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What is the purpose of taxation

What is the purpose of taxation

Paying Taxes
Taxes are monies paid by citizens and residents to federal, state, and local
governments. The money collected from these taxes help fund for services
provided by the government. It is the one of the main sources of government
revenue. Types of taxes include income tax, sales tax (VAT), and property tax.
Income Tax
These are paid on a federal level and in some cases to state or local
governments as well. “Taxable income” is essentially money obtained through
wages, self-employment, and tips and from things like sale of property. The
large majority of people pay their income taxes by having the money withheld
from their paychecks. The proportion of income tax an individual is required to
pay will vary according to earnings. Income tax rates are generally lower for
those who make less money. However, any individual who earns an income,
live in the United States and satisfies certain criteria is needed to file a tax
return and also pay any taxes that they owe.
Value Added Tax (VAT) or Sales Taxes
Sales taxes are more or less state or local taxes and usually added to the buying
cost of certain things. These taxes will be based on the cost of items and help
fund for services provided by state and local government, such as roads, police,
and firefighters.
Property taxes
These are also state and local taxes that are charged on your home and land. In
most situations, these property taxes contribute to funding of local public
schools and other services in the area person.
This is a concept summary. It aims to show how different types of taxes are
categorized, and to highlight the strong and weak points of each type.
Government is supported by resources drawn from the economy.  In return,
government protects the economy from foreign and domestic enemies,
undertakes large-scale infrastructure works of general benefit, and enforces the
rights, obligations and bargains necessary for economic activity in a civil
society.  In modern industrial society, a tax either claims a portion of the flow
of value in economic transactions between people, or takes a part of someone’s
accumulated stock of economic value.

9.8 Scope or Source of Income Tax Law:
In order to determine income tax on the income of an assessee in Bangladesh,
certain provisions, rules and regulations are necessary. They are follows:
9.8.1 The Income Tax Ordinance, 1984: The Income Tax Ordinance, 1984
came into force on 1 st July, 1984 as Income Tax Manual, Part-I. It has 23
Chapters, 187 sections, numerous sub-sections and seven schedules containing
provisions regarding assessment, penalty, appeal, etc. It also lays down the
powers and duties of various income tax authorities.
9.8.2 Income Tax Rules, 1984: Every Act/Ordinance normally gives power
to an authority, responsible for implementation of the Act/Ordinance to make
rules for carrying out purpose of the Act/Ordinance. Section 185 of the Income
Tax Ordinance, 1984 has given power to the National Board of Revenue to
make such rules named Income Tax Rules, 1984
9.8.3 Finance Act: To give effect to the various proposals in the annual
budget covering the areas of direct and indirect taxes, Finance Act is issued. It
contains various applicable tax rates and other amendments of the Income Tax
Ordinance and Rules, 1984.
9.8.4 SRO (Statutory Regulatory Orders): According to the Section 185 of
the Income Tax Ordinance1984, National Board of Revenue can issues
certain/circulars as and when necessary. The provisions of these SROs are also
to be considered at the time of computing income tax like the provisions of
income Tax Ordinance and Rules.
9.8.5 Judicial Decisions: In the course of assessment proceedings, there may
sometimes arise a dispute between the National Board of Revenue and the
assesse over the interpretation of some of the provisions of the Ordinance and
Rules. The assesse can go the court objecting the National Board of Revenue’s
interpretation, and the judgments given by the courts act as guidance to the
assessing officers and the assesse in similar circumstances in the future.
9.9 What is Income tax Return?
Income & Expenditure statement which also indicates the financial position
(statement of Assets & Liabilities) at the end of financial year of a person is
call Income Tax Return.
9.10 Who is Assessee?
As per section under 2(7) of Income tax ordinance of 1984 Assessee means a
person by whom any tax or other sum of money payable to government or tax
authority under Income tax ordinance of 1984.

9.11 Computation of Income:
Section 20 of income tax ordinance, 1984 relating to Heads of Income: –
Section 20 of ITO 1984 defines various types of income chargeable to income
tax in seven categories. Subsequent sections 21 to 34 provided details on how
different categories of income shall be calculated and what deductions are
allowed.
Save as otherwise provided in this Ordinance, all incomes shall, for the purpose
of charge of income tax and computation of total income, be classified and
computed under the following heads of incomes, namely: –
1. Salaries
2. Interest of securities
3. Income from house property
4. Agricultural Income
5. Income from business or profession
6. Capital Gains
7. Income from other sources;
9.12 Concept of income:
Concept of income in the ITO 1984 is an inclusive definition but not
exhaustive. It describes sources of income and prescribes the method of
computation on income but it refrains from saying what is income. It is also
important to note that the word ‘income’ used in ITO 1984 is not limited only
to ‘profit or gains’ and hence in order to consider as income it is not necessary
that it should constitute or provide a profit or gain to the assesse. Under the
definition of Income as provided in section 2(34) of the ITO 1984, income
includes;
 any income, receipts, profits or gains chargeable to tax as per ITO 1984; or
 any amount which is subject to collection or deduction of tax at source as
per ITO 1984; or
 any loss of such income, profits or gains; or
 any amount on which a tax is imposed; or
 any amount which is treated as income under any provision of ITO 1984
(i.e. section 19).
The illegality of income does not exempt it from tax, the revenue shall not be
concerned with the tainting of illegality of income or its source.
Any income actual or deemed to accruing or arising or received in Bangladesh
and or any amount on which a tax is imposed are also part of income.
Section 18 of ITO 1984 explains the situation when certain types of income are
considered as income deemed to accrue or arise in Bangladesh.

9.13 Tax Rates:
Income tax rates for various types of person and or various types of income as
well as surcharge are updated through the Finance Act which become effective
from 1 July of each financial year. As per Section 183 if the Act is delayed
previous rate or the rate proposed in the bill, whichever is beneficial to the
assessee shall be applied.
9.13.1 Tax rates for individual, etc.
No tax is payable by tax residents on income not exceeding TK 250,000. The
following rates are applicable to resident individual, Hindu undivided family,
partnership firm, non-resident Bangladeshi, association of persons and any
other taxpayer including artificial judicial person created by the act.
9.13.1.1 Residents including non-resident Bangladeshi
Total income Tax Rate
First Tk 300,000* Nil
Next Tk 100,000 5%
Next Tk 400,000 10%
Next Tk 500,000 15%
Next Tk 600,000 20%
Next Tk 300,000 25%
On the balance 30%
*Initial exemption limit for women and senior citizens aged 65 years or over is
TK 350,000 for physically challenged persons, it is TK 450,000 and for gazette
war wounded freedom fighters, it is TK 425,000.
In case of parent/legal guardian of a physically challenged persons, he/she will
get a further initial exemption of TK 50,000 in addition to above limit.
9.13.1.2 Nonresidents:
Nonresident other than Bangladeshi non-residents shall pay tax on the total
income at the rate of 30%
9.13.1.3 Minimum tax payable:
Minimum tax payable is as follows depending on location of the assessee:
Location Minimum Tax
Within Dhaka and Chattogram city corporation TK 5,000
Any other City corporation Tk 4,000
Other than city corporation Tk 3,000
9.13.1.4 Dividend Income:
Dividend income received for individual assessee from company listed with an
exchange in Bangladeshi is tax exempted up to Tk 50,000.
9.13.1.5 Charge of surcharge:

Surcharge is payable by an individual assessee on total tax payable if the total
net worth exceeds Tk 30 million as stated below:

Total net worth Rate

a) Over Tk 30 million to Tk 50 million or owner of more than 1
motor car or owner of a flat of 8,000 sft size within City
Corporation area

10%

b) Over Tk 50 million to Tk 100 million 15%
c) Over Tk 100 million to Tk 150 million 20%
d) Over Tk 150 million to Tk 200 million 25%
e) Over Tk 200 million 30%
However, minimum surcharge will not be less than Tk 3,000 for option (a)
above and not less than Tk 5,000 if net worth exceeds Tk 100 million.

However, if the total net wealth is Tk 500 million or more, surcharge will be
higher of the following:
a) 0.1% of net wealth; and
b) 30% of surcharge on total tax.
9.13.2 Rate for owner of small or cottage industry
If an individual is the owner of a small or cottage industry situated in a less or
least developed area and is engaged in manufacturing of products and derives
income from such industries then he will be entitled to rebate on income
derived from such industries at the following rates:

Particulars Rate of rebate

If production during the year is more than
15% but less than 25% compared to
previous year

Rebate of 5% on tax payable on
income derived from such industries.

If production during the year exceeds 25 %
as compared to previous year.

Rebate of 10% on tax payable on
income derived from such industries.

9.13.3 Tax rates applicable for owners of motor car and jeep
Tax payable at the time of registration or renewal of fitness certificate for
motor vehicles is:

Type of Vehicle Tax payable (Tk)
Up to 1500 CC for each motor car or jeep 15,000
Up to 2000 CC for each motor car or jeep 30,000
Up to 2500 CC for each motor car or jeep 50,000
Up to 3000 CC for each motor car or jeep 75,000
Up to 3500 CC for each motor car or jeep 100,000
More than 3500 CC for each motor car or jeep 125,000
Micro-bus each 20,000
Such advance tax shall not be collected from government, local government,
any project under government, foreign diplomat, development partner, an

educational institute under MPO, public university, gazette war-wounded
freedom fighter and any letter issued by NBR to any institute.
However, if any assessee owns more than one motor vehicle self or jointly, then
registration cost will be 50% higher for every subsequent registration. This
shall be treated as advance payment of tax of the assessee. Moreover, such
advance tax shall not be refundable.
9.13.4 Corporate tax rates
The rates of tax applicable to companies, banks, insurance and other financial
institutions:

Companies Rate
Publicly traded companies i.e. companies listed with any stock exchange in
Bangladesh other than banks, insurance companies, merchant banks and other
financial institutions and jute, textile, garment industries, mobile phone
operator companies and cigarette zarda, bidi, gul or any other tobacco
product Manufacturing companies.

25%

Non-listed companies including branch companies other than banks, insurance
companies, merchant banks and other financial institutions, jute, textile,
garment industries, mobile phone operator companies and cigarette, zarda,
bidi, gul or any other tobacco product manufacturing companies.
[If non-listed companies other than banks, insurance companies, merchant banks
and other financial institutions, jute, textile, garment industries, mobile phone
operator companies and cigarette, zarda, bidi, gul or any other tobacco product
manufacturing companies list at least 20% of their paid up capital through IPO,
they shall receive a rebate of 10% in the year of listing.
50% of export income is exempt from tax.
However, rebate on income from export business shall not apply to companies who
are enjoying tax exemption or paying tax at the reduced rates as mentioned in 2.3.]
35%

Banks, insurance and other financial institutions (except merchant banks) if
not publicly listed

40%
Banks, insurance and other financial institutions (except merchant banks) if
publicly listed and those which got approval from the Government in 2013

37.5%
Merchant banks 37.5%
Cigarette, zarda, bidi, gul or any other tobacco product manufacturing
companies (companies, firms and individuals) irrespective of listing status
Surcharge in addition to above tax is applicable on business income.

45%
2.5%
Mobile phone operator companies if not publicly listed as below 45%
Mobile phone operator companies that convert themselves into a publicly
traded company by transfer of at least 10% shares through stock exchanges,
of which maximum 5% may be through Pre-Initial Public Offering Placement
[If mobile phone operator companies list at least 20% of their paid-up capital
through IPO, they shall receive a rebate of 10% in the year of listing.

40%

However, 5% additional tax will be charged from 1 July 2020 if disabled

persons are not provided with proper arrangement for movement at the place of
service by school, college, university and NGO. On the other hand, 5% tax
rebate will be allowed if at least 10% of total employees constitute disabled
person.
9.13.4.1 Reduced rates of Corporate Tax applicable to certain
industrial companies

Companies Rate
Textile industries (time extended up to 30 June 2022) 15%
Jute industries (time extended up to assessment year 2019-2020) 10%
Knit wear and woven garments manufacturer and exporter (time extended
up to assessment year 2019-2020)

12%

Knit wear and woven garments manufacturer and exporter with
internationally recognized factory with ‘green building certification’

10%

Research Institutes at national level, registered under the Trust Act, 1882
or Societies Registration Act, 1860

15%

Private Universities, Private medical college, Private dental college,
Private engineering college or Private college engaged in imparting
education on information technology

15%

Co-operative society registered under Co-operative Society Act 2001
other than income from agricultural or cottage sector

15%

Production of pelleted poultry feed, Production of pelleted feed for fish,
shrimp and cattle, Production of seeds marketing of locally produced
seeds, cattle farming, dairy farming, horticulture, frog farming, sericulture,
mushroom farming and floriculture:
Income up to Tk 1,000,000
 Next Tk 2,000,000
On the balance amount

3%
10%
15%

9.13.5 Reduced tax rates applicable to local authority:
25% reduced tax rate will be applicable for following local bodies:
WASA (Dhaka, Chattogram, Khulna
and Rajshahi

BREB BPDP

Bangladesh Hi-Tech Park Authority RDA Chattogram Port Authority
Bangladesh Civil Aviation Authority CDA Pyra Port Authority
National Housing Authority BTRC Bangladesh Bridge Authority
Mongla Port Authority RAJUK IDRA
Bangladesh Television BEPZA BWAPDA
Borendra Multipurpose
Development Authority (Rajshah)

BIWTA KDA
All Sustainable and Renewable Energy Development Authority

9.13.6 Capital gains tax
9.13.6.1 Capital gains tax on sale of shares of listed companies
Capital gain from transfer of stocks and shares of public limited companies
listed with stock exchange except listed Govt. securities:

Particulars Rate
a) For resident companies and firms 10%
b) Capital gain tax of non-resident shareholders (refer to section 5.9) 15%
c) For sponsor shareholders and shareholder directors 5%
d) For resident individual holding at least 10% of the total share capital
of the company

5%

Capital gains tax on sale of stocks and shares of public limited companies
listed with stock exchange in respect of resident individual assessee shall be
exempt from tax unless such residents fall in categories (c) and (d) above.
9.13.6.2 Capital gains tax other than sale of shares of listed companies
In the case of a company, income from capital gains will be separated from
total income and tax at 15% is payable on such capital gains regardless of the
period of holding of the asset from the date of its acquisition.
In the case of an assessee other than a company, if the asset is transferred
before the expiry of five years from the date of acquisition, the capital gains
will be taxed at the usual rate applicable to the assessee’s total income
including the capital gains. If the asset is transferred at any time after expiry of
five years from the date of its acquisition, the capital gains will be taxed at the
usual rate applicable to the assessee’s total income including the capital gains
or at the rate of 15% on the amount of capital gains whichever of the two is
lower.
9.13.7 Tax on dividend/remittance of profit
A company paying dividend shall withhold tax at the rate of 20% on dividend
payable to a company and at 10% (subject to furnishing 12-digit Tax Payer’s
Identification Number) or 15% on dividend payable to a resident individual.
A company paying dividend shall withhold tax at the rate of 30% on dividend
payable to any non-resident individual (other than a company).
If stock dividend declared or distributed by a listed company exceeds the cash
dividend in any income year, 10% tax on the whole amount of stock dividend
will be applicable. Such tax cannot be adjusted with any other tax liability of
the company. The provision is also applicable if any cash dividend is not

declared or distributed in the income year.
A branch company shall withhold tax at the rate of 20% while remitting profit
to Head Office.
However, in cases where dividend is payable to a shareholder resident in a
country with which Bangladesh has signed a tax treaty, the rate mentioned in
the tax treaty will apply subject to confirmation/certification from NBR
Further, any distribution from mutual fund or alternative investment fund
would be subject to tax like dividend declared by a company.
9.13.8 Tax on retained earnings
A company (listed in stock exchange) shall pay tax at the rate of 10% on the
total amount transferred to retained earnings or any fund, reserve or surplus, if
such amount exceeds 70% of the net profit/income after tax in the income year.
9.13.9 Applicability of tax rates
All rates quoted from 2.1 to 2.6 will apply for the assessment year 2019-2020,
unless stated otherwise.
9.13.10 Charge of additional tax
Additional tax will be charged to the employer who employs or allows an
individual not being a Bangladeshi citizen to work at his business or profession
without prior approval of BIDA or any other competent Government authority.
This additional tax is higher of 50% of the tax payable on his income or Tk
500,000.
9.13.11 Filing of tax return
 Filing of tax return is compulsory for every person who:
 in a fiscal year earns total income from all sources exceeding the minimum
threshold;
 was assessed for tax for any one of the three years immediately preceding
that income year;
 is a company; or a non-government organization registered with NGO
affairs bureau or co-operative society or a firm or an association or persons
or a shareholder director or shareholder employee of a company, partner of
a firm, an employee of the government or an authority corporation, body or
units of the government who draws basic salary of Tk 16,000 or more at
any time during the income year, an employee holding an executive or a
management position in a business or profession; a Micro Credit
Organization having license with Micro Credit Regulatory Authority; a
non-resident having permanent establishment in Bangladesh; or
 is subject to tax exemption or lower tax rate except not being an institution
established solely for charitable purpose or a fund;
 at any time during the relevant income year fulfils any of the following
conditions:
– owns a motor car, owns membership of a club registered under any law
governing value added tax.

– runs any business or profession having obtained a trade license from any
City Corporation, pourashava or /and operates a bank account;
– has registered with a recognized professional body as a doctor, lawyer,
income tax practitioner, chartered accountant, cost and management
accountant, engineer, architect or surveyor or any other similar profession;
– is a member of a chamber of commerce and industry or trade association;
– Runs for an office of any pourashava, city corporation or a Member of
Parliament;
– participates in a tender floated by the government, semi-government,
autonomous body or local authority;
– Serves in the board of directors of a company or group of companies;
– Participates in a ride sharing arrangement by providing motor vehicle.
However, a return of income shall not be mandatory for-
1. An educational institution receiving government benefits under Monthly
Payment Oder (MPO); or
2. a public university; or
3. a fund; or
4. a non-resident, not being a non-resident individual, having no permanent
establishment in Bangladesh; or
5. a non-resident individual having no fixed base in Bangladesh; or
6. Any class of persons which the Board, by order in official gazette, exempt
from filling the return.
9.14 Methods of Accounting
Section 35(3) of ITO 1984 requires every company as defined in the
Companies Act 1913 or 1994 to submit 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 and the statements are
prepared and reported in accordance with International Accounting Standards
and the International Financial Reporting Standards and are audited by in
accordance with the Bangladesh Standards on Auditing. As per Section 35(4)
only in case when a company has not complied with the requirements of sub-
section 35(3) a DCT can compute the income on such basis and such manner
he/she thing fit. So first he/she has to prove that non-compliance of Section
35(3) occurred. When revenues are supported by VAT return such revenues
reported in trading/profit and loss accounts shall not be ignored by the DCT
and use any other amount for calculation of minimum turnover tax.
9.15 Definition of person:
As per Section 2(46) definition, “person” includes an individual, a firm, an
association of persons, a Hindu undivided family, a trust, a fund, a local
authority, a company, an entity and every other artificial juridical person.

9.16 Individual (Personal) income tax
9.16.1 Introduction
In general, Bangladesh residents are taxed on their worldwide income. Non-
residents are taxed on income earned in Bangladesh irrespective of where the
payment is made.
There is no provision for married couples to file joint returns. Returns are to be
filed by 30 November for the income year ending 30 June.
Individuals may file returns under universal self-assessment scheme but the
assessing officers have discretion to scrutinize the returns.
Where total income exceeds Tk 600,000 during the income year for any
individual, he is required to pay advance tax as either 100% of last assessed tax
or 75% of current estimated income tax and pay the outstanding tax (if any) at
the time of filing the return. Tax on an employee’s salary is required to be
withheld on a monthly basis by the employer.
9.16.2 Resident
An individual is treated as a resident of Bangladesh if that person stays in
Bangladesh for 182 days or more in any income year; or 90 days or more in an
income year if that person has previously resided in Bangladesh for a period of
more than 365 days during the four preceding years. Residence is determined
in Bangladesh purely on the period of presence in Bangladesh irrespective of
residency in other countries. Short-term visitors and dependents of foreign
nationals not earning any income in Bangladesh are not taxed in Bangladesh
and are not required to file tax return.
9.16.3 Universal self-assessment (Section 82BB)
The Universal self-assessment has been re-structured. The responsibilities of
the tax authority have been specified. Where an assessee files a return of income
mentioning twelve- digit Taxpayer's Identification Number (TIN) in
compliance with the conditions and within the time specified and pays tax on
the basis of the tax return, tax authority will issue an acknowledgment of
receipts of the return and such acknowledgment shall be deemed to be an order
of assessment of the Deputy Commissioner of Taxes.
Upon receipt of an income tax return, the DCT shall compute the total income
after necessary adjustments of any arithmetical accuracy and incorrect claim.
He shall determine tax liability taking into account of tax refundable claimed
including any tax deducted at source, any tax collected at source and any

advance tax paid.
After processing the submitted tax return, the DCT shall send a notice to the
assessee communicating the difference of computation of income, tax, refund
or other related particulars with opportunity to justify his position in writing
and to file an amended return specifying time limit in the notice. If the assesse
files an amended return properly, the DCT shall send a letter of acceptance
within 90 days. In case the assesse does not respond to the notice, the DCT
shall send a demand notice within 9 months specifying total income and tax
payable or refundable.
After filing the return, if the assessee finds any unintentional mistake resulting
less tax liability has been paid or computed, he may file an amended return
with a written statement mentioning the reason and paying tax in accordance
with the amended return. An interest at the rate of 2% will be applicable for the
tax that was paid or computed less. However, amended tax return cannot be
filed after the expiry of 180 days from the date of the filing the original return
or after the original return has been selected for audit.
A return of income filed under universal self-assessment shall not be selected
for audit where such return except the return of income of a financial
institution shows at least 15% higher income than the income assessed or
shown in the return of immediately preceding assessment year and such return:
 is accompanied by corroborative evidence in support of any income
exempted from tax;
 is accompanied by a copy of bank statement or account statement, as the
case may be, in support of any sum or aggregate of sums of loan exceeding
Tk 500,000;
 does not show receipt of gift during the year;
 does not show any income chargeable to tax at a rate reduced under Section
44; or
 does not show or result in any refund.
No question regarding the source of investment shall be raised, if a new
assessee shows income at least 20% of the capital invested in a business or
profession and shows income which exceeds the tax exemption threshold.
However, the initial capital investment or any fraction thereof shall not be
transferred within five years from the end of the income year.
Time limitation for disposal of universal self-assessment cases is two years
from the end of assessment year in which the income was first assessable.

9.16.4 Taxable income
Taxable income is the total income earned from all sources, excluding exempt
income. Foreign source income of a resident is included in his/her taxable
income with the exception of the foreign source income of foreign nationals
who are resident in Bangladesh.
9.16.5 Requirement of twelve-digit Taxpayer's Identification Number (e-
TIN)
It has been made compulsory to submit e-TIN certificate or acknowledgement
receipt of income tax return or the tax certificate issued by Deputy
Commissioner of Taxes at the time of:
 opening a letter of credit for the purpose of import;
 submitting an application for the purpose of obtaining an import registration
certificate;
 renewal of trade license;
 submitting any tender documents;
 submitting an application for membership of a club registered under the
Companies Act 1994;
 issuance or renewal of license or enlistment of a surveyor of general
insurance;
 Registration of land, building or apartment situated within any city
corporation deed value of which exceeds Tk 100,000. Such document shall
contain TIN of both the seller and the purchaser. This provision will not
apply in cases of non-resident Bangladeshis;
 registration, change of ownership or renewal of fitness of a car, jeep or a
microbus;
 registration, renewal of fitness or change of ownership of a bus, truck,
prime mover, lorry etc. plying for hire;
 sanction of loan exceeding Tk 500,000 to a person by a commercial bank or
a leasing company;
 issue of credit card;
 issue of practicing license to a doctor, a lawyer, a chartered accountant, a
cost and management accountant or an income tax practitioner;
 all sponsor directors at the time of registration of a company (other than
non-resident foreign directors/sponsors);
 applying for or renewal of membership of any trade body;
 submitting a plan for construction of building for the purpose of obtaining
approval from RAJUK, CDA, KDA and RDA;
 Issuance of drug license;
 applying for connection of gas for commercial use within a city corporation,
pourashava or cantonment board;
 applying for connection of electricity within a city corporation, pourashava
or cantonment board;

 issuance or renewal of survey certificate of a water vessel including launch,
steamer, fishing trawler, cargo, coaster and dump-barge etc., plying for
hire; or
 registration or renewal of certificate as agent of an insurance company;
 parents of the students of English medium school following international
curriculum within City Corporation or in any pourashava of a district
headquarter.
 receiving the salaries by an employee of the government or an authority
corporation, body or units of the government who draws a salary at a scale
of grade 10 or above;
 receiving any amount from the government under Monthly Payment Order
(MPO) if the amount of payment exceeds Tk 16,000 per month;
 receiving any payment which is an income of the payee classifiable under
the head of salaries by any person employed in the management or
administrative function or any supervisory position in the production
function;
 obtaining or maintaining the agency or the distributorship of a company;
 receiving any commission, fee or other sum in relation to money transfer
through mobile banking or other electronic means or in relation to the
recharge of mobile phone account;
 receiving any payment by a resident from a company against any advisory
or consultancy service, catering, service, event management service, supply
of manpower or providing security service;
 submitting a bill of entry for import into or export from Bangladesh;
 participates in a ride sharing arrangement by providing motor vehicle; and
 Releasing overseas grants to a registered NGO or a Micro Credit
Organization having license with Micro Credit Regulatory Authority.
9.16.6 Issuance of e-TIN without application and re-registration
 Twelve-digit Taxpayer’s Identification Number (e-TIN) may be issued
without any application where any income tax authority has found a person
having taxable income during the year and has failed to apply for TIN.
 Board may direct any person having a TIN to furnish such information or
documents for the purpose of re-registration and thereafter issue a new
twelve-digit Taxpayer’s Identification Number.
9.16.7 Issuance of Temporary Registration Number (TRN)
Temporary Registration Number (TRN) may be given to a person who has
been found having taxable income in any year and has failed to apply for
Taxpayer's Identification Number (TIN) under section 184B.

9.16.8 Submission of Statement of Assets and Liability and Life Style
(Section 80)
It is mandatory for an individual assessee to submit the statement of assets,
liabilities and lifestyle, if he
a) has a gross wealth over Tk 2.5 million; or
b) owns a motor car; or
c) has made an investment in a house property or an apartment in the city
corporation area.
If any individual, not being a shareholder director, has his income from salary
or his income from business or profession does not exceed Tk 0.3 million, he
may opt not to submit the statement of lifestyle.
9.16.9 Tax Clearance Certificate
Every expatriate employed in Bangladesh is required to obtain a Tax Clearance
Certificate from the concerned Deputy Commissioner of Taxes. This certificate
is required to be produced as an evidence of tax payment/exemption at the port
of departure from Bangladesh.
9.16.10 Tax Rebate on Investment
An assessee shall be entitled to a rebate from the amount of tax payable if
he/she invests during the income year in the following items e.g.
 life insurance premium
 contribution to approved Provident Fund (both by the employee and
employer)
 contribution to deposit pension scheme amounting to not exceeding Tk
60,000 sponsored by a scheduled bank or a financial institution
 donation to a national level institution set up in memory of the liberation
war
 donation to a national level institution set up in memory of father of the
nation
 donation to Prime Minister’s Higher Education Fund
 donation to Aga Khan Development network/Asiatic Society/CRP/Dhaka
Ahsania Mission Cancer Hospital/icddrb
 donation to Zakat Fund/charitable fund established by or under Zakat Fund
 any sum invested in Bangladesh Government Treasury Bond and
Sanchayapatra
 stocks and shares of listed companies, mutual funds and debentures listed
with any stock exchange in Bangladesh

Allowable limit of investment tax rebate is as follows:
Total income Investment tax rebate
on eligible amount*
Up to Tk 1.5 million 15%
Over Tk 1.5 million 10%
*Eligible amount is the lowest of the following:
Actual investment; or
25% of total income; or
Tk. 1.5 core
9.16.11 Deemed income
Deemed income in tax context is defined as quasi income, which is Section 19
 House rent:
If rent free accommodation is provided to the employee, the rental value or
25% of the basic salary, whichever is less, is included in income. If
accommodation is provided at a concessional rate, the actual payment by
employee is excluded from the above. Tax exempted house rent receivable in
cash is Tk 25,000 per month or 50% of basic salary, whichever is lower.
 Conveyance allowance:
Tax exempt conveyance allowance receivable in cash is a maximum of Tk
30,000 per annum. If the employer provides conveyance for personal or private
use, an amount equal to 5% of the employee’s basic salary or Tk 60,000,
whichever is higher, is added with total income.
 Loan:
Any amount of loan not exceeding Tk 500,000 received by any assessee not
being a company from any person, not being a banking company or financial
institution, without crossed cheque or bank transfer shall be treated as income
under the head ‘income from other sources’ if not paid back within three years.
 Gift:
Loan or gift received from any source by an individual exceeding Tk 500,000

without crossed cheque or bank transfer shall be treated as income under the
head ‘income from other sources’

 Medical expenses:
Where any amount is received or receivable by the employee by way of
hospitalization, medical expenses or medical allowance, the amount, if any, so
receivable or received exceeds 10% of basic salary or Tk 120,000 annually,
whichever is less, shall be included in his income.
In case of an employee being a person with disability, the medical expenses
exceed Tk 1,000,000 shall be include in his total income.
Other items of such deemed incomes are contained in section 19 of the Income
Tax Ordinance 1984.
 Unexplained investments: –
Special tax treatment in respect of investment in residential building and
apartment (Section 19BBBBB) Any sum invested by any person in the
construction/purchase of any residential building/apartment shall be deemed to
have been explained if tax is paid at following rates:

Area Tax per square meter

Up to 200
square meter

More than 200
square meter

A. Gulshan Model Town, Banani, Baridhara,
Motijheel Commercial Area and Dilkusha
Commercial Area

Tk 4,000 Tk 5,000

B. Dhanmondi Residential Area, Defence Officers
Housing Society (DOHS), Mohakhali, Lalmatia
Housing Society, Uttara Model Town,
Bashundhara Residential Area, Dhaka
Cantonment, Kawran Bazar, Bijoynagar,
Segunbagicha and Nikunja of Dhaka and
Panchlaish, Khulshi, Agrabad and Nasirabad of
Chattogram

Tk 3,000 Tk 3,500

Area Tax per square meter

Up to 120
square meter

Up to 200
square meter

More than 200
square meter

C. Any City Corporation other than
area mentioned in A and B

Tk 800 Tk 1,000 Tk 1,500

above
D. Pourashava or any district
headquarters

Tk 300 Tk 500 Tk 700
E. Other area Tk 200 Tk 300 Tk 500
The rates will be 20% higher if the assessee makes investment in two or more
buildings/apartments or already has any building or apartment in any City
Corporation.
Furthermore, the rate of tax will be 100% higher if for the income:
a) notice issued before submission of return for concealment or escaped
assessment;
b) notice issued before submission of return to furnish information; and
c) Proceeding initiated before submission of return for any noncompliance or
providing false statement or false information.
However, the above will not be applicable rather under section 164, 165 and
166 if the source of income is:
a) derived from any criminal activities; or
b) not derived from any legitimate source.
9.16.12 Imposition of tax on income of chamber of commerce and
industry, trade federation or any such business organization
Any income derived from any source other than income from business, and
interest income of government approved chambers of commerce and industry,
trade federation, industry and trade cooperative etc. shall not fall under scope
of tax liability.
9.17 Corporate tax
9.17.1 Introduction
Every company is required to obtain an e-TIN and register with the VAT
authorities to receive distinctive numbers. Companies have to file their tax
returns within Tax Day*. The filing date may be extended up to two months
and further extension up to another two months by the tax authorities
upon application. The return has to be accompanied with audited statement of
accounts, computation of total income along with supporting schedules, for
example depreciation schedule as per tax law, statement of profit/loss on sale
of fixed assets, excess perquisite calculation statements, etc. An assessing
officer verifies the filed return and may ask for information, explanation and
evidences of claims made where required. Based on this, the officer may re-
compute the total income and tax payable, and pass an order of assessment and
communicate the order to assessee.

Company means a company incorporated under the Companies Act in
Bangladesh and includes:
– A body corporate established or constituted by or under any law in force
– Any nationalized bank or industrial or commercial organization
– Any association or combination of persons, if any of such persons are
registered as a company
– An association or body incorporated by or under any laws of a country
outside Bangladesh
– Any foreign association or body which the NBR declares to be a company.
9.18 Artificiality of Corporation
A company is created through veil of incorporation which gives it a separate
identity in the form of an artificial judicial person. Therefore, taxation of a
company is different and distinct from its owners (i.e. shareholders). Section
2(20) of ITO 1984 defines a company as:
 a company as per the Companies Act 1913 or 1994;
 a body corporate established or constituted by or under any law in force in
Bangladesh;
 any association or body incorporated by or under the laws of a country
outside Bangladesh; and
 any foreign association or body, not incorporated by or under any law which
NBR may declare as company.
Therefore, a company defined under the ITO 1984 may be different than a
company defined in the Companies Act 1994. Since the rate of income tax
would be different for a company as compared to all other class of person
whether a person shall be treated as company or not is very important.
9.19 Residency
Residency is very important factor, because if a person is resident all income
from whatever source derived is received, accrues or arises in Bangladesh as
well as outside Bangladesh shall be considered as total income for Bangladesh
taxation purpose. However, if a person is non-resident only income which is
received, accrues or arises in Bangladesh shall be considered as total income.

9.20 Bangladeshi resident company
Section 2(11) defined Bangladeshi company as those company formed and
registered under the Companies Act 1913 or 1994 as well as established or
constituted by or under any Bangladeshi law and having its registered office in
Bangladesh. As per Section 2(55(c) of ITO 1984 all such Bangladeshi
company as well as any other company the ‘control and management’ of
whose affairs is situated wholly in Bangladesh in that year shall be treated as
Bangladesh resident.
9.21 Control and management
Control of a business not necessarily means from where the actual trading or
physical business activities are conducted. Normally, where directors who
manage and control the company hold their meetings and take decisions not
merely where they resides. A fundamental case on this matter is De Beers
Consolidated Mines Ltd v Howe where a South African incorporated mineral
company is determined as having resident of London, UK. This matter is also
elaborated further in various avoidance of double taxation treaty prepared
under OECD guidelines.
9.22 Bangladesh connection
Section 18 of ITO 1984 explains the situation when any income shall be
deemed to accrue or arise in Bangladesh.
9.23 Residence- Section 2(55):
Tax Residence is quite different to Legal/Immigration Residence.
Company:
In general, a company which is incorporated in Bangladesh will be treated as a
resident for tax purposes. Any company whose control and management is
situated wholly in Bangladesh will also be treated as a resident for tax
purposes.
A Bangladeshi company; or any other company the Control and Management
of whose affairs is situated wholly in Bangladesh in that year (directors
meeting, physical undertaking and subjects of trade etc.). It can happen that

resident of one country but the trading is undertaken in another country. In
India the term used is "place of effective management", which means a place
where key management and commercial decisions that are necessary for the
conduct of business of an entity as a whole are, in substance made.
Residency:
Residency is very important factor, because if a person is resident all income
from whatever source derived is received, accrues or arises in Bangladesh as
well as outside Bangladesh shall be considered as total income for Bangladesh
taxation purpose. However, if a person is non-resident only income which is
received, accrues or arises in Bangladesh shall be considered as total income.
Resident companies are subject to income tax on their worldwide income, and
as such foreign income is also taxable in its country of tax resident. Normally,
a company can be tax resident of only one country. Non-residents are assessed
only on income received or accrued in Bangladesh, including capital gains.
9.24 Permanent establishment
Detailed definition of “Permanent Establishment” (PE) has been inserted in the
definition section of tax law.
PE in relation to income from business or profession, means a place or activity
through which the business or profession of a person is wholly or partly carried
on, and includes:
(i) a place of management; (ii) a branch; (iii) an agency; (iv) an office; (v) a
warehouse; (vi) a factory; (vii) a workshop; (viii) a mine, oil or gas well,
quarry or any other place of exploration, exploitation or extraction of natural
resources (ix) a farm or plantation; (x) a building site, a construction, assembly
or installation project or supervisory activities in connection therewith; (xi) the
furnishing of services, including consultancy services, by a person through
employees or other personnel engaged by the person for such purpose, if
activities of that nature continue (for the same or a connected project) in
Bangladesh; and (xii) any associated entity or person (hereinafter referred
to as “Person A”) that is
Commercially dependent on a non-resident person where the associated entity
or Person A carries out any activity in Bangladesh in connection with any sale
made in Bangladesh by the non-resident person”.
However, earlier definition of PE in Transfer Pricing section of tax law has
been deleted.

9.24.1 Taxable income
Tax is imposed on total income from all sources after all allowable deductions.
Sales revenue, fees, commissions, realised exchange gains, rents, dividends
and interest received, provisions and trading liabilities not paid within three
years as well as inadmissible expenses are included in taxable income. All
expenses, including realised exchange losses and tax depreciation incurred in
earning this income are allowable as deductions.
Foreign source income of companies’ resident in Bangladesh is included in
taxable income but credit is given for tax paid outside Bangladesh. Foreign
source income of a non-resident company is not taxed in Bangladesh unless
such income is brought into Bangladesh.
Where a company not listed with a stock exchange, receives its paid-up capital
by issuing shares in an income year, the amount so received in any mode other
than by crossed cheque or bank transfer, shall be deemed to be the income of
the company from ‘other sources’ for that income year. However, capital
contribution through land transfer (non-cash contribution) is acceptable.
a) Income deemed to accrue or arise in Bangladesh
b) The scope of income has been widened in our tax law. As per the new law,
any income from the below sources will be captured:
c) any permanent establishment in Bangladesh;
d) any property, asset, right or other source of income, including intangible
property, in Bangladesh;
e) the transfer of any assets situated in Bangladesh;
f) the sale of any goods or services by any electronic means to purchasers in
Bangladesh; and
g) any intangible property used in Bangladesh.
Below is the explanation for this section:
a. the shares of any company which is a resident in Bangladesh shall be
deemed to be property in Bangladesh;
b. intangible property shall be deemed to be property in Bangladesh if it is (i)
registered in Bangladesh; or (ii) owned by a person that is not a resident of
Bangladesh but has a permanent establishment in Bangladesh to which the
intangible property is attributed; and
c. Transfer of shares of non-resident company will be treated as transfer of
asset in Bangladesh to the extent it is attributable to the value of any assets
in Bangladesh.

9.25 Tax Day
*Tax Day means in case of company the 15th day of the seven-month
following the end of the income year or 15th September following the end of
the income year where said 15th day falls before the 15th September.
9.25.1 Income year
Entities other than banks, insurance companies or financial institution (and
subsidiaries thereof) are required to have their accounting year, for tax filing
purposes, as July to June.
Banks, insurance companies or financial institution (and subsidiaries thereof)
are required to have their accounting year, for tax filing purposes, as January to
December.
Deputy Commissioner of Taxes (DCT) may allow a different financial year for
an entity which is a subsidiary or holding company or a branch or liaison office
of a parent company incorporated outside Bangladesh if such entity is required
to follow a different accounting year for the purpose of consolidation.
9.26 Deemed income
Deemed income in tax context is defined as quasi income, which is Section 19.
9.27 Deductions of the Income Tax Ordinance 1984
All expenses relating to the business operations of a company and incurred
during the relevant income year are allowed as deductions. Tax depreciation on
fixed assets of the company (except on cost of land) is allowed at prescribed
rates as per third schedule. The cost of free samples and entertainment
expenses are allowed as deductions at prescribed rates based on turnover and
profit respectively or on the actual amounts, whichever are lower. Provision for
bad debts is not allowed.
Specific provisions for accrued expenses in the relevant income year are
allowed as deductions. Prepaid expenses can be carried forward and allowed as
a deduction in the relevant accounting year.
Liabilities for expenses which remain unpaid are added to income in the fourth
year but allowed as a deduction in the year when the payments are made.
9.28 Tax depreciation
There will be no limit for allowing tax depreciation of a bus or minibus
transporting the students and teachers in case of educational institute or
employees of the business or profession.

Amortization of license fee is now allowed as an admissible expense for any
company engaged in providing specialized services, if such license is integral
to the operation of the company. Previously it was only allowed for cellular
mobile phone operator.
9.28.1 Allowable perquisites
Perquisite has been defined as follows: Perquisite means –
– Any payment made to an employee by an employer in the form of cash
or in any other form excluding basic salary, festival bonus, incentive
bonus, arrear salary, advance salary, leave encashment and overtime,
and
– Any benefit, called by whatever name, provided to an employee by an
employer, whether convertible into money or not; other than contribution
to a recognized provident fund, approved pension fund, approved
gratuity fund and approved superannuation fund.
Provided that the provision of this clause shall not be applicable to an
employer where perquisites were paid to an employee in pursuance of any
Government decision published
in the official Gazette to implement the recommendation of a Wage Board
Constituted by the Government.
Limit of allowable perquisites has been fixed at Tk 550,000 per employee. The
value of perquisites paid/provided to an employee in excess of Tk 550,000 in
an assessment year shall be disallowed in company's assessment.

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