax Holiday for Physical Infrastructure undertaking

Corporate Tax Planning Page 26 of 41

08
CORPORATE SOCIAL RESPONSIBILITY (CSR)

Reference: SRO No. 223 dated 27 June 2012 and 186 dated 01 July 2014.
Corporate Social Responsibility (CSR) is defined as the integration of business operations and values, whereby the
interests of all stakeholders including investors, customers, employees, the community and the environment are
reflected in the company‘s policies and actions. CSR is about how businesses align their values and behavior with the
expectation of stakeholders – not just customers and investors, but also employees, suppliers, communities,
regulators, special interest groups, and society as a whole. It is the company‘s commitment to be accountable to its
stakeholders. CSR demands that businesses manage the economic, social, and environmental impacts of their
operations.

The Government sees CSR as the business contribution to its sustainable development goals. Essentially, it is about
how business takes account of its economic, social and environmental impacts in the way it operates – maximizing
the benefits and minimizing the downsides. However, CSR is still considered as the voluntary action that business
can take, over and above the compliance with minimum legal requirements, to address both its own competitive
interests and the interests of wider society. Key CSR issues include good governance, labor standards, responsible
sourcing, eco-efficiency, environmental management, stakeholder engagement, employee and community relations,
social equity and human rights. It is not only about fulfilling a duty to society, it can bring competitive advantage.

The corporate sector in Bangladesh spends a big amount outside their business for the betterment of the society and
the people. But any expenditure for this purpose does not qualify for allowable deductions as this is not business
related expenditure. To encourage the companies to contribute towards the society, CSR provision has been
introduced in 2009 through an SRO.
Conditions to qualify for CSR
1. Regularity in payment of salary to staff
2. Having waste treatment plant in industry
3. Regularity in payment of Income tax, VAT, duty and loan
4. CSR only through govt. approved institutions
5. Compliance with Labor Law
6. Amount spent for CSR will not be considered as business expenditures
7. Documents in support of actual CSR expenditure to be submitted to the concerned DCT
8. Submit CSR plan to NBR and obtain exemptions certificate

Corporate Tax Planning Page 27 of 41

CSR benefits and calculation for companies
The companies will get 10% tax rebate. The calculation is given below:

20% of income
Or,
12 crore Whichever is lower Tax rebate 10% is
is to be treated as applicable on such
Or,
CSR expenditure allowable CSR
Actual money spent

Areas of CSR
The tax provision clearly specified 22 areas where the companies can perform their corporate social responsibility
for availing the benefit of tax rebate:
1. Natural calamities
2. Old home
3. Welfare of retarded persons
4. Education of poor children
5. Accommodation of slum dwellers
6. Awareness program of anti-dowry and women rights
7. Rehabilitation of poor and orphan children
8. Research on liberation war related subject
9. Sanitation in Chittagong hill tracts
10. Treatment of cataract, cancer, leprosy
11. Treatment of acid victims
12. Free medical treatment to the poor by specialized hospital
13. Public university
14. Technical and vocation education
15. Computer and information technology
16. Vocation training to unskilled workers for man power export
17. Infrastructure of national level sports
18. Donation to national level institution set up in memory of the liberation war
19. Donation to national level institution set up in memory of Father of the Nation
20. Donations made to non-profit voluntary social welfare organizations engaged for running
rehabilitation center, creation of awareness and treatment of HIV, AIDS and Drug addicted
21. Donations made to non-profit voluntary social welfare organizations engaged for running
rehabilitation center for recovered children/women of cross boarder trafficking
22. Donation to Govt. approved fund for helping victims of natural disaster or for any tournament or for
any national level program.

Corporate Tax Planning Page 28 of 41

09
WITHHOLDING TAX
Tax Withholding Function: u/s 48-63
According to the provision of Chapter VII (section 48-63), tax is to be deducted or collected at source at the prescribed
rate/ rates.

Deposit of Deducted /Collected tax: [Rule-13]

- All sums deducted or collected at sources shall be deposited to the credit of the Government within 2 (Two)
weeks from the end of the month of such deduction or collection.

- The Deputy Commissioner of Taxes may, in a special case and with the approval of the Inspecting Additional
Commissioner of Taxes or Joint Commissioner of taxes, permit an employer to pay the tax deducted from
Salaries quarterly on September 15, December 15, March 15 and June 15.

Procedure of Deposit of Deducted /Collected tax: [Rule-14]

The amount of tax deducted or collected shall be deposited to the credit of the Government by remitting it into the
Bangladesh Bank or the Sonali Bank, as the case may be, accompanied by an income tax challan. [Rule 14(1)]

Payment of Advance Tax: u/s 64-73

- In case of first year, if income is likely to exceed Tk. 4,00,000/- or
- In case of old assessee, last assessed income if exceeds Tk. 4,00,000/-
- Advance tax is to be paid in four (4) equal installments 15thSeptember, 15th December, 15th March and 15th June.

Corporate Tax Planning Page 29 of 41

10
TRANSFER PRICING
Reference:
IT Ordinance:107A- 107J and IT Rules: 70 – 75A

Around the world tax authorities increasingly consider that international transactions which actually provide scope
for revenue leakage. As a result, National Board of Revenue (NBR) of Bangladesh introduced new regulation on
transfer pricing in Bangladesh tax laws for the first time through Finance Act 2012 which has become effective from
1 July 2014. The transfer pricing law in Bangladesh aims to track down international transactions between two
associated entities, either or both of whom are non-residents; hence the law will generally affect multinational
companies or foreign companies having direct or indirect transactions with their subsidiaries, associates or other
legal form of entities (e.g. branch office, agent, etc.) in Bangladesh.

The transfer pricing regulation in Bangladesh is generally in line with OECD Transfer Pricing Guidelines for
Multinational Enterprises and Tax Administrations 2010 and Transfer Pricing Legislation – A Suggested Approach
2011 issued by OECD.

In addition to necessary documentation on international transactions, Bangladesh transfer pricing regulation

requires companies/enterprises to submit a statement of international transactions in a prescribed manner, and also
a report from Chartered Accountants on the statement of international transactions if the aggregate value of such
transactions exceeds 30 million Bangladeshi taka (BDT) during any income year.

Arm's length price means a price in a transaction, the conditions (e.g. price, margin or profit split) of which do not
differ from the conditions that would have prevailed in a comparable uncontrolled transactions between independent
entities carried out under comparable circumstances.

To determine associated enterprise a checklist can be followed given on the next page.

Corporate Tax Planning Page 30 of 41

To determine whether the transaction is international transaction or not in terms of NBR view we can
easily use the following reference to determine international transaction since it is the first indicator
of falling into the transfer pricing law of NBR.

Corporate Tax Planning Page 31 of 41

However, it is important to mention here that the assessee has to maintain following documents for
inspection of NBR and further reference listed below.

Corporate Tax Planning Page 32 of 41

Corporate Tax Planning Page 33 of 41
11
COMPUTATION OF TAX LIABILITY OF TWO COMPANIES
We herewith present Statement of Financial Position and Statement of Profit or loss and other compressive income
of two different business natured companies separately. And, from those statements we calculate tax liability to be
borne by those companies. And, a format of return is also enclosed herewith.
The names of those companies are:

SL Company Name Industry

1 NRB Commercial Bank Limited Banking
2 R A K Ceramics (Bangladesh) Limited Ceramics

NRB Commercial Bank Limited

NRB Commercial Bank Limited (NRBC Baank) having its Registered Office at 114 Motijheel Commercial Area, Dhaka-
1000, Bangladesh, was incorporated on February 20, 2013 as a Public Limited Company under the Companies Act,
1994 (Act No.18 of 1994) and also is governed by the Bank Company Act 1991 (Amendment upto 2013) with Authorized
Capital of Tk.10000 million and having strong capital base of Tk.444.60 crore (Paid up Capital) by converting the hard
earned foreign currency of 53 (Fifty three) qualified NRBs from business persons, community leaders, scientists,
educationists, living in across the globe which includes USA, Canada, UK, Russia, Italy, Germany, UAE and Kuwait.

NRBC Bank started its journey from 2 April 2013 after getting permission vide memo No. BRPD (P-3)/745(60)/2013-
1189 dated 10 March 2013 as a scheduled Bank. Presently NRBC Bank has 40 Branches in rural and urban area of
Bangladesh and, recently, formed a subsidiary company M/s. NRBC Bank Securities Limited.

Corporate Tax Planning Page 34 of 41

Corporate Tax Planning Page 35 of 41
Corporate Tax Planning Page 36 of 41
Corporate Tax Planning Page 37 of 41
RAK Ceramics (Bangladesh) Limited
RAK Ceramics (Bangladesh) Limited (the Company), formerly RAK Ceramics (Bangladesh) Pvt. Limited, a UAE
Bangladesh joint venture company, was incorporated in Bangladesh on 26 November 1998 as a private company
limited by shares under the Companies Act 1994. The Company was later converted from a private limited into a
public limited on 10 June 2008 after observance of required formalities as per laws. The name of the Company was
thereafter changed to RAK Ceramics (Bangladesh) Limited as per certificate issued by the Registrar of Joint Stock
Companies dated 11 February 2009. The address of the Company’s registered office is RAK Tower, Plot # 1/A,
Jasimuddin Avenue, Sector # 3, Uttara, Dhaka 1230. The company got listed with Dhaka Stock Exchange (DSE) and
Chittagong Stock Exchange (CSE) on 13 June 2010.

RAK Ceramics (Bangladesh) Limited (the Company), formerly RAK Ceramics (Bangladesh) Pvt. Limited, a UAE
Bangladesh joint venture company, was incorporated in Bangladesh on 26 November 1998 as a private company
limited by shares under the Companies Act 1994. The Company was later converted from a private limited into a
public limited on 10 June 2008 after observance of required formalities as per laws. The name of the Company was
thereafter changed to RAK Ceramics (Bangladesh) Limited as per certificate issued by the Registrar of Joint Stock
Companies dated 11 February 2009. The company got listed with Dhaka Stock Exchange (DSE) and Chittagong Stock
Exchange (CSE) on 13 June 2010.

Corporate Tax Planning Page 38 of 41

Corporate Tax Planning Page 39 of 41
The liability tax calculation on the basis of Financial Statements of aforementioned entity is given below:

Corporate Tax Planning Page 40 of 41

12

EPILOGUE

As the tax rates are consistently changing every year in Bangladesh and there is no way to predict the
future years tax rates, provisions and laws the tax planning for a company of 5 to 10 years would
contain so much uncertainty that the benefit derived from it will be lower than the cost of preparing
the report. Moreover, to forecast next 5 to 10 years financial statements requires many assumptions
such as cost of equity, future growth of sales, inflation rates etc. and that makes it way more difficult
to plan an efficient tax planning.
However, besides the above facts, tax manager should always keep a close eye on the latest tax rate,
rules and laws of respective industry that he has been working with.

Corporate Tax Planning Page 41 of 41