KPMG in Bangladesh presents highlights of the country’s Finance Act 2017 and related regulations, which preserve current tax holidays for certain investments, make corporate tax rate changes, and introduce an income tax exemption for certain infrastructure work done through public-private partnerships.
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, Russia and India aim to increase foreign investment in infrastructure and energy. The tax authority has already begun issuing formal gazettes, orders and notifications in this regard.
Application of the new VAT Act 2012 has been postponed until 1 July 2019. The VAT Act 1991 and related rules remain in effect with no significant changes for 2017. However, all businesses must obtain a nine-digit electronic business identification number (e-BIN) by 31 December 2017.
The tax law generally maintains the previous corporate tax 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:
In 2017, the government introduced tax exemptions for work in public-private partnerships (PPP) by project companies involved in the following projects:
Qualifying PPP companies will be exempt from tax as follows:
To qualify for the above exemptions, the PPP company must: