WELCOME TO THE PRESENTATION ON

Bangladesh Governments Financial Policies for Foreign Investors

By
M A Quader Sarker
Member (Tax Administration and Human Resource Management) National Board of Revenue

Government of Bangladesh

National Board of Revenue

The National Board of Revenue (NBR) is the central authority of tax policy and administration in Bangladesh. Administratively, it is under the Internal Resources Division (IRD) of the Ministry of Finance (MoF). MoF has 4 Divisions, namely, the Finance Division, the Internal Resources Division (IRD), the Banking Division and the Economic Relations Division (ERD). Each division is headed by a Secretary to the Government. Secretary, IRD is the ex-officio Chairman of NBR. NBR is responsible for formulation and continuous re-appraisal of tax-policies and tax-laws in Bangladesh. The three wings of the NBR are income tax, value added tax (VAT) and customs. In recent years, Bangladeshs tax collection has recorded an impressive growth averaging 20% per annum. Bangladesh tax-GDP ratio at 9.5% remains quite low when compared with other countries in South Asia.

Basic Features of Income Tax

Income tax is one of the main sources of revenue among the direct taxes. It is a progressive tax system. Income tax is imposed on the basis of ability to pay.

The more a taxpayer earns the more he should pay''- is the basic principle of charging income tax.
It aims at ensuring equity and social justice. Sources of income are salaries, interest on securities,income from house property, income from agriculture, business or profession, capital gains, income from other sources.

Basic Features of Income Tax

Tax Rate (Assessment Year- 2011-2012) : Other than Company : For individuals (other than female taxpayers, senior taxpayers of 65 years and above and retarded taxpayers), tax payable for the First Taka 1,80,000/- Nil Next Taka 3,00,000/- 10% Next Taka 4,00,000/- 15% Next Taka 3,00,000/- 20% Rest Amount 25% For female taxpayers, senior taxpayers of age 65 years and above, tax payable for the First Taka 2,00,000/- Nil Next Taka 3,00,000/- 10% Next Taka 4,00,000/- 15% Next Taka 3,00,000/- 20% Rest Amount 25% For retarded taxpayers, tax payable for the First Taka 2,50,000/- Nil Next Taka 3,00,000/- 10% Next Taka 4,00,000/- 15% Next Taka 3,00,000/- 20% Rest Amount 25% Minimum tax for any individual assessee is Tk. 2,000 Non-resident Individual 25% (other than non-resident Bangladeshi)

Tax Rate (Assessment Year- 2011-2012) :

For Companies
Publicly Traded Company 27.5%

Non-publicly Traded Company 37.5%

Bank, Insurance & Financial Company 42.5% Cigarette manufacturing company (not listed with stock exchange) 42.5% Cigarette manufacturing company (listed with stock exchange) 35% Mobile Phone Operator Company 45% Publicly Traded Mobile Operator Company 35% If any publicly traded company (excluding Mobile Operator Company) declares more than 20% dividend, 10% rebate on total tax allowed; Inter Corporate dividend-20%

Basic features of Customs duty

Customs wing is primarily responsible for collection of all duties and taxes at the import stage;

Apart from collection of government revenue it is also responsible for trade facilitation, enforcement of government regulations, protection of society and environmental protection;
Preparation of foreign trade statistics, trade compliance and protection of cultural heritage; Rate of custom duty are 3%, 5%, 12% and 25% varies on the item; Exemptions from customs duty: capital machinery, raw materials of medicine, poultry medicine, chemicals for leather and leather goods, solar power equipments, private power generation unit, textile raw materials and machineries etc. To know more about Customs regulation please visit: www.nbrbd.org.

Basic features of VAT

On production VAT rate is 15%; On trading and Services there are truncated rates ranging from 9% to 1.5%; On imports VAT rate is 15%; All persons doing production, trading and import of VATable goods and rendering VATable services require to VAT registration. They require to maintain few documents namely purchase register, sales register,VAT chalan register, current account book, return etc.

Basic features of VAT

Primary Agricultural Products and some other items as detailed in schedule-I are VAT exempted. Few services as detailed in schedule-II are VAT exempted; Export is zero rated meaning there will be no VAT. Moreover VAT, supplementary duty, ATV (Advance Trade VAT), Customs duty and regulatory duty paid on imports of exported goods are paid back to the exporters; Industrial undertakings in EPZ area are exempted from VAT and supplementary duty; To know more about VAT , please visit www.nbr-bd.org and www.vatbd.com.

Incentives for Foreign Direct Investment (FDI)

Incentives can be divided into three broad categories
Fiscal incentives Non-fiscal incentives Other Facilities

Fiscal Incentives for Foreign Investment in Bangladesh

Relief from double taxation [Bangladesh-Singapore signed Double Taxation Agreement]; Full repatriation of dividend and capital at exit; Accelerated depreciation for new industries is available at the rate of 50%, 30% and 20% for the first, second and third years respectively, on the cost of plant and machinery; Remittance of royalty, technical know-how and technical assistance fees; Tax holidays

Tax Holiday
Industrial undertakings set up in Dhaka and Chittagong Division [excluding Dhaka, Narayanganj, Gazipur, Chittagong, Rangamati, Bandarban and Khagrachari] districts [IT Ordinance 1984- Section 46B]

Tax exemption Period

Rate of tax exemption

First 02 Years
Next 02 Years For the last 01 Year

100% of income
50% of income 25% of income

Tax Holiday
Industrial undertakings set up in Rajshahi, Khulna, Sylhet and Barisal divisions and Rangamati, Bandarban and Khagrachari districts [IT

Ordinance 1984- Section 46B]

Tax exemption Period First 03 Years Next 03 Years For the last 01 Year

Rate of tax exemption 100% of income 50% of income 25% of income

Tax Exemption for newly set up Industrial undertakings [IT Ordinance 1984- Section 46B] Industries engaged in the production of a. active and radio pharmaceuticals ingredient;b. barrier contraceptive and rubber latex; c. basic chemicals and dies and chemicals; d. basic ingredient of electronic industries; e. bio fertilizer; f. bio technology; g. boilers; h. compressors; i. computer hardware; j. energy efficient appliances; k. insecticide or pesticide; l. petro-chemicals; m. pharmaceuticals; n. processing of locally produced fruits & vegetables; o. radioactive(diffusion) application industry; p. textile machinery; q. tissue grafting; r. any other industrial undertaking as notified by Government.

Special Tax Holidays for newly established Physical Infrastructure Facilities [July 2011-June 2013] [IT Ordinance 1984- Section 46C]
Physical Infrastructure facilities will get 10 years Tax Holiday:
Period of exemption
First 5 years

Rate of exemption
100% of Income

Next 3 years Last 2 years

50% of Income 25% of income

a. deep sea port; b. elevated expressway; c. export processing zone; d. flyover ; e. gas pipe line; f. high-tech par; g. ICT village or software technology zone; h. IT Park; i. large water treatment plant and supply through pipe line; j. LNG (Liquefied Natural gas) terminal and transmission line; k. mono-rail; l. rapid transit; m. renewable energy e.g energy saving bulb; n. solar energy plant o. windmill; p. sea or river port; q. toll road, underground rail; r. waste treatment plant; s. any other category as notified by the Government.

Tax Exemption for Private Power Generation Companies

Commercial production date 1 July 2013 and onwards Tax exemption period Rate of tax exemption

First 5 years from production date 100%

Next 3 years
For the last 2 years

50%
25%

Special Facilities for Industries in Export Processing Zone (EPZ)

Duty free import of construction materials, machineries, office equipment, spare parts etc. 100% foreign ownership permissible;
Duty free import and export of raw materials and finished goods. Enjoy MFN (most favoured nation) status; No ceiling on foreign and local investment; Full repatriation of capital and dividend; Foreign currency loan from abroad under direct automatic route; Non-resident Foreign Currency Deposit (NFCD) Account permitted; Operation of FC account by B and C type industries allowed;

Special Facilities for Industries in Export Processing Zone (EPZ)

Foreign Technician working in EPZ are exempted from Income Tax for 3 years; No UD (Utilization Declaration), IRC (Import Realization Certificate), ERC (Export Realization Certificate)and renewal of Bond License; Secured and Protected bonded area; Off-shore banking available; Import on Documentary Acceptance (DA) basic allowed; Import and export on CM basis allowed; Import from DTA Allowed (Domestic Tariff Area);

Other Facilities for Industries in Export Processing Zone (EPZ)..

10% sale to DTA (Domestic Tariff Area); Customs clearance at factory site; Simplified sanction procedure; Sub-contracting with export oriented industries inside and outside EPZ allowed; Relocation of foreign industries allowed; One window same day service and simplified procedure for Customs formalities;

Bangladesh

Singapore