WELCOME TO THE PRESENTATION

ON

Bangladesh Government’s Financial Policies for

Foreign Investors

By

M A Quader Sarker

Member (Tax Administration and Human Resource Management)

National Board of Revenue

Government of Bangladesh

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, Bangladesh’s 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.

National Board of Revenue

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

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)

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%

Tax Rate (Assessment Year- 2011-2012) :

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.nbr-bd.org.

Basic features of Customs duty

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

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

Fiscal Incentives for Foreign Investment in

Bangladesh

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 100% of income

Next 02 Years 50% of income

For the last 01 Year 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 Rate of tax exemption

First 03 Years 100% of income

Next 03 Years 50% of income

For the last 01 Year 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. radio-

active(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:

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.

Period of exemption Rate of exemption

First 5 years 100% of Income

Next 3 years 50% of Income

Last 2 years 25% of income

Tax exemption period Rate of tax exemption

First 5 years from production date 100%

Next 3 years 50%

For the last 2 years 25%

Tax Exemption for Private Power Generation Companies

Commercial production date 1 July 2013 and onwards

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)

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