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.
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.
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:
Certain companies remain taxed at different rates. For example:
Generally, a company’s export earnings are 50 percent exempt.
Finance Bill 2017 makes no changes to the current tax legislation providing tax holidays for:
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.