DOING
BUSINESS IN BANGLADESH
(As of October, 2008)
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Facilities for foreign investors : (As of October, 2008)
Government of Bangladesh provides lot many incentives for foreign investors. These are, in brief, as follows :
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(1
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Protection
of foreign investment and its repatriation : |
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Protection of foreign investment from expropriation by the state is fully ensured. Moreover, full repatriation of capital invested from foreign sources is allowed. Similarly, post-tax profits and dividend accruing to foreign investors are allowed to be transferred in full. Remittance of approved post-tax royalties, technical know-how and technical assistance fees is also allowed in full. Foreigners employed in Bangladesh are entitled to remit 50 per cent of their salary and full repatriation of their savings and retirement benefits.
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(2) |
Fiscal
incentives : |
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i. |
Avoidance of double taxation on the basis of bilateral agreements. |
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ii. |
Tax exemption of capital gains from transfer of shares of public companies listed with stock exchange. |
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iii. |
Tax Holiday.
Tax holiday for 5/7 years is available to defined sectors of industry and physical infrastructure on fulfilment of certain conditions. |
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iv. |
Concessionary import of Capital Machiner
Concessionary import duty and exemption from VAT and supplementary duty are available in case of import of capital machinery. |
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v. |
Incentives to Private Sector Power Generation
Private sector power generation companies are allowed tax holiday for 15 years from the date of commercial production. |
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vi. |
Special incentives to Oil and Gas sectors
In respect of petroleum operation undertaken by a contractor entering into production sharing contract (PSC) with the government, government holds and keeps the contractor harmless from all present and future Bangladesh taxes except where specifically provided to the contrary.
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vii. |
Facilities for export-oriented industries
Duty free import of capital machineries is allowed and facilities of Bonded Warehouse, Back to Back Letter of Credit and Duty Draw Back are available in case of export-oriented industries. |
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viii. |
Additional facilities in the Export Processing Zones
There are several additional benefits for industries set up in the Export Processing Zones, viz. tax holiday for 10 years, duty-free import of machinery, equipment and raw materials, complete exemption of tax on dividend of foreigners for tax holiday period, off-shore banking facilities, freedom from customs formalities, provision of electricity, water, gas and telecommunication connections on the same day applied for. After the expiry of tax holiday period, 50% of income of such industries attributable to export sales is exempt from income tax. |
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Tax Structure and Rates of Different Taxes: (As of October, 2008)
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(1)
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Income Tax
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Rate of tax on companies listed with stock exchange is 27.5% while for others the rate is 37.5% for the assessment year 2008-09. For banks, financial institutions, and mobile phone operator companies the rate is 45%. Tax rate of listed companies would, however, be 37.5% if they fail to declare at least 10% dividend or fail to distribute the declared dividend within the time specified by the Securities and Exchange Commission. If a listed company declares dividend of more than 20% and distributes it within the specified time, it would get rebate @10% from the due income tax. If a mobile phone operator company is converted into a publicly traded company by transferring at least 10% of shares through Stock Exchange, the rate of tax would be 35%. The rate of tax on inter-corporate dividend is 20%. Rate of corporate capital of gain tax is 15% irrespective of the period of retention of the asset. Remittance of post-profit tax by branch companies is taxed @ 20% as dividend. As to individual tax, the first Taka 165,000 of total annual income of male tax-payers is exempt while the first Taka 180,000 of the total income of the females, males aged 70 years or above and the disabled is exempt for the assessment year 2008-09. The balance is taxed at four slab rates of 10, 15, 20 and 25 percent, minimum tax payable being Taka 2,000. Non-resident individuals except non-resident Bangladeshis are taxed at the maximum rate of 25%. If capital gain arises to a person other than a company on disposal of an asset after five years of acquisition, tax would be payable at the rate of 15% of the capital gain or at the rate applicable to the total income including the capital gain whichever is lower. If, however, the capital gain arises on disposal of the asset within five years of acquisition, tax would be payable on the total income including the capital gain.
Principal Indirect Taxes are Customs Duty, VAT and Supplementary Duty.
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(2) |
Customs
Duty |
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Customs duty has four tiers. On capital machinery and spares the rate is 3%, on basic raw materials it is 7%, on intermediate goods it is 12% and on finished goods it is 25%.
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(3) |
VAT |
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VAT is payable on production and specified services @15% if the annual turnover is or above Taka 24 lakh. On imports, VAT is payable at the same rate of 15% irrespective of the quantum. In respect of several services VAT is imposed at truncated rates as fixed by the National Board of Revenue. If annual turnover of production and services is less than Taka 24 lakhs, Turnover Tax is payable at the rate of 4%.
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Supplementary Duty |
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This duty is imposed on the production and import of non-essential, luxury, harmful and socially undesirable goods. Except those exempted or rate of those otherwise specified, the common rate of Supplementary Duty is 20%. Considering however, the extremely harmful effects on health and environment, the rates of a few goods are much higher varying from 60% to 350%.
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(5) |
Withholding
Tax |
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The system of Withholding Tax is there both for income tax and VAT in specified cases at fixed rates.
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Other taxes that may affect foreign investors |
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Stamp Duty
On transfer of property – 5% on the value of consideration.
On transfer of shares of a company – 1.5% on the value of consideration.
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Board of Investment (E-mail: ecboi@bdmail.net and Web: www.boibd.org) and Bangladesh Export Processing Zone Authority (E-mail: bepza@bdmail.net and Web: www.bangladesh-epz.com) are sponsoring agencies of the Government for foreign investment in Bangladesh. All foreign investors may contact these agencies to avail of all facilities and institutional support services as provided by the Government of Bangladesh.
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