Fiscal Incentives for Stock Market Development in Bangladesh

Guideline: SEC is the regulator: No tax DSE and CSE are the trading place: No tax They are no longer physical trading place as it goes to online and brokerage houses are allowed to do substandard for Stock Market De elop!ent in "angladesh# it is necessary to increase the nu!ber of co!pany$ %or bank# there is no difference in listing# but Mobile &hone Co!pany has '() to *()$ %or others +,$() to *,$()# but condition is *- days# when co!!erce will be there# then di idend will be paid instantly$ Publicly Traded Company Di idend declared by less than .-) or failure to pay declared di idend SEC stipulated ti!e (30 days from 9.2.10) /ther situation /ther co!pany Minimum Tax irrespective of profit or loss: Taka !000 0f di idend paid at !ore than +-)# .-) rebate on applicable tax$

+,$() within *,$() *,$()

0nco!e fro! Mutual fund is totally tax exe!pted$ &art 1 2th Schedule$ +-3$ "ecause they ha e obligation to pay all the inco!e 45()6 directly except !anage!ent expenses 4()6$ They can7t retain the inco!e and rein est it because their pri!e purpose is not to do business$ There is exe!ption in head Exemption of Dividend from Mutual Fund or Unit Fund: 1ny inco!e fro! di idend of a !utual fund or a 8nit fund where such di idend does not exceed taka +(---$ So if the inco!e fro! di idend of a !utual fund is less than +(--- then there is no tax on that but if it exceeds +(---tk then the total inco!e is taxable$ Mobile phone operator companies Types of Income !" Capital #ain from: Transfer of stocks 9 shares of non:listed pri ate li!ited co!pany . Transfer of other capital assets $" Dividend income
0

Tax ate

.-) .() $%&

<esident;non:resident "angladeshi Co!pany = +-) 0nco!e fro! Di idend 8;S (' <esident;non:resident "angladeshi &erson other than Co!pany = .-)

"or example: 0n E&> there is ?orean co!pany$ 0f ?orean co!pany gi es di idend# that di idend is not taxable is "angladesh# it is taxable in ?orea$ 1lso he is gi en stock di idend$ 1ccording to the definition of inco!e# it is said that stock di idend is not an inco!e$ 'ther Industrial Companies:
Types of 0nco!e Capital gain fro!: - Transfer of stocks 9 shares of non:listed pri ate li!ited co!pany . Transfer of other capital assets Dividend income 'ther income &ublicly traded co!pany Di idend declared by less than .-) or failure to pay declared di idend within SEC stipulated ti!e (30 days from 9.2.10) /ther situation Tax <ate .-) .() $%&

(" 'ther income Co!pany being con erted into a publicly traded through transfer of at least .-) shares through stock exchanges# of which !axi!u! () !ay be through: &re:0&/ &lace!ent Tax rate is *() /ther co!pany Tax rate is '() Minimum Tax irrespective of profit or loss: Taka !000 )on*Corporate Taxpayers: <esident indi idual assesse# non:resident "angladeshi# association of persons# fir! and other artificial @uridical persons +& tax on Capital #ain on transfer of shares of: a sponsor shareholder or director of a listed co!pany Asource tax u;s (*M and settled tax u;s 3+CB a sponsor shareholder or director of bank# financial institution# !erchant bank# insurance co!pany# leasing co!pany# portfolio !anage!ent co!pany and stock dealer co!pany #proposed$ other shareholder or director of a listed co!pany ha ing !ore than .-) of share capital of a co!pany at any ti!e in inco!e year #proposed$

Placement ,hareholder: -!%.: Transfer of /overnment0 Types of Income Capital gain fro! transfer of shares of listed co!pany #proposed$

Tax ate 10%

0f a co!pany raises its share capital through book building *) /r# public offering or rights offering or pri ate place!ent or preferential share or in any other way# at a alue in excess of face alue #sec. 1&'$ 4Source tax u;s (*C and settled tax u;s 3+C6 1hen the company 2ill submit its3 return4 0t is !andatory for the co!pany whether it incurs loss or gain$ %or others the date is .* th Septe!ber$ %or co!pany# the date is by .(th Duly or within 2 !onths whiche er is earlier$ 4Sec$ ,(6 1ccording to .5 4..G6# rule +' co!pany7s return for! is different$ 5ssessment: Two types of assess!ents$ /ne is uni ersal self:assess!ent and other is nor!al assess!ent$ 0n uni ersal self:assess!ent# there is less hassle in general$ 1hen the tax 2ill be #iven4 %or co!pany# they ha e obligation ad ance Euarterly tax pay!ent$ 0f they ha e total inco!e of '----- tk$# then they ha e to pay ad ance tax# 4Sec 236$ 1nd the regular pay!ent is before filing the return$ 0ts7 obligation is .(th Duly or within 2 !onths before the inco!e year ends whiche er is earlier$ "ut !axi!u! co!panies follow the financial year# because in .( th Duly the account has not closed yet$ %or this# there is opportunity to take ti!e$ 0t has rule like at first you need to apply for * !onths and after that you can apply for another * !onths$ 0n total# you will get 2 !onths for return sub!ission$ 0f the assess!ent is not co!pleted# you cannot sub!it the re ised return$ Tax holiday: tax rate is Fero on business inco!e# but if he has other inco!e# tax will be i!posed on that$ Ge has to sub!it the return$ 5dvance payment of tax: two types of rules$ %irst one is on his assessed inco!e of pre ious year$ Suppose assessed inco!e is . crore tk$ 0f he pays 4.;'6 of . crore Euarterly# then there will be no proble!$ 0f he says that in this year# inco!e will go down to 3- lacks# he has to pay tax on that Euarterly$ "ut here is a proble!$ Cike if his esti!ated inco!e fluctuates widely with the actual# suppose his inco!e beco!es .$( crore# he has to pay tax on .$( crore with interest pay!ent calculated fro! the ery beginning 4.st 1pril6$ 0n this case# if he has already gi en tax on . crore taka earlier# then no Euestion will be asked$ The rule of ad ance tax is at least ,() of tax should be gi en$ Tax recovery: Hhen the person does not pay tax# then the Euestion of reco ery co!es$ 0n this regard# at first tax authority will do the assess!ent$ 0f difference is there# they will issue notice of de!and of how to reco er tax$ I<ule (3 4.5+ to +'26J

Corporate Taxation in Bangladesh

Corporate tax or co!pany tax refers to a tax i!posed on entities that are taxed at the entity le el in a particular @urisdiction$ Such taxes !ay include inco!e or other taxes$ The tax syste!s of !ost countries i!pose an inco!e tax at the entity le el on certain type4s6 of entities 4co!pany or corporation6$ Many syste!s additionally tax owners or !e!bers of those entities on di idends or other distributions by the entity to the !e!bers$ The tax generally is i!posed on net taxable inco!e$ Net taxable inco!e for corporate tax is generally financial state!ent inco!e with !odifications# and !ay be defined in great detail within the syste!$ The rate of tax aries by @urisdiction$ The tax !ay ha e an alternati e base# such as assets# payroll# or inco!e co!puted in an alternati e !anner$ Most inco!e tax syste!s pro ide that certain types of corporate e ents are not taxable transactions$ These generally include e ents related to for!ation or reorganiFation of the corporation$ 0n addition# !ost syste!s pro ide specific rules for taxation of the entity and;or its !e!bers upon winding up or dissolution of the entity$ 0n syste!s where financing costs are allowed as reductions of the tax base 4tax deductions6# rules !ay apply that differentiate between classes of !e!ber:pro ided financing$ 0n such syste!s# ite!s characteriFed as interest !ay be deductible# sub@ect to interest li!itations# while ite!s characteriFed as di idends are not$ So!e syste!s li!it deductions based on si!ple for!ulas# such as a debt:to:eEuity ratio# while other syste!s ha e !ore co!plex rules$ So!e syste!s pro ide a !echanis! whereby groups of related corporations !ay obtain benefit fro! losses# credits# or other ite!s of all !e!bers within the group$ Mechanis!s include co!bined or consolidated returns as well as group relief 4direct benefit fro! ite!s of another !e!ber6$ Most syste!s also tax co!pany shareholders on distribution of earnings as di idends$ 1 few syste!s pro ide for partial integration of entity and !e!ber taxation$ This is often acco!plished by Ki!putation syste!sK or franking credits$ 0n the past# !echanis!s ha e existed for ad ance pay!ent of !e!ber tax by corporations# with such pay!ent offsetting entity le el tax$ Many syste!s 4particularly sub:country le el syste!s6 i!pose a tax on particular corporate attributes$ Such non:inco!e taxes !ay be based on capital stock issued or authoriFed 4either by nu!ber of shares or alue6# total eEuity# net capital# or other !easures uniEue to corporations$ Corporations# like other entities# !ay be sub@ect to withholding tax obligations upon !aking certain arieties of pay!ents to others$ These obligations are generally not the tax of the

corporation# but the syste! !ay i!pose penalties on the corporation or its officers or e!ployees for failing to withhold and pay o er such taxes$.

Taxation of Corporations:
Corporations !ay be taxed on their inco!es# property# or existence by arious @urisdictions$ Many @urisdictions i!pose a tax based on the existence or eEuity structure of the corporation$ %or exa!ple# Maryland i!poses a tax on corporations organiFed in that state based on the nu!ber of shares of capital stock issued and outstanding$ Many @urisdictions instead i!pose a tax based on stated or co!puted capital# often including retained profits$ 0n "angladesh# the principal direct taxes are personal inco!e taxes and corporate inco!e taxes# and a alue:added tax 4L1T6 of .() le ied on all i!portant consu!er goods$ The top inco!e tax rate for indi iduals is +()$ %or the +--';-( tax year 4Duly . +--'MDune *- +--(6 the top corporate rate was '()$ Gowe er# publicly traded co!panies registered in "angladesh are charged a lower rate of *-)$ "anks# financial institutions and insurance co!panies are charged the '() rate$ 1ll other co!panies are taxed at the *,$() rate$ Effecti e . Duly +--+# the L1T rate on co!puter hardware and software was reduced to ,$()# and certain agricultural eEuip!ent and electricity supplied to the agricultural sector was exe!pted fro! L1T altogether$ L1T on the transfer of land is also to be abolished$ Essential agricultural i!ple!ents and irrigation pu!ps had pre iously been excluded fro! certain taxes$ 1ny inco!e collected or gained by a co!pany doing business in "angladesh# whether resident or not is taxable$ Corporate tax rates for industrial co!panies whose shares are publicly traded are *() and the rate of those whose shares are not publicly traded is '-)$ 1 tax rate on inco!e of all other co!panies including banks# financial institutions# insurance co!panies and local authorities is '()$ Co!panies en@oying tax holiday are reEuired to in est only +() to *-) of their inco!e in other acti ities as per rules of the National board of <e enue 4N"<6$

Statutory Definition of Company:

8nder Section +4+-6# Company !eans a co!pany as defined in the co!panies 1ct# .5.* 4 ii of .5.*6 or co!pany act .55' and includes M a6 1 body corporate established or constituted by or under any law for the ti!e being in forceN b6 1ny nationaliFed banking or other financial institution# insurance body and industrial or business enterpriseN bb6 an association or co!bination of persons# called by whate er na!e# if any of such persons is a co!pany as defined in the co!panies act# .5.* 4 ii of .5.*6 or co!pany act# .55'$ c6 1ny foreign association or body not incorporated by or under any# which the board !ay# by general or special order# declare to be a co!pany for the purposes of this ordinance$
1

%ro! Hikipedia# the free encyclopedia

esidential Status:
<esidential status !ay be resident Adefined u;s +4((6# 0T/B or non:resident Adefined u;s +4'+6# 0T/B$ 8nder section .,# resident assessee 4taxpayer6 has to pay inco!e tax on total global inco!e including foreign inco!e# but non:resident taxpayer has to pay inco!e tax only on his total do!estic 4"angladeshi6 inco!e as deter!ined u;s .3 4inco!e dee!ed to accrue or arise in "angladesh6$ 8nder section +4((6# an indi idual is to be a resident if his period of stay in "angladesh is at least .3+ days in the concerned inco!e year# or at least 5- days in the concerned inco!e year# and at least *2( days in the preceding ' inco!e years$ 1 partnership fir! is considered as resident# if the control and !anage!ent of its affairs situated wholly or partly in "angladesh in the concerned inco!e year$ 1 co!pany will be a resident# if control and !anage!ent of its affairs situated wholly in "angladesh in the concerned inco!e year$ /therwise# a taxpayer will be treated as non:resident Au;s +4'+6B$+
3

Tax Rate for Corporate Taxpayers:

Types of Company 4.6 Capital gain arising out of Type of Income : Transfer of stocks 9 shares of pri ate li!ited co!pany #(.).*. +o. 220, -in.-ykar.200/ dated 13.00.200/$ Tax ates for 56 $%%.* $%%7* %7 %8 .-) .() .() '() .-) .() .() '-) *-) '-) .-) .() .() '() .-) .() .() '-) *-) '-)

"ankO# insurance# financial institutions

/ther co!panyOO

: Transfer of other capital assets 4+6 Di idend inco!e 4*6 /ther : "oth for publicly traded and not publicly inco!e traded co!pany : Transfer of stocks 9 shares of pri ate 4.6 Capital li!ited co!pany #(.).*. +o. 220, gain -in.-ykar.200/ dated 13.00.200/$ arising out of : Transfer of other capital assets 4+6 Di idend inco!e : %or publicly traded co!pany O Di idend declared by less than .-) or failure to pay declared di idend 4*6 /ther within SEC stipulated ti!e inco!e O /ther situation : %or other co!pany

8nder section .2C# a bank co!pany# if shows# in the return# profit exceeding (-) of the aggregate su! of capital and reser e# shall pay tax = .() of such excess profit as additional tax$ OO 8nder section .2"# a listed co!pany other than a banking or insurance co!pany# if has not issued# declared or distributed di idend or bonus share eEui alent to at least .() of paid:up capital within six !onths i!!ediately following any inco!e year# shall pay tax = () of Pundistributed profitQ 4accu!ulated profit including free reser e6 as additional tax$

Su!mission of

eturn:

+ *

Tax &lanning in "usiness: "angladesh &erspecti e by Swapan ?u!ar "ala# %CM1 Tax &lanning in "usiness: "angladesh &erspecti e by Swapan ?u!ar "ala# %CM1

The return under sub:section +A4.6# 4.16 and 4."6B shall be furnished in the prescribed for! setting forth therein such particulars and infor!ation as !ay be reEuired thereby including the total inco!e of the assessee$ ,i#ned and 9erified*
(i)

in the case of an indi idual# by the indi idual hi!self N where the indi idual is absent fro! "angladesh# by the indi idual concerned or by so!e person duly authorised by hi! in this behalfN and when the indi idual is !entally incapacitated fro! attending to his affairs# by his guardian or by any other person co!petent to act on his behalf N in the case of Gindu undi ided fa!ily# by the ?arta# and# where the ?arta is absent fro! "angladesh or is !entally incapacitated fro! attending to his affairs# by any other adult !e!ber of such fa!ily N

(ii)

(iii) in the case of a co!pany or local authority# by the principal officer thereof N (iv) in the case of a fir!# by any partner thereof# not being a !inorN (v)

in the case of any other association# by any !e!ber of the association or the principal officer thereof N and

(vi) in the case of any other person# by that person or by so!e person co!petent to act on

his behalf$

"ssessment:
Provisional 5ssessment: (1) The Deputy Co!!issioner of Taxes !ay# at any ti!e after the first day of Duly of the year for which the assess!ent is to be !ade# proceed to !ake# in a su!!ary !anner# a pro isional assess!ent of the tax payable by the assessee on the basis of the return and the accounts and docu!ents# if any# acco!panying it and where no return has been filed# on the basis of the last assess!ent including an assess!ent under this section$ 4+6 0n !aking a pro isional assess!ent under this section# the Deputy Co!!issioner of Taxes shall:: 4a6 rectify any arith!etical errors in the return# accounts and docu!entsN 4b6 allow# on the basis of the infor!ation a ailable fro! the return# accounts and docu!ents# such allowances as are ad!issible under the Third Schedule and any loss carried forward under section *3 or *5 or '.$ %or the purposes of pay!ent and reco ery# the tax as deter!ined to be payable upon pro isional assess!ent shall ha e effect as if it were deter!ined upon regular assess!ent$

4*6

4'6

The tax paid or dee!ed to ha e been paid under Chapter L00# in respect of any inco!e pro isionally assessed under sub:section 4.6# shall be dee!ed to ha e been paid towards the pro isional assess!ent$ 1ny a!ount paid or dee!ed to ha e been paid towards pro isional assess!ent under this section shall be dee!ed to ha e been paid towards regular assess!entN and the a!ount paid or dee!ed to ha e been paid towards pro isional assess!ent in excess of the a!ount found payable after regular assess!ent shall be refunded to the assessee$ Nothing done or suffered by reason or in conseEuence of any pro isional assess!ent !ade under this section shall pre@udice the deter!ination on !erit of any issue which !ay arise in the course of regular assess!ent$ There shall be no right of appeal against a pro isional assess!ent under this section$

4(6

426

4,6

Universal ,elf*5ssessment: -,ec" 8$::0 Two new sub:sections ' and ( ha e been added to this section$ Sub-sec 4, no Euestion as to the source of in est!ent by a new assessee deri ing inco!e fro! business or profession shall be !ade when he shows a !ini!u! inco!e of +() of in ested capital and pays tax before filing of return$ Sub-sec. 5, initial capital in est!ent shall not be transferred or let out within fi e years fro! the end of the assess!ent year in respect of which return of inco!e has been filed under this section$

Tax #ayment:
Deduction at ,ource and 5dvance Payment of Tax*
4.6 Notwithstanding that regular assess!ent in respect of any inco!e is to be !ade later in any assess!ent year# and without pre@udice to the charge and reco ery of tax under this /rdinance after such assess!ent# the tax on inco!e shall be payable by deduction or collection at source# or by way of ad ance pay!ent$ any su! deducted or collected# or paid by way of ad ance pay!ent shall# for the purpose of co!puting the inco!e of an assessee# be dee!ed to be the inco!e recei ed# and be treated as pay!ent of tax in due ti!e# by the assessee$

4+6

Payment of Tax 'n The :asis 'f eturn* E ery person who is reEuired to file a return under section ,( shall# on or before the date on which he files the return# pay the a!ount of the tax payable by hi! on the basis of such return as reduced by the a!ount of any tax deducted fro! his inco!e or paid by hi!$
1)

+6 1ny a!ount paid under sub:section 4.6 shall be dee!ed to ha e been paid towards the su! as !ay be deter!ined to be payable by hi! after regular assess!ent$

*6 1 person who# without reasonable cause# fails to pay the tax as reEuired by sub: section 4.6 shall be dee!ed to be an assessee in default$