Bangladesh – Tax holidays, Corporate tax rate changes | KPMG | GLOBAL

Bangladesh – Tax holidays, corporate tax rate changes

Bangladesh – Tax holidays, corporate tax rate changes

KPMG in Bangladesh presents highlights of the country’s Finance Bill 2017, which preserves current tax holidays for certain investments, and makes minor adjustments to corporate tax rates.

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GDP growth continues

Bangladesh has shown remarkable economic performance, achieving GDP growth of 6 percent on average over the last decade and of 7.4 percent in its fiscal year 2016/17. To sustain this performance, the government of Bangladesh passed a budget on 1 June 2017 of 50 billion US dollars (USD).

Tax revenue is expected to meet about 72 percent of this outlay, with income tax and value added tax (VAT) expected to contribute about 35 percent each and the balance coming from customs duties and other taxes. As a result, the government intends to broaden the tax net for income tax and VAT in the current and future fiscal years. 

Bangladesh continues to focus on developing its infrastructure and improving its energy sector. Recently signed memoranda of understanding with China, Japan and Russia aim to increase foreign investment in infrastructure and energy, and the tax authority has already begun issuing formal gazettes, orders and notifications in this regard. 

Corporate tax rates

The tax law generally maintains the previous corporate rate structure, which imposes income tax at 25 percent on listed entities and 35 percent for non-listed entities. Corporate tax rate changes announced this year include:

  • an additional surcharge of 2.5 percent on income of companies in the tobacco sector
  • a reduction of the corporate income tax rate for companies in the readymade garments sector to 15 percent (from 20 percent)
  • a further 1 percent rate reduction (to 14 percent) for companies in the readymade garments sector that have an internationally recognized green building certificate.  

Certain companies remain taxed at different rates. For example:

  • Banking companies, insurance companies and non-banking financial institutions are taxed at 40 percent if they are listed and 42.5 percent if non-listed.
  • Cigarette manufacturers and mobile phone operator are taxed at 45 percent (before the additional surcharge on cigarette manufacturers noted above)
  • Companies engaged in production and export of knitwear and woven garments enjoy a reduced corporate tax rates of 20 percent, and companies that produce or export jute products are taxed at 10 percent.

Generally, a company’s export earnings are 50 percent exempt.

Tax holidays

Finance Bill 2017 makes no changes to the current tax legislation providing tax holidays for:

  • industries established in export processing zones (5 to 7 years, depending on location)
  • investment in economic zones (10 years) and development of economic zones (12 years) 
  • industrial undertakings (5 to 10 years, depending on location) 
  • physical infrastructure (10 years) 
  • coal-based private power generation companies (15 years)
  • non-coal-based power generation companies (10 years). 

The tax holiday (until 2024) for companies engaged in “information technology enabled services” also remains intact, although Finance Bill 2017 includes specifically defines these services.

Other notable changes

  • For companies, the tax day (i.e. tax return due date) is now the 15th day of seventh month following the end of income year; alternatively, where that fifteenth day is before 15 September, the tax day is 15 September of the year following the end of the income year.
  • With the government focusing more on ensuring individuals and business entities have tax registration numbers, more regulations have been proposed in this area.

MESA Tax Update - July 2017

Welcome to the latest edition of our Middle East and South Asia (MESA) Tax Update, bringing you the latest news in tax from the MESA region.

 
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