Tax Structure and Rates of Different Taxes (As of 01 July, 2010):

           (1) Income Tax

 Rate of tax on companies listed with stock exchange is 27.5% while for others the rate is 37.5% for the assessment year 2010-11. Tax rate of tax 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. For banks, financial institutions and insurance companies, the rate is 42.5%. For mobile phone operator companies the rate is 45%. If a mobile phone operator company is converted into a publicly traded company by transferring at least 10% of shares, of which Pre Initial Public Offer Placement must not exceed 5%, 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. The first Taka 180,000 of the total income of the females and males aged 65 years or above is exempt while the first taka 200,000 of the disabled is exempt. The balance of the total income 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.

          (2) Customs Duty

Customs duty has four tiers. On capital machinery and spares the rate is 3%, on basic raw materials it is 5%, on intermediate raw materials it is 12% and on finished products it is 25%. Duty on capital machinery imported by export-oriented industries and garment manufacturing industries registered by Board of Investment (BoI) and enlisted with their respective association is, however only 1%.

          (3) VAT

VAT is payable on production and specified services @15% if the annual turnover is or above Taka 60 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 60 lakhs, Turnover Tax is payable at the rate of 4%. In specified cases, however, VAT is payable irrespective of turnover and in such cases VAT registration is mandatory.

          (4) Supplementary Duty

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%.

          (5) Withholding Tax

The system of Withholding Tax is there both for income tax and VAT at varying rates. Withholding income tax rates vary from 1% to 45% depending on the source of income, nature of business and residential status of the taxpayer. Withholding VAT rates vary from 1.5% to 15% depending on the nature of services/supplies.

          (6)Other taxes that may affect foreign investors

              Stamp Duty

On transfer of property – 3% on the value of consideration.
On transfer of shares of a company – 1.5% on the value of consideration.

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.