Professional Documents
Culture Documents
Taxation
Lectures
Of
Ranjan Kumar Bhowmik FCMA
Compiled by:
Asif Ahmed
Articled Student
KPMG in Bangladesh
Rahman Rahman Huq
Chartered Accountants
Special thanks to Rajesh Chandra Kuri, Md. Masrul Mollah and A S M Mahfuz of KPMG for their nice
cooperation.
:Contents:
SL
01
Lectures
Lecture # 01
Contents
Income tax authority, types of taxes, some important
Page
39
Lecture # 02 & 03
10 20
03
Lecture # 04
21 31
Lecture # 05
Capital Gain
32 34
05
Lecture # 06 & 07
35 43
06
Lecture # 08
44 48
07
Lecture # 09
49 50
08
Lecture # 11
50 50
09
Lecture # 10
51 49
10
Assessment, Penalty
50 57
11
Lecture # 15
Tax appeal
60 65
12
Lecture # 16
66 66
Lecture # 17
67 74
resident; DTAA
14
Lecture # 18
Page 2 of 74
Lecture # 01
02.06.2012
Coverage:
1.
2.
3.
4.
5.
IT Ordinance Vs IT Rules:
Tax Ordinance made or changed by the parliament
Tax Rules made by NBR
Govt. can reduce tax burden through SRO but cannot imply tax. Power to impose new tax is lid on the parliament.
Page 3 of 74
Types of Taxes:
NBR
Income Tax
Income
Tax
Gift
Tax
Foreign
Travel Tax
Value
Added Tax
Turnover
Tax
Supplementary
Duty
18 ) to its shareholders with a view to increase its paid-up share capital shall not be
included as income of that share holder;
ASIF AHMED (KPMG)
Page 4 of 74
Page 5 of 74
Income Year
July 1, 2011 June 30, 2012
January 1, 2011 December 31, 212
August 1, 2011 July 31, 2012
1.
2.
3.
Assessment Year
2012-2013
2012-2013
2012-2013
If proper books of accounts maintained, income year can be started from any month, but cannot be changed
without prior notice to DCT.
If proper books of accounts not maintained (individual), income year must be the financial year.
Firms (partnership) income year and its partners income should be the same.
Firm
Resident
Resident
Company
Non-Resident
Resident
Tax Rate:
Study References:
1. Finance Act
2. Section 16 of ITO
3. Second Schedule of ITO
4. SRO (Reduced tax rate)
Other than Company:
Entity other than the company (individual, HUF, firms etc) are taxed at progressive rate as below
On the 1st tk. 200,000
On next tk. 300,000
On next tk. 400,000
On next tk. 300,000
Balance amount
Nil
10%
15%
20%
25%
For women and senior citizen (65+) first slab will be of tk. 225,000 and for handicapped it is of tk. 275,000.
As per second schedule, in case of non-resident non-Bangladeshi tax rate is 25% direct.
ASIF AHMED (KPMG)
Page 6 of 74
Company:
Company tax rate is direct on its assessment income at following rate
1. Listed company
27.5%
2. Non listed or non-resident company
37.5%
3. Bank, insurance & NBFI
42.5%
4. Mobile Phone
a. If listed
35%
b. If not listed
45%
5. Cigarette
a. If listed
35%
b. If not listed
42.5%
6. Merchant Bank
37.5%
Income from any dividend received from any other company (where the company hold shares) tax on such
dividend will be 20%.
Tax on capital gain of the company will be 15%.
Income other than these two will be taxed as above.
Listed Company
Declared dividend
more than 20%
Declared dividend
more than 10%
Section 16:
Section - 16B; Charge of additional tax:
1. Notwithstanding anything contained in section 46A, where a public limited company, not being a
banking or insurance company, listed with any stock exchange in Bangladesh, has not issued, declared
or distributed dividend or bonus share equivalent to at least fifteen percent of its paid up capital to its
share holders within a period of six months immediately following any income year, the company shall
be charged additional tax at the rate of five per cent on the undistributed profit in addition to tax payable
under this Ordinance.
2. Explanation.- For the purpose of this section, "undistributed profit" means total income with
accumulated profit including free reserve.
Section - 16C; Charge of excess profit tax:
1. Where a banking company operating under , 1991 (1991 14 ) shows
profit in its return of income for an income year at an amount exceeding fifty per cent of its capital as
defined under the said Act together with reserve, the company, in addition to tax payable under the
Ordinance, shall pay an excess profit tax for that year at the rate of fifteen per cent on so much of profit
as it exceeds fifty per cent of the aggregate sum of the capital and reserve as aforesaid.
Page 7 of 74
Section - 16E; Charge of tax on sale of share at a premium over face value:
Notwithstanding anything contained in any other provisions of this Ordinance or any other law, where a company
raises its share capital through book building or public offering or rights offering or placement or preferential
share or in any other way, at a value in excess of face value, the company shall be charged, in addition to tax
payable under this Ordinance, tax at the rate of three (3) percent on the difference between the value at which the
share is sold and its face value. Added F.A. 2010
Capital Gain
Company:
15%
Example, salary income tk. 500,000 and capital gain tk. 1,000,000 = total income tk. 1,500,000, tax
On 1st tk. 200,000
Nil
Next tk. 300,000
30,000
Next tk. 400,000
60,000
Next tk. 300,000
60,000
Next tk. 300,000
75,000
Total tk. 1,500,000
225,000
Or
(300,000*10%) + (1,000,000*15%) = tk. 180,000
Lower one (which is Tk. 180,000)
Page 8 of 74
In case of gain of winning any lottery tax are deducted @ 20% at source though it can be computed with total income,
but no further tax rebate can be claimed.
10%
15%
15%
25%
Asif Ahmed
Articled Student
KPMG (Bangladesh)
Rahman Rahman Huq
asif.ahmed0001@yahoo.com
01922939126
Page 9 of 74
Lecture # 02 & 03
09.06.2012 / 10.06.2012
Income from Salary:
Study Reference:
Definition: Section 2(58), 2(45), 2(50), 2(27), 2(28) read with rule 33(2)(b)
Section 21, 50, 50B read with rule 21 and 22
108 read with rule 23
124(2), 165 and 172
Exemption: Rule 33 read with Sixth Schedule (Part A) para 5
Provident Fund:
1st schedule (Part B) read with Rule 43, 44
6th Schedule (Part A) Para 4,6, 21, 25
SRO 454 (Serial 19) date 31/12/1980
Definition of Salary:
There is no exhaustive definition of salary at Income Tax Ordinance, 1984. Only an inclusive definition is given at
section 2(58) where salary includes the following:a) Wages
b) Annuity
c) Pension Totally exempted as per 6th Schedule (Part-A) Para-8
d) Gratuity Totally exempted as per 6th Schedule (Part-A) Para-20
e) Fees
f) Commission
g) Allowances
h) Perquisites
i) Profits in lieu of salary or wages
j) Profits in addition to salary or wages
k) Advance Salary
l) Leave encashment
However, the term Basic Salary has been defined at Rule 33(2) as well as at Rule 65A (1) where basic salary
means the pay and allowances payable monthly or otherwise but does not include the following:
a)
Dearness allowance (unless it enters into the computation of Superannuation or retirement benefits of the
employee)
b) Employers contribution to Recognised Provident Fund and interest credited on the accumulated balance
c)
Page 10 of 74
e)
f)
g)
h)
i)
Advance Salary
Leave encashment
Leave Fare Assistance (LFA)
Overtime
Contribution by the employer to1) Recognized provident fund.
2) Approved Pension Fund.
3) Approved Gratuity Fund and
4) Approved Superannuation Fund.
There is an inclusive definition of "Profits in lieu of salary" at section 2(50) where profits in lieu of salary include: a) The amount of compensation is connection with the termination / modification of any terms and
conditions relating to employment.
b) Any payment from a provident or other fund to the extent to which it does not consist of contributions
by the employee and the interest on such contributions.
Apportionment of salary over the years due to arrear or advance salary (sec.172)
Where the salary is assessable at a rate higher than that at which it would otherwise have been assessed by reason of(a) Any portion of salary being received in arrear or in advance;
(b) Salary received in the year for more than 12 months;
(c) Received a payment, which is a profit in lieu of salary;
The DCT may, on the basis of application to him by the assessee, allocate salary over the year or years to which it
relates and may refund the amount of tax, if any, paid in excess. According to section 21, salary is taxable in the year
in which it is due or is paid. Where salary is paid in arrear or in advance, or where a retirement benefit or salary for
more than 12 months is received in any one year, the income for that year may be liable to assessment at a rate higher
than that at which it would otherwise have been assessed. Section 172 authorises the DCT to grant appropriate relief
for income tax in the above situation.
Page 11 of 74
Pay and Allowances totally exempt from Tax: (Sixth Schedule, Part-A)
The following pay and allowances shall be exempted from payment of tax and shall not be included in the
computation of salary income:a) Interest accrued on P.F.on which Provident Fund Act, 1925 applies (Para 4(1).
b) Interest accrued on Workers Profit Participation Fund established under the Companies Profit (workers
participation) Act, 1968 (Para 4(2)
c) Any special allowances, benefits, or perquisites granted to meet expenses incurred for official duties (Para-5)
d) Remuneration of Ambassadors/High Commissioner/Charge daffairs etc. of Embassies of foreign states and
their non-Bangladeshi employees (Para-7).
e) Pension (Para-8).
f) Gratuity (Para-20).
g) Any payment from provident fund to which PF Act. 1925 applies or from a recognized provided fund, an
approved superannuation fund or workers profit participation fund (Para-21).
h) Interest credited on accumulated balance of a recognized provident fund. The exemption limit is 1/3 rd of
salary [here salary means basic salary and dearness allowance (if any)] or interest credited @ 14.5%
whichever is higher (Para-25, definition of salary as per 1st Schedule (Part -B) and S.R.O.no 310 dated
27/06/1984).
i) Any amount received at the time of voluntary retirement in accordance with any scheme approved by the
Govt. (Para-26).
(b)
(c)
(d)
(e)
As per Private Sector Power Generation Policy of Bangladesh, income of any foreigner employed in a private
power generation company of Bangladesh is tax-free for 3 years from the date of his arrival in Bangladesh.
(S.R.O. no 114/1999)
Any salary drawn by any foreigner from the contracting state or agency as per bilateral agreement between the
Govt. of Bangladesh and Govt. of the contracting state or agency from any foreign aided development project
is fully exempt from payment of tax. (S.R.O. NO 207/1997)
Salaries of categorized personnel of United Nations and its agencies are tax free as per provision of schedule-1
(Article-V) Section-17 and schedule-2 (Article-VI) section-18 of United Nations and Specialized Agencies
(Privileges and Immunities) Act, 1975. (NBR Circular No: NBR/Tax-7/Tax Policy/02/2006, dated. 29/4/2007.)
When in any year an assessee has ceased to be an employee participating in a recognised Provided Fund and
has been declared by the employer maintaining the Fund not to be eligible to receive the whole for the
accumulated balance due to him, so much of his income as is assessable for that year shall be exempted from
income tax and shall be excluded from the computation of his total income and if such amount exceeds the
amount of his income in that year, so much of his income in the following year or years as is equal to the
amount of such excess shall be so exempted and excluded is such year or years. [S.R.O.no 454(serial no19)
dated:31/12/1980]
Festival bonus and all other allowances and benefits (except basic salary or remuneration) of Govt. employees,
Ministers, MP and Judges of Supreme Court are exempted from payment of tax [SRO No:226,227 and 228
dated 04/7/2011]
Information regarding payment of salary (Section 108 read with rule 21, 22 and 23)
Every employer shall furnish salary statement of employees in the form prescribed at rule-23 to the DCT before 1st
September each year. The DCT may however extend this date. This section requires information to be given
regarding accrual and actual payment of salary in order to help detection of any avoidance of tax. In case of non-govt.
employees every person responsible for making deduction before payment of salaries to them shall send forthwith a
statement prepared in the form prescribed in rule-21 to the concerned DCT.
Page 12 of 74
The Commissioner of Taxes may under rule-22 permit an employer to pay tax on the income of his employees in a
lump sum every month based on the average amount of tax deductible from such income from salaries and submit at
the end of the year the statement in the form prescribed in rule-23(3) Such statement must show not only the salary
which is paid but also the salary due. Because salary due is chargeable under section 21, whether paid or not.
Failure to furnish statement is punishable under section 124(b) and for making a false statement under section 165.
Tax on Tax
Salary of the employees is exempt if tax is being borne by the employer and there is no tax on tax in this case.
(S.R.O. no 182/1999 dated 01-07-1999)
600,000
360,000
960,000
(180,000)
780,000
i)
Rental value of the rent-free accommodation or 25% of basic salary of the employee whichever is less.
Example:
Basic Salary (50,000*12)
600,000
Free accomodation
(25% of Basic Salary)
150,000
750,000
(Where the accommodation is provided at a concessionary rate, the rent actually paid by him shall be deducted);
Example:
Basic Salary (50,000*12)
House Rent (25% of BS)
Less: House rent given
(2,000*12)
600,000
150,000
(24,000)
126,000
Page 13 of 74
j)
Received
400,000
160,000
Coveyance Allowance
Exempted
120,000
Net
400,000
40,000
24000
24,000
584,000
144,000
440,000
k) 7.5% of basic salary if conveyance is provided by the employer for the use of the employee exclusively for
personal or private purpose;
l) In case of medical allowance, the amount exceeding the actual expenditure.
m) The value of any benefit provided free of cost or at a concessionary rate;
n) Any sum paid by an employer in respect of any obligation of an employee.
o) In case of leave fares assistance; if it is mentioned in the job contract than it is exempted up to actual
expenditure. If not mentioned in the job contract than fully taxable. But if the travel is outside the country the
exemption is only applicable for every alternative year. If within the country, than exemption is for every time
of travel.
Page 14 of 74
GPF
Automatic taxable*
N/A
RPF
Automatic taxable*
Taxable
Investment allowance
Interest on PF
Treatment on the hand of employer
Yes
Tax free
N/A
***
Yes (both)
**
Allowable
expenditure on Profit
and loss account
***
UPF
Automatic taxable*
Taxable but at the
end of the service
No
Fully taxable
Not allowable
***
*Automatic Taxable = deduction of contribution to PF cannot be considered. Total basic salary are added to the total
income
**
One third (1/3) of the basic salary (Basic + Dearness allowance)
Or
Interest @ 14.5%
Whichever is higher is exempted
For example, a person received interest on his PF @ 16% which is tk. 230,000 and his basic salary is tk. 600,000.
Than exemption will be
1. 1/3 of his BS, which is tk. 200,000 or
2. Interest @ 14.5% = ((230,000/.16)*.145) = 208,438
Higher one is exempted, that is tk. 208,438 is exempted.
So his total income = (600,000+(230,000 -208,438)) = 621,562
But this interest should be excluding from the total income in time of calculating investment allowance.
***
In case of pre-mature job leave and where employees received nothing from the PF, on which the employee has
already pay tax should be deducted from his total income in the subsequent years.
Whichever is lower is to
be treated as investment
allowance
OR
TK. 1,00,00,000/=
OR
Actual Investments
After rebate, minimum tax is Tk.3000/ if total income exceeds the minimum taxable limit.
ASIF AHMED (KPMG)
Page 15 of 74
1.
=
=
=
=
=
nil
10%
15%
20%
25%
However, the threshold limit for woman and senior citizen ageing 65 years or more is Tk.2,25,000/ and for
physically handicapped persons Tk. 2,75,000/
However, the minimum tax is Tk. 3,000/ if total income exceeds the minimum taxable limit.
15th September
15th December
15th March; and
15th June
Basic Salary
Dearness Allowance
Entertainment Allowance
Employers Contribution to P.F. (Recognized)
Lunch Allowance
School fee for the Children of Mr. X
Utility Allowances
Fee for Golf Club (yearly)
Medical Allowance
(Actual expenditure during the year was Tk. 30,000/-)
Festival Bonus Equal to basic pay (got two bonus during the year)
25,000/5,000/1,000/2,500/1,000/5,000/3,000/5,000/3,000/-
Page 16 of 74
Other Particulars:(1)
(2)
(3)
(4)
(5)
(6)
3,00,000/60,000/12,000/30,000/12,000/60,000/36,000/22,500/5,000/36,000/30,000/-
4,20,000/75,000/-
6,000/50,000/-
75,000/14,400/6,82,900/-
Total Income
100
)
100 10
2,00,000
8,82,900/-
Page 17 of 74
1,00,000/40,000/60,000/2,00,000/-
As per Section 44(3) of the I.T. Ordinance, allowable investment allowance comes to 20% of total income
[excluding employers contribution to R.P.F.] = (8, 82,900-30,000) x 20% = 1,70,580/
TAX CALCULATION
On 1st Tk. 2,00,000/- of Total Income
On Next Tk. 3,00,000/- of Total Income
On Next Tk. 3,82,900/- of Total Income
Tax on Total Income of Tk. 8,82,900
Less: Tax Rebate on Investment Allowance
(1,70,580/- X 10%)
Total Tax:
Less:- Tax deducted at source from bank interest
Net tax liability
Tax
Tax @ 10%
Tax @ 15%
Nil
Tk. 30,000/Tk. 57,435/Tk.87,435/17,058
70,377/
20,000/50,377/-
Answer: (1) Total Income: - Tk. 8,82,900/(2) Net tax liability: - Tk. 50,377/-
Page 18 of 74
Solutions:
Mr. X
Calculation of Total Income
AY: 2012-13
a)
Description
Salary Income:
Basic Salary (BS)
Dearness allowance
Bonus
House rent allowance (55% of BS)
Less: 50% of BS or 15,000 p.m. lower one
Medical Allowance
Less: Allowable
Conveyance Allowance
Less: Allowable
Posting Allowance (it can also be allowable fully under sixth
schedule (part A) Para 5)
Employers' contribution to PF
Interest accrued
Less: Allowable @ 14.5% or 1/3 of BS (BS+DA), higher one
b)
c)
d)
e)
f)
Workings
Amount (BDT)
20,000*12
20% of BS
1 months BS
1,32,000
(1,20,000)
6,000
2,40,000
48,000
20,000
6,000
14,400
(14,400)
60,000
12,000
24,000
96,000
(96,000)
4,04,000
Interest on Securities:
Interest on SEC approved debenture
Interest on Govt. bond
Total income from interest on securities
35,000
70,000
1,05,000
25% of AV
225,000*1/3
10,00,000
(10,00,000)
45,000/.90
5,400/.90
1,20,000
(30,000)
(10,000)
(6,000)
(73,500)
500
75,000
75,000
50,000
6,000
56,000
6,40,500
Page 19 of 74
Investment Allowance:
Employees contribution to RPF
Employers' contribution to RPF
Investment in share
Pension scheme (5000*12)
24,000
24,000
1,00,000
60,000
Interest on RPF
2,08,000
1,23,300
1,00,00,000
2,00,000
3,00,000
1,40,500
6,40,500
0%
10%
15%
38,745/640,500
0.0605*75,000
0
30,000
21,075
51,075
(12,330)
38,745
(4,537)
34,208
(5,600)
28,608
38,745
0.060491803
4,537
Asif Ahmed
Articled Student
KPMG (Bangladesh)
Rahman Rahman Huq
asif.ahmed0001@yahoo.com
01922939126
Page 20 of 74
Lecture # 04
16.06.2012
Income from Interest on Securities:
Study Reference:
Section; 22, 23, 51, 172(d), 106
Sixth Schedule (part A); Para 24 and Para 40
Types of Securities:
1.
2.
3.
Government Securities
Government Approved Securities
Securities/Debentures issued by company or local authority.
Section 22:
Section 22; Interest on securities:
The following income of an assessee shall be classified and computed under the head "Interest on securities",
namely:(a) interest receivable by the assessee on any security of the Government or any security approved by
Government; and
(b) interest receivable by him on debentures or other securities of money issued by or on behalf of a
local authority or a company.
But Supreme Court says tax should be deducted when it is received or withdrawn (case ref: Lal Bhai Dolpat Bhai Vs
CIT Bombay, 1952)
Section 23:
Section 23; Deductions from interest on securities:
1. (1) In computing the income under the head "Interest on securities", the following allowances and
deduction shall be made, namely:1. (a) any sum deducted from interest by way of commission or charges by a bank realising the
interest on behalf of the assessee;
2. (b) any interest payable on money borrowed for the purpose of investment in the securities by
the assessee:
3. Provided that no allowance or deduction on account of any interest or commission paid under
clause (a) or (b), as the case may be, in respect of, or allocable to the securities of
Government which have been issued with the condition that interest thereon shall not be
liable to tax, shall be made in computing the income under section 22;
4. [(c)]Deleted F.A. 1995
2. (2) Notwithstanding anything contained in sub-section (1), no deduction shall be allowed under this
section in respect of any interest payable outside Bangladesh on which tax has not been paid or
deducted in accordance with the provisions of Chapter VII.
Page 21 of 74
Section 51:
Section 51; Deduction at source from interest on securities:
1. (1) In the case of the security of the Government, or security approved by the Government, unless the
Government otherwise directs, the person responsible for issuing any security, income of which is
classifiable under the head "Interest on securities", shall collect income tax at the rate of ten percent
(10%) upfront on interest or discount, receivable on maturity, from the purchaser of the securities:
2. Provided that the provision of sub-section (1) of this section shall not apply to the Treasury bond or
Treasury bill issued by the Government.
3. [(2)]Deleted F.A. 2005
4. (3) Nothing in this section shall apply to any payment on account of interest payable on debentures
issued by or on behalf of a local authority or a company.
Example (Upfront Systems);
A person purchase securities of tk. 10,000,000 @ 6% simple interest matured after 3 years.
So, interest income after 3 years = tk. (10,000,000*6%*3) = tk. 1,800,000.
But TDS @ 10% on tk. 1,800,000 (which is tk. 180,000) should be deducted today.
Section 172(d):
Section 172(d); Relief:
His (person) having received in arrears in one income year any portion of his income from interest on securities
relatable to more income years than one; the Deputy Commissioner of Taxes may, on an application made to him
in this behalf, determine the tax payable as if the salary, payment or interest had been received by the assessee
during the income year or years to which it relates and may refund the amount of tax, if any, paid in excess of the
tax so determined.
Page 22 of 74
Introduction:As per Income Tax Ordinance, 1984 house property means any building (including furniture, fixture, fittings etc.) and
land appurtenant thereto owned by the assessee and rented for commercial or residential purposes. Property
situated outside Bangladesh should also be assessed according to the same provision of section 24 of the Income Tax
Ordinance, 1984. Rental income derived from vacant plots of land will not be treated as house property income rather
it will be treated as income from other sources u/s 33.If an assessee let out his machinery, plant or furniture along
with building and the letting out building is inseparable from the letting of machinery, plant or furniture, the income
must necessarily be assessed as income from other sources and in such a case there is no room for disintegrating the
rent or assessing a part of the rent as income from house property.
Assessment of Co-owner:As per section 24(2), where property is owned by two or more persons and their respective shares are definite and
ascertainable, the co-owners should not be assessed in respect of their income from such property as an association of
persons (AOP), but each co-owner must be assessed individually in respect of his share of house property income.
Though the property may be possessed jointly by co-heirs under the Muslim law, the shares of co-heirs under that law
are definite and ascertainable, and therefore each of the heirs must be separately assessed u/s 24 in respect of his
share of house property income.
For example, Mr. A having been a building at Motijhel C/A received rent @ tk. 1,000,000 per month. But
after his death the property is divided among his 4 sons (B, C, D and E) and they received tk. 250,000 each from this
building. But according to income tax law they cannot be assessed for tk. 1,000,000 aggregately as an AOP, rather
portion of their receipt will be added up with their individual income and they will assessed individually.
Self occupied property:In respect of house property, no tax is payable if the owner occupies the property for his own residence or for the
purpose of his business or profession the profits of which are assessable to tax u/s 28. Moreover, interest on
maximum loan amount Tk.20, 00,000/- will be treated as allowable deduction from total income if the loan has been
taken to acquire, construct, renew or reconstruct the self occupied property.
ASIF AHMED (KPMG)
Page 23 of 74
occupy the property. For example, where the tenant agrees to pay the service charge which is actually payable by the
owner, the total consideration paid by the tenant is the house rent plus the service charge and that is the figure which
may be taken as evidence of the annual value by grossing-up.
Up to Tk. 20,000/-
Nil
2.
5%
3.
Monthly rent
Rate of Deduction
5%
Govt. Organization
N.G.O.
Company
4.
5.
6.
For Example, P Bank let a house @ tk. 50,000 per month with advance of tk. 500,000 which is adjustable with rent @
tk. 10,000 per month, so
TDS on rent = tk. (50,000*5%) = tk. 2,500
Payment in each month = tk. (50,000 10,000, - 2,500) = tk. 37,500
Annual Value = tk. (50,000*12) = tk. 600,000
TDS on tk. 500,000 (at the time of payment) = 0
Page 24 of 74
Allowable deductions from annual value to derive income from house property (Section 25):In computing house property income the following allowances are deductible from the annual value:(1) Repairs and maintenance:The following expenditure relating to repairs, maintenance and provision of basic services is granted as a deduction
even if no evidence for such expenditure is produced. Where the property is let out for residential purposes the
allowable deduction is 1/4th of the annual value and where it is let out for commercial purpose the allowable
deduction is 30% of the annual value:
(a)
Repairs;
(b)
(c)
(d)
Common electricity;
(e)
(f)
Page 25 of 74
(e) The annual Value of the property to which the unpaid rent relates has been included in the assessed
income of the year during which that rent was due and income tax has been duly paid on such assessed
income;
The concession given here appears to be an exemption but it is actually a deduction as that part of rent which
will be irrecoverable and which has already been charged in the preceding year will be deducted from the
total income in the subsequent year.
*If the full house is not rented (partly used by owner or his dependent) than all of these deduction shall be made
proportionately.
Problem 1:
Mr. Alam a retired govt. officer owns a two-stored house in Dhanmondi, Dhaka. He along with his family occupies
the ground floor while the first floor has been let out October 1, 2011 for a monthly rental of tk. 60,000 and before
than it was vacant for about 3 months. He has constructed the house with a loan of tk. 25 lac from National Bank
Limited and paid interest of tk. 321,000 during the construction period from January 2010 to June 2010. During the
financial year 2009-10 he has paid tk. 5 lac to the bank. His other expense relation to the property for 2011-12 FY are
Solution:
Mr. Alam
Calculation of House Property Income
AY: 2012-13
Description
Annual Value (AV)*
Less: Repair and Maintenance
Municipal Tax
Insurance
Bank interest
Vacancy allowances
Interest at construction stage
Net House Property Income
Workings
60,000*12
1/4 of AV
1/2
1/2
1/2
60,000*3
1/2 of 1/3
Amount (BDT)
7,20,000
(1,80,000)
(10,000)
(2,500)
(25,000)
(1,80,000)
(53,500)
2,69,000
Page 26 of 74
Problem 2:
Mr. Azim owns a house the municipal value of which is tk. 220,000. Half of the house has been let out at tk. 25,000
per month. The rest of the house is used by his son in law who pays nothing for the use. Following were the expenses
for the house in FY 2011-12;
White wash and repair
Insurance premium
Municipal tax
Water and sewerage charges
Interest on mortgage
Service charges
Land revenue tax
Cost of alteration
tk. 6,000
tk. 4,000
tk. 5,000
tk. 7,000
tk. 4,000
tk. 6,000
tk. 2,000
tk. 15,000
He has a residential house situated at Uttara, Dhaka. The city corporation for tax purpose valued its annual value at
tk. 200,000. He spent tk. 6,000 for its repair and paid city corporation tax at tk. 5,000. He also paid interest on a loan
taken from Agrani bank for alteration and expansion of the house for which interest payable was tk. 20,000 per year.
Compute the house property income for Mr. Azim for the assessment year 2012-13.
Solution:
Mr. Azim
Calculation of House Property Income
AY: 2012-13
Description
Annual Value (AV)*
Less: Repair and Maintenance
Municipal Tax
Insurance
Land revenue tax
Interest on mortgage
Net House Property Income
Workings
25,000*12
1/4 of AV
1/2
1/2
1/2
1/2
Amount (BDT)
3,00,000
(75,000)
(2,500)
(2,000)
(1,000)
(2,000)
2,17,500
Page 27 of 74
Agricultural Income:
Study References:
Section; 2(1), 26, 27, 35, 19(17), 19(19)
Rule: 31 and 32
Third Schedule
Sixth Schedule (Part A); Para 27, Para 29 and Para 45
Section 2(1):
Agricultural income means (a) any income derived from any land in Bangladesh and used for agricultural purposes 1. (i) by means of agriculture; or
2. (ii) by the performance of any process ordinarily employed by a cultivator to render marketable the
produce of such land; or
3. (iii) by the sale of the produce of the land raised by the cultivator in respect of which no process, other
than that to render the produce marketable, has been performed; or
4. (iv) by granting a right to any person to use the land for any period; or
(b) any income derived from any building which 5. (i) is occupied by the cultivator of any such land as is referred to in sub-clause (a) in which any
process is carried on to render marketable any such produce as aforesaid;
6. (ii) is on, or in the immediate vicinity of such land; and
7. (iii) is required by the cultivator as the dwelling house or store-house or other out-house by reason of
his connection with such land;
Page 28 of 74
Page 29 of 74
Page 30 of 74
Para - 45:
Any income derived from corn, mize, sugarbeet are exempted upto fifty (50) percent.
Asif Ahmed
Articled Student
KPMG (Bangladesh)
Rahman Rahman Huq
asif.ahmed0001@yahoo.com
01922939126
Page 31 of 74
Lecture # 05
17.06.2012
Capital Gain:
Study References:
Section; 2(15), Capital Asset
31, Capital Gain
32, Manner of computing capital gain; read with rule - 42
Second Schedule; Tax rate on capital gain
Sixth Schedule (Part A), Para 18, Para 43
Share Market: SRO No. 289; date 01/07/2010.
Page 32 of 74
2.
3.
TDS: Tax shall be deducted at 2% on the sale price and this deduction is final for tax settlement of capital
gain.
Capital gain on sale of property of business and profession is tax free if another property is purchased within
one (1) year.
For example,
A Capital machinery with cost of tk. 1,000
Sales price
(1,600)
Capital Gain
tk. 600
Purchase another building within one year (before or after) by this capital gain than this tk. 600 is tax free. But,
Sl
1
2
Situation
If purchase price is tk. 600
If purchase price is tk. 500
Consequences
No gain tax and tax depreciation is not allowable for that property.
Gain tax on tk. 100 and tax depreciation is not allowable for that
property.
No gain tax, but tax tax depreciation is allowable for tk. 300.
Page 33 of 74
In case of non-resident no-Bangladeshi shareholders, if this gain is tax free in his country, than it will also
tax free in Bangladesh.
If property is sold (and capital gain is also happened) in exchange of share (not in cash) than this gain is
totally tax free. For example, Mr. X sold his land @ tk. 1 crore to ABC Co. which has a cost price of tk. 60
lac. But he receives share of tk. 1 crore from the company instead of cash. Than his capital gain of tk. 40 lac
is tax free.
Asif Ahmed
Articled Student
KPMG (Bangladesh)
Rahman Rahman Huq
asif.ahmed0001@yahoo.com
01922939126
Page 34 of 74
Lecture # 06 & 07
23.06.2012 / 29.06.2012
Income from Business and Profession:
Study References:
Section; 2(34), Income
2(14), Business
2(49), Profession
2(61), Speculative Business
Definitions
Deemed Income
Main Section
Sixth Schedule (Part A), Para 1A, Para 33, Para 35, Para 37, Para 39, Para42, Para 44, Para 45.
Third Schedule; tax depreciation
SRO; CSR
Rule 30, 31, 32
Definitions:
Section 2(34); Income:
Income includes(a) any income, profits or gains, from whatever source derived, chargeable to tax under any provision of this
Ordinance under any head specified in section 20;
(b) any loss of such income, profits or gains;
(c) the profits and gains of any business of insurance carried on by a mutual insurance association computed in
accordance with paragraph 8 of the Fourth Schedule;
(d) any sum deemed to be income, or any income accruing or arising or received, or deemed to accrue or arise
or be received in Bangladesh under any provision of this Ordinance:
[]Deleted F.A. 1993
Provided that the amount representing the face value of any bonus share or the amount of any bonus declared,
issued or paid by any company registered in Bangladesh under , 1994 (1994 18 ) to
its shareholders with a view to increase its paid-up share capital shall not be included as income of that share
holder;
Section 2(14); Business:
Business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade,
commerce or manufacture.
Page 35 of 74
Rules:
Rule 30; Determination of income from business when such income is also partially agricultural:
In the case of income which is partially "agricultural income" and partially income from "business", in
determining that part of income which is from "business", the market value of any agricultural produce which
has been raised by the assessee or received by him in kind and which has been utilised as raw material in such
business or the sale proceeds of which are included in the accounts of the business shall be deducted, and no
further deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver
of the produce in kind.
Rule 31; Computation of income derived from the sale of tea:
1.
2.
3.
Income derived from the sale of tea grown and manufactured by the seller in Bangladesh shall be
computed as if 40% of such income was derived from business and 60% of such income was derived
from agriculture:
Provided that in computing, such income from business, an allowance shall be made in respect of the
cost of planting bushes in replacement of bushes that have died or become permanently useless in an
area already planted, unless such area has previously been abandoned:
Provided further that in computing such income an allowance shall be made in respect of the
expenditure incurred in the income year by the asssssee in connection with the development of the new
areas for bringing them under tea cultivation
Page 36 of 74
Deemed Income:
Section 19(15); Deemed Income:
Where, for the purpose of computation of income of an assessee under section 28, any deduction has been made
for any year in respect of any loss, bad debt, expenditure or trading liability incurred by the assessee, and-1. (a) subsequently, during any income year, the assessee has received, except as provided in clause (aa)
whether in cash or in any other manner whatsoever, any amount in respect of such loss, bad debt, or
expenditure, the amount so received shall be deemed to be his income from business or profession
during that income year (example -1);
2. (aa) such amount on account of any interest which was to have been paid to any commercial bank or the
Bangladesh Shilpa Bank or the Bangladesh Shilpa Rin Sangstha or on account of any share of profit
which was to have been paid to any bank run on Islamic principles and which was allowed as a
deduction in respect of such expenditure though such interest or share of profit was not paid by reason
of the assessee having maintained his accounts on mercantile basis, within three years after expiry of
the income year in which it was allowed, shall, to such extent as it remains unpaid, be deemed to be
income of the assessee from business or profession during the income year immediately following the
expiry of the said three years (example -2);
3. (b) the assessee has derived, during any income year, some benefit in respect of such trading liability
(discount), the value of such benefit, if it has not already been treated as income under clause (c), shall
be deemed to be his income from business or profession during that income year;
4. (c) such trading liability or portion thereof as has not been paid within three years of the expiration of
the income year in which deduction was made in respect of the liability, such liability or portion, as the
case may be, shall be deemed to be the income of the assessee from business or profession during the
income year immediately following the expiry of the said three years; and the business or profession in
respect of which such allowance or deduction was made shall, for the purposes of section 28, be
deemed to be carried on by the assessee in that year:
5. Provided that where any interest or share of profit referred to in clause (aa) or a trading liability
referred to in clause (c) is paid in a subsequent year, the amount so paid shall be deducted in
computing the income in respect of that year
Example 1: Salary charged in the Income Statement and allowed by the tax authority in AY 2011-12. But
subsequently the salary was not withdrawn by the employee. Than this expenditure will be treated as income in AY
2012-13.
Example 2: Interest on loan was incurred (but not paid) in IY 2011. But if it is not paid in the subsequent 3 years
than it will be treated as income in the following year (IY 2015). But if the interest paid subsequently in 2016 it will
deducted from the income of 2016.
Section 19(15)(c) is like Section 19(15)(aa) but for trading liability.
Section 19(16):
Where any building, machinery or plant having been used by an assessee for purpose of any business or profession
carried on by him is disposed of during any income year and the sale proceeds thereof exceeds the written down
value, so much of the excess as does not exceed the difference between the original cost and the written down
value shall be deemed to be the income of the assessee for that income year classifiable under the head "Income
from business or profession (see below example).
Page 37 of 74
Tk. 100
(30)
Tk. 70
Now, if machine is sold @ tk. 78 or tk. 68 or tk. 114 treatment of gain will be as follows;
Case 1: Tk. 8 is Business income
Case 2: Tk. 2 is Business loss
Case 3: Tk. 30 is Business income and tk. 14 is capital gain
Section 19(18):
Where any insurance, salvage or compensation moneys are received in any income year in respect of any building,
machinery or plant which having been used by the assessee for the purpose of business or profession is discarded,
demolished or destroyed and the amount of such moneys exceed the written down value of such building,
machinery or plant, so much of the excess as does not exceed the difference between the original cost and the
written down value less the scrap value shall be deemed to be the income of the assessee for that income year
classifiable under the head "Income from business or profession (see below example).
For example, a machinery
Cost price
Less: Depreciation
WDV
Tk. 100
(30)
Tk. 70
Now, if machine is destroyed and insurance claim and sale of scrap generate tk. 78 or tk. 68 or tk. 114 treatment of
such gain will be as follows;
Case 1: Tk. 8 is business income
Case 2: Tk. 2 is business loss
Case 3: Tk. 30 is business income and tk. 14 is capital gain
Section 19(20):
Where an asset representing expenditure of a capital nature on scientific research within the meaning of section 29
(1) (xx) is disposed of during any income year, so much of the sale proceeds as does not exceed the amount of the
expenditure allowed under the said clause shall be deemed to be the income of the assessee for that income year
classifiable under the head "Income from business or profession.
Section 19(23):
Where during any income year an assessee, being an exporter of garments, transfers to any person, the export
quota or any part thereof allotted to him by the Government, such portion of the export value of the garments
exportable against the quota so transferred as may be prescribed for this purpose shall be deemed to be the income
of the assessee for that income year, classifiable under the head "Income from business or profession".
Page 38 of 74
4.
5.
6.
7.
Para 37; Income of any private Agricultural College or private Agricultural University derived from
agricultural educational activities.
Para 39; Income derived from any Small and Medium Enterprise (SME) engaged in production of any
goods and having an annual turnover of not more than taka forty lakh:
Para 42; Any income from poultry farming for the period from the first day of July , 2011 to the thirtieth
day of June, 2013 subject to the following conditions :
a. if such income exceeds taka 1,50,000/- an amount not less than 10% of the said income shall be
invested in the purchase of bond or securities issued by the Government within six months from the
end of the income year;
b. the person shall file return of his income in accordance with the provisions of clause (c) of subsection (2) of section 75 of this Ordinance; and
c. no such income shall be transferred by way of gift or loan within five years from the end of the
income year.
Para 44; Cinema Hall or Cineplex has been given exemption facility up to 2015
a. Dhaka and Chittagong areas for five years
b. Other than Dhaka and Chittagong areas for seven years
For 5 Years
For 2 Years
100% tax-free
For 2 Years
50% tax-free
For 1 Year
For 3 Years
100% tax-free
For 3 Years
50% tax-free
For 1 Years
Exemption
For 7 Years
8.
Para 45; Exemption facility for Production of rice bran oil has been given up to 2015
a. Dhaka and Chittagong areas for five years
b. Other than Dhaka and Chittagong areas for seven years
For 5 Years
For 2 Years
100% tax-free
For 2 Years
50% tax-free
For 1 Year
For 3 Years
100% tax-free
For 3 Years
50% tax-free
For 1 Years
Exemption
For 7 Years
Page 39 of 74
2.
Industrial undertakings;
a. Dhaka and Chittagong divisions, excluding Dhaka, Narayanganj, Gazipur, Chittagong, Rangamati,
Bandarban and Khagrachari districts, for a period of five years beginning with the month of
commencement of commercial production of the said undertaking.
b. Rajshahi, Khulna, Sylhet and Barisal divisions and Rangamati, Bandarban and Khagrachari
districts, for a period of seven years beginning with the month of commencement of commercial
production of the said undertaking.
Physical infrastructure facility;
a. Subject to the provisions of this Ordinance, income, profits and gains under section 28 from
physical infrastructure facility (hereinafter referred to as the said facility) set up in Bangladesh
between the first day of July, 2011 and the thirtieth day of June, 2013 (both days inclusive) shall be
exempted from the tax payable under this Ordinance for ten years beginning with the month of
commencement of commercial operation, and at the rate, specified below:
Period of Exemption
Rate of Exemption
For the first five years (first, second, third, fourth and fifth year)
100% of income
For the next three years (sixth, seventh and eighth year)
50% of income
25% of income
For tax holiday purpose a entity has to fulfill some conditions and apply with prescribed from. Details of these are
found at IT ordinance 1984 in section 46B and 46C.
Page 40 of 74
Entertainment:
Entertainment expense is only allowable if the company is make profit. Not profit no entertainment! And
expense is allowable at
On the 1st tk. 10 lac of assessed profit 4%
And on the balance profit over tk. 10 lac 2%
Or
The actual entertainment expense charged in the profit and loss account, whichever is lower.
profit should be assessed after disallowing charged entertainment expenses in profit and loss a/c.
2.
Free Sample:
On the first 5 crore of disclosed turnover
On the next 5 crore of disclosed turnover
On the balance
Or, the actual free sample given whichever is lower.
3.
Pharmaceuticals
2%
1%
0.50%
Others
1.5%
0.75%
0.375%
Page 41 of 74
30(g); Headquarter expenditures of foreign companies are allowable up to 10% of assessed profit (or actual, lower
one).
Expenses allowable on assessed profit
1. Entertainment
2. Head office expenses
3. Technical know how fee
30(h); Royalty and technical knowhow fee is allowable up to 8% of assessed profit (or actual, lower one).
30(i); monthly gross salary over tk. 15,000 shall be given in cheque or bank transfer.
30(j); incentive bonus allowable up to 10% of disclosed net profit before tax.
30(k); overseas travelling allowable up to 1% of disclosed turnover.
30(l); no brokerage / commission is allowable to shareholder directors (FA 2012).
30(m); any payment over tk. 50,000 should be in cheque or bank transfer, but not applicable in salary, raw material
purchase and payment to government (FA 2012).
* in case of car depreciation is allowable up to tk. 20 lac. If the cars price is over tk. 20 lac, depreciation
should be calculated as if the price in tk. 20 lac.
In case of financial lease, assessee will get the depreciation not the leasing company.
In the year of acquisition, full depreciation is allowable but in the year of disposal no depreciation is
allowable.
For example, Car price tk. 3,000,000. After 2 years sold at tk. 2,400,000. Compute gain.
Notional cost price
Less: Depreciation (Y 1)
WDV after Y 1
Less: Depreciation (Y 2)
WDV after Y 2
tk. 2,000,000
(400,000)
tk. 1,600,000
(320,000)
tk. 1,280,000
Proportionate sales price = (Notional cost price / actual price) * actual sales price
= (2,000,000 / 3,000,000) * 2,400,000
= tk. 1,600,000
Gain (business income) = (tk. 1,600,000 tk. 1,280,000) = tk. 320,000
Page 42 of 74
2.
Accelerated Depreciation:
Only applicable for plant and machinery used for the first time in Bangladesh. But this opportunity cannot be
taken if the company is in the tax holiday or vice versa.
Rate of depreciation:
1st year
50% of cost
nd
2 year
30% of cost
3rd year
20% of cost
Application to the DCT for applying this depreciation should be made within the 6 months of starting
production.
3.
Initial Depreciation:
Only applicable for Building and Plant & machinery. But the property should be new and given only in the
first year of addition along with normal depreciation.
Rate of depreciation:
Building
10%
Plant and machinery
25%
For example, a machinery coats tk. 100 lac. In first year depreciation allowance is
Initial depreciation (25%)
tk. 25 lac
Normal depreciation (20%)
tk. 20 lac
Depreciation allowance (year 1)
tk. 45 lac
WDV after 1st year
tk. 55 lac.
4.
5.
Extra depreciation
Special depreciation
Last two depreciation policy is not applicable now.
Asif Ahmed
Articled Student
KPMG (Bangladesh)
Rahman Rahman Huq
asif.ahmed0001@yahoo.com
01922939126
Page 43 of 74
Lecture # 08
03.07.2012
Income from other sources:
Study References:
Section; 2(26) Dividend; read with rule 19(7)
2(56) Royalty
2(31) Fees for technical services
Section; 33, 34, 35, 36
Section; 19(1) 19(5)
19(8) 19(13)
19(21), 19(21B), 19(24), 19(26), 19(27), 19(28)
Page 44 of 74
(a) the income year in which it is received and the immediately preceding income year if the time taken in
making such work exceeds twelve months but does not exceed twenty-four months ; and
(b) the income year in which it is received and the two immediately preceding income years if the time taken
in making such work exceeds twenty-four months, and shall be allocated in equal proportions to each such
income year and the income of the assessee in respect of an income year shall be computed accordingly.
Explanation.- For the purposes of this section, the expression "author" includes a joint author and the
expression "lump sum" in regard to royalties or copyright fees includes an advance payment on account of
such royalties or copyright fees which is not returnable.
Page 45 of 74
any person, such amount shall be deemed to be the income of such assessee for that income year classifiable under
the head "Income from other sources".
(11) Where any benefit or advantage, whether convertible into money or not, is derived by an assessee during any
income year on account of cancellation of indebtedness []Deleted F.A. 1999, the money value of such advantage or benefit
shall be deemed to be his income for that income year classifiable under the head "Income from other sources":
Provided that the provisions of this sub-section shall not apply in case of a loan or interest waived in respect of an
assessee by a commercial bank including Bangladesh Krishi Bank, Rajshahi Krishi Unnyan Bank, Bangladesh Shilpa
Bank or Bangladesh Shilpa Rin Sangstha or a leasing company or a financial institution registered under
, 1993 (1993 27 )
(12) Any managing agency commission including compensation received during any income year by an assessee for
termination of agencies or any modification of the terms and conditions relating thereto shall be deemed to be his
income for that income year classifiable under the head "Income from other sources".
(13) Any amount received by an assessee during any income year by way of winnings from lotteries, crossword
puzzles, card games and other games of any sort or from gambling or betting in any form or of any nature whatsoever
shall be deemed to be his income for that income year classifiable under the head "Income from other sources".
(21) Where any sum, or aggregate of sums exceeding taka fifty thousand is claimed or shown to have been received
as loan by an assessee during any income year from any person, not being a banking company or a financial
institution, otherwise than by a crossed cheque drawn on a bank, and has not been paid back in full within three years
from the end of the income year in which it is claimed or shown to have been received, the said sum or part thereof
which has not been paid back, shall be deemed to be the income of the assessee for the income year immediately
following the expiry of the said three years and be classifiable under the head "Income from other sources":
Provided that where the loan referred to in this sub-section is paid back in a subsequent income year, the amount so
paid shall be deducted in computing the income in respect of that subsequent year.
[(21B) Where any sum, shown as initial capital of business or profession in return of income filed under section
82BB, is transferred by a person partly or fully within the period of limitation stipulated in the said section, the sum
so transferred shall be deemed to be his income of the year in which such sum was transferred and shall be
classifiable under the head "Income from other sources".] Added F.A. 2011
[(24) Where an assessee, being a private limited company or a public limited company not listed with a stock
exchange, increases its paid up capital by issuing shares in an income year, the amount so received as increased paid
up capital, not being received by crossed cheque or bank transfer, shall be deemed to be the income of such assessee
for that income year classifiable under the head "Income from other sources.] Subs. F.A. 2010
[(25)]Deleted F.A. 2007
[(26)Where an assessee, being a company, receives any amount as loan from any other company otherwise than by a
crossed cheque or by bank transfer, the amount so received shall be deemed to be the income of such assessee for that
income year in which such loan was taken and shall be classifiable under the head "Income from other sources".] Added
F.A. 2011
[(27)Where an assessee, being a company, purchases directly or on hire one or more motor car or jeep and value of
any motor car or jeep exceeds ten percent of its paid up capital, then fifty percent of the amount that exceeds such ten
percent of the paid up capital shall be deemed to be the income of such assessee for that income year classifiable
under the head "Income from other sources".]Added F.A. 2011
Page 46 of 74
Solutions of Problem:
ABC Company Limited
Calculation of Total Income
For the year ended 31st December 2012
AY: 2012-13
Description
a)
Workings
5,73,000
16,000
14,400
30,000
10,000
5,000
30,000
54,000
1,80,000
b)
c)
2,34,000
7,01,600
5,42,700
35,000
10,000
2,00,000
20,000
72,000
(12,000)
(10,000)
40,000
83,032
1,23,032
Interest on Securities:
Interest on Govt. securities
45,65,000
52,66,600
(1,15,000)
51,51,600
(54,000)
50,97,600
10,000
51,07,600
Capital gain:
Sale of machineries
(1,05,400)
4,67,600
10,50,000
3,70,000
22,87,300
Amount
(BDT)
10,000
51,17,600
d)
3,50,000
20,000
16,000
5,000
3,91,000
55,08,600
Page 47 of 74
55,08,600
(10,000)
(20,000)
54,78,600
20,54,475
1,500
4,000
20,59,975
89,80,000
20,000
16,000
72,000
10,000
5,000
91,03,000
45,515
20,59,975
20,59,975
(4,000)
(1,600)
(2,00,000)
18,54,375
Asif Ahmed
Articled Student
KPMG (Bangladesh)
Rahman Rahman Huq
asif.ahmed0001@yahoo.com
01922939126
Page 48 of 74
Lecture # 09
14.07.2012
Set Off and Carry Forward Losses:
Study References:
Section; 37: carry forward losses.
Section; 38 read with section 46B and 3rd schedule
39
40
41
42
Section - 46B: Exemption from tax of newly established industrial undertakings set up between the
period of July 2011 and June 2013, etc. in certain cases.1.
2.
(1) Subject to the provisions of this Ordinance, income, profits and gains under section 28 from an industrial
undertaking (hereinafter referred to as the said undertaking) set-up in Bangladesh between the first day of
July, 2011 and the thirtieth day of June, 2013 (both days inclusive) shall be exempted from the tax payable
under this Ordinance for the period, and at the rate, specified below:
if the said undertaking is set-up in1. (i) Dhaka and Chittagong divisions, excluding Dhaka, Narayanganj, Gazipur, Chittagong,
Rangamati, Bandarban and Khagrachari districts, for a period of five years beginning with the
month of commencement of commercial production of the said undertaking:
2.
3.
Period of Exemption
Rate of Exemption
100% of income
50% of income
25% of income
(ii) Rajshahi, Khulna, Sylhet and Barisal divisions and Rangamati, Bandarban and Khagrachari
districts, for a period of seven years beginning with the month of commencement of commercial
production of the said undertaking:
4.
Period of Exemption
Rate of Exemption
For the first three years (first, second and third year)
100% of income
For the next three years (fourth, fifth and sixth year)
50% of income
25% of income
Page 49 of 74
Lecture # 11
20.07.2012
Deduction and collection of tax at source (TDS):
Detail Sheet to be attached
Page 50 of 74
Lecture # 10
16.07.2012
Assessment of Partnership Firm:
Study References:
Section 30(b);
43(3)
85
Sixth Schedule (Part A) Para 18
Sixth Schedule (Part B) Para 16
2.
(1) Notwithstanding anything contained in this Ordinance, where the assessee is a firm and the total
income of the firm has been assessed under sections 82, 83, or 84, as the case may be,1. [(a)] Deleted F.A. 1995
2. (b) in the case of a firm, the tax payable by the firm shall be determined on the basis of the total
income of the firm.
(2) Whenever any determination is made in accordance with the provisions of sub-section (1), the
Deputy Commissioner of Taxes shall, by an order in writing, notify to the firm1. (a) the amount of tax payable by it, if any ;
2. (b) the amount of the total income on which the determination has been based; and
3. (c) the apportionment of the amount of income between the several partners.
Asif Ahmed
Articled Student
KPMG (Bangladesh)
Rahman Rahman Huq
asif.ahmed0001@yahoo.com
01922939126
Page 51 of 74
Salary to Partner A
Commission to Partner C
Office Rent
Interest on Capital B
Interest on Capital C
Provision for Bad debts
Net Profit
2,000,000
1,000,000
3,000,000
Requirements:
1. Compute the total income of ABC firm
2. Tax payable by the firm
3. Allocate profit among the partners
4. Compute total income of Mr. B
5. Tax payable by Mr. B
Solution:
1. Total income of ABC firm
Computation of total income for ABC firm
for the year ended 30 June 2012 (Assessment year 2012-2013)
Net Profit as per P/L acc
Less: Capital gain for separate consideration
Business income
Add: Ibadmissibe expenses
Provision for bad debt sec 30(b)
Salary to partner A sec 30(b)
Commission to partner B sec 30(b)
Intarest on capital (B+C) sec 30(b)
Income from business
Capital gain
Total income
1,650,000
(1,000,000)
650,000
400,000
150,000
200,000
300,000
1,050,000
1,700,000
1,000,000
2,700,000
2. TAX PAYABLE
Capital gain is within five years (A):
On the first
On the next
On the next
On the next
On the balance
Tk
Tk
Tk
Tk
Tk
200,000
300,000
400,000
300,000
1,500,000
2,700,000
@ 10%
@ 15%
@ 20%
@ 25%
Tk
Tk
Tk
Tk
Tk
200,000
300,000
400,000
300,000
500,000
1,700,000
@ 10%
@ 15%
@ 20%
@ 25%
Nil
30,000
60,000
60,000
375,000
525,000
Nil
30,000
60,000
60,000
125,000
275,000
150,000
425,000
425,000
500,000
B
350,000
C
350,000
125,000
475,000
200,000
175,000
725,000
Total income
Less: Capital gain
2,700,000
1,000,000
1,700,000
650,000
1,050,000
5. Tax Liability
On the first
On the next
On the next
Tk
Tk
Tk
Total
1,050,000
150,000
200,000
300,000
1,700,000
300,000
90,000
210,000
475,000
685,000
200,000
300,000 @ 10%
185,000 @ 15%
685,000
Less: Tax at average rate on share of partnership firm income=(57,750*475,000)/685,000
Nil
30,000
27,750
57,750
40,046
17,704
Page 52 of 74
showing at least 20% higher income than the income assessed or shown in the immediate preceding
assessment year. But to keep himself out of audit, an assessee will have to fulfill the following conditions:
Such return does not show any tax free income;
Such return does not show any receipt of gift;
Such return does not show any receipt of loan except bank loan;
Such return does not show any wealth accretion which is not covered by income;
If the return is selected for audit, then DCT will proceed to make fresh assessment by issuing notice under
section 83(1) for hearing and he will make assessment within 2 years from the end of the assessment year.
Otherwise it will be barred by time limitation. Assessment can be done under section 83(2) or under section
84 as the situation permits.
Re-open the universal self assessment under section 93:
If any concealment has been detected in the return submitted by the assessee under universal self assessment
scheme within 5 years from the end of the assessment year then the DCT may re-open the case and proceed
to assess further.
4. FINAL SETTLEMENT OF TAX LIABILITY (SEC. 82C):
Any tax deducted /collected at source from the following heads shall be deemed to be the final discharge of
tax liability:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Page 53 of 74
Section 82C has been re-drafted through Finance Act, 2011 keeping area of final tax liability unchanged but
changing the way of calculating income which will suffer more taxes. Some new conditions are as follows:
(1) Income to be determined through back calculation
(2) Such income will not set off with loss under any other head or loss of earlier year or years.
(3) Though it is final settlement of tax liability but tax is to be paid again in the following situations:
If shown income is in excess of the amount determined under back calculation, then tax is to be
paid again at the applicable rate on excess income shown.
Tax at applicable rate will also be payable on disallowances under sec. 30
Assessee shall have to pay surcharge if net wealth exceeds Tk.2 crore.
5. SPOT ASSESSMENT (SEC.82D):
Where an assessee, not being a company, who has not previously been assessed but carrying on business or
profession in any shopping centre or commercial market or having a small establishment, the D.C.T may fix
tax payable by him at the rate prescribed at Rule-38B and the receipt obtained for payment of such tax shall
be deemed to be an assessment order.
6. ASSESSMENT AFTER HEARING (SEC.83):
When the D.C.T. is not satisfied without requiring the physical presence of the assessee who filed the return
or the production of evidences then he will issue notice u/s 83(1) fixing a date and time for hearing.
After hearing and considering the evidences produced and if necessary considering such other evidences by
issuing another notice u/s 83(2) the D.C.T. will make assessment u/s 83(2) within 30 days from the last
hearing and communicate the assessment order within another 30 days from the date of assessment.
Thus section 83(1) deals with notice of hearing and section 83(2) deals with both requisition notice and
assessment.
7. ASSESSMENT ON THE BASIS OF REPORT OF NBR APPOINTED CHARTERED
ACCOUNTANT (SEC.83AAA):
When NBR has reasonable cause to believe that a return submitted by any company assessee is incorrect or
incomplete, then the Board may appoint a chartered accountant to examine the books of accounts of that
company. He will then exercise the powers and functions of a DCT only relating to section 79 and other than
clause (f) of section 113.After examination of the books of accounts he will submit report to the Board and
the Board will then forward the report to the DCT for consideration. After receiving the report DCT will
proceed to assess the income of the company by issuing notice u/s 83(1)
8.
Page 54 of 74
Page 55 of 74
of any property managed by a Trust, Court of Words, receiver or manager will be brought to tax through the
Trustees, Court of Words, receivers or manager.
19. ASSESSMENT OF SHIPPING BUSINESS (SEC. 102):
If any Ship calls on any port in Bangladesh, the aggregate of the receipt arising from the carriage of
passenger, livestock, mail or goods shipped at the port since the last arrival of the ship or at any port outside
Bangladesh for which amount is received or deemed to be received in Bangladesh shall be treated as income
received in Bangladesh and in this case tax rate will be 8% (usually tax rate is 4% in case where there is a
double taxation avoidance agreement with the country the ship is originated).
20. ASSESSMENT OF AIR TRANSPORT BUSINESS (SEC. 103A):
If any Aircraft calls on any airport in Bangladesh, the aggregate of the receipts arising from the carriage of
passengers, livestock, mail or goods loaded at the said airport into that aircraft shall be deemed to be income
received in Bangladesh and in this case tax rate will be 3% (usually no tax in case where there is a double
taxation avoidance agreement with the country the aircraft is originated).
Penalty:
There are provisions for imposition of penalties on fraudulent assessee at chapter XV (section 123-133) of the Income
Tax Ordinance, 1984. The penalty is the additional amount of income tax though as per definition of tax at section 2
(62), tax includes penalty. The power to impose penalty is given mainly to the Deputy Commissioner of taxes (DCT)
and in case of concealment of income the power to impose penalty is also given to the Commissioner of Taxes
(Appeal), Appellate Joint Commissioner of Taxes and Taxes Appellate Tribunal. The power to impose penalty is
subject to the prior approval of the Inspecting Joint Commissioner of taxes (IJCT) except in the case of imposing
penalty for failure to file return u/s 124. Penal proceedings can be initiated by the DCT only in the course of any
proceedings in connection with the regular assessment and no such proceedings can be started after completion of the
assessment order. If the penalty proceedings are not finalized but the assessment is completed there is nothing to bar
the DCT to impose penalty. There is another restriction that assessee has been heard or has been given a reasonable
opportunity of being heard before imposing penalty.
Penal Provisions
The penal provisions are tabulated below: Sl.
1.
Grounds of Penalty
Section
Amount of Penalty
Penalty
for
not
maintaining accounts in
the prescribed manner
123
(Read with
section 35 and
Rule-8)
Pre-conditions/
Comments
1) Penalty cannot be
imposed
unless
the
assessee has been heard
or has been given a
reasonable opportunity of
being heard.
2) DCT shall not impose
the penalty without the
previous approval of the
IJCT.
2.
124(1)
Penalty
cannot
be
imposed
unless
the
assessee has been heard
or has been given a
reasonable opportunity of
being heard.
Page 56 of 74
Sl.
Grounds of Penalty
Section
Amount of Penalty
124(2)
124(2) Proviso
124A
125
Pre-conditions/
Comments
Tk.20,000/( maximum)
-Do-
-Do-
1) Penalty cannot be
imposed
unless
the
assessee has been heard
or has been given a
reasonable opportunity of
being heard.
2) DCT shall not impose
the penalty without the
previous approval of the
IJCT
1) Penalty cannot be
imposed
unless
the
assessee has been heard
or has been given a
reasonable opportunity of
being heard.
2) DCT shall not impose
the penalty without the
previous approval of the
IJCT.
4.
Penalty
for
noncompliance with notice
u/s 79, 80, 83(1) and
83(2)
126
The
amount
subsequently
(maximum)
of
tax
assessed
-Do-
Page 57 of 74
Sl.
Grounds of Penalty
6.
Section
127
128
7.
137
Failure to deduct/collect
tax at source or having
deducted/collected fails
to deposit into national
exchequer.
57
89(3)
Amount of Penalty
Pre-conditions/
Comments
The
amount
subsequently
(maximum)
-Do-
-Do-
of
tax
assessed
No pre-condition.
The above-mentioned sections prescribe the maximum penalty (except section 124 and section 57 where penalty is
fixed). But the fact is that the ceiling of penalty does not mean that penalty must necessarily be imposed in every
case. The discretion of the DCT to levy or not to levy a penalty is still preserved by the penalty sections mentioned
above.
Penalty for not maintaining accounts in the prescribed manner (section 123).
As per provision of section 35 income shall be computed in accordance with the method of accounting regularly
employed by the assessee in case of the following heads of income: 1. Income from business or profession.
2. Agricultural Income
3. Income from other sources.
Medical practitioners known as doctors, surgeons, physicians, dentists, psychiatrists, homeopaths, veterinary surgeons
other than medical practitioners, who do not make any separate charge for consultation but make a charge for the
Page 58 of 74
medicines supplied by them and legal practitioners (including income-tax practitioners) accountant and auditors,
architects and engineers, are to maintain accounts in the manner prescribed in rule-8.
Asif Ahmed
Articled Student
KPMG (Bangladesh)
Rahman Rahman Huq
asif.ahmed0001@yahoo.com
01922939126
Page 59 of 74
Lecture # 15
02.08.2012
Appeal:
An appeal lies to the Appellate Joint Commissioner of Taxes (AJCT) or to the Commissioner (Appeals), as the case
may be, against the order of the Deputy Commissioner of Taxes (DCT). Section 153 gives the right of appeal only to
the tax payer and not to the department. Therefore, income tax department cannot appeal against any order of the
DCT. But the Inspecting Joint/Additional Commissioner of Taxes (IJCT/IACT) has the power U/S 120 to revise any
order passed by the DCT if it is erroneous and prejudicial to the interest of the revenue. Commissioner of Taxes
working in the territorial zone can also exercise his revisional power U/S 121A and pass such order not being an
order prejudicial to the interest of the assessee. Therefore, no appeal would lie if a right of appeal is not given at our
tax law because appeal is not an inherent right. The sequence of appeal is given below through a flow chart:
Order
of the
DCT
3
Choose an
Appeal Option
4
2
Review
application
to the CT
of
Territorial
Zone
END
Reference application to
High Court Division of
the Supreme Court (Only
at question of law point)
9
Appeal to the Appellate
Division of the Supreme Court
against the judgment of the H/C
division (if the H/C division
certifies to be fit case for appeal
to the Appellate Division)
END
Page 60 of 74
1.
Only assessee can file 1st appeal to the Appellate Joint Commissioner of Taxes (AJCT) or Appellate Additional
Commissioner of Taxes (AACT) or Commissioner (Appeals) as per jurisdiction. The jurisdiction is usually
mentioned at the bottom of the demand notice issued by the DCT. Normally, AACT and Commissioner (Appeals)
deal with company cases along with the directors of the company and the AJCT deals with other individual cases.
Appeal to the Commissioner (Appeals) also lies against the order made by the IJCT U/S 10 or U/S 120.It is to be
noted here that the right of appeal is given to the assessee. Where an assessment is made on the representative or on
the agent of a non-resident, the person beneficially entitled to the income is nevertheless an assessee within the
meaning of section 153 and has therefore a right to appeal.
When 1st appeal can be filed
(a)
Appeal can be filed by the assessee against the following order of the DCT:
(i)
(ii)
(iii)
(iv)
(b)
Page 61 of 74
(v)
confirm
reduce
Enhance
Set aside with the direction to make fresh assessment. (only on the ground that notice was
not served properly)
Annul
Enhancement of assessment means increase in the amount of total income or tax. It can be
done only after giving the assessee a reasonable opportunity of being heard.
If the AJCT or Commissioner (Appeals) does not enhance the total income but by means of
reduction under one head and an increase under another head allows the assessment to remain
the same or reduces it, it can not be said to have enhanced merely because income under one
head has been increased Where the assessees income has been assessed under more than one
head, even if the assessees appeal is confined to the income assessed under only one of the
heads, the AJCT or Commissioner (Appeals) may enhance the assessment by increasing the
amount assessed under another head of income in respect of which the assessee has not
appealed. The reason is that income tax is only one tax and when the assessee goes in appeal
then exposes the assessment as a whole.
But appeal authority has no power to enhance the assessment by assessing entirely new sources
of income outside the subject matter of the assessment appealed against. He has no jurisdiction
to travel beyond the subject matter of the assessment and his power of enhancement relates only
to that income which has been subjected to the process of assessment.
On the other hand it is not open to the assessee who has preferred an appeal to withdraw it so as
to prevent the Appellate Joint Commissioner of Taxes (AJCT) or Commissioner (Appeals) from
enhancing the assessment.
(d) Appeal authority in his judgment can give the following decisions when an appeal filed against
penalty order:
(i)
confirm
(ii) set-aside (only an the ground that notice was not served properly)
(iii) cancel
(iv) reduce
(v)
enhance (only after giving reasonable opportunity of being heard)
(e) In any other case, appeal authority can pass such order as they think fit. But the AJCT or Commissioner
has no power to review his own order in any case but he is empowered U/S 173 to rectify any mistake
apparent from record.
ASIF AHMED (KPMG)
Page 62 of 74
(f) Appeal shall be disposed of by the appeal authority with 150 days from the end of the month of which the
appeal was filed and such order shall be communicated to the appellant, DCT and Commissioner of Taxes
within 30 days. If the appeal is not disposed of within the period of limitation the appeal so filed shall be
deemed to have been allowed.
2.
(b)
(c)
(d)
(e)
3.
Both assessee and DCT (with prior approval of his Commissioner) can prefer 2 nd appeal against the
1st appeal order (Including an order imposing penalty u/s 128 by the AJCT or Commissioner
(Appeals). An order of the AJCT or Commissioner (Appeals) refusing to condone delay ( if there is
any application for condo nation) and refusing to admit, or rejecting after hearing, an appeal as time
barred, will be treated as an order passed in the appeal and a 2nd appeal would lie to the tribunal.
Appeal shall be filed at the form prescribed at Rule-28 with duly signed and verified by the
appellant.
Tribunal fee of TK.1000/- is to be paid before submission of 2nd appeal (this fee is not applicable
when appeal is filed by the DCT).
Assessee has to pay tax @ 10% of the difference between the tax as per appeal order and tax as per
section 74. However, authority to reduce such tax has been given to the Commissioner of Taxes if
assessee applies for this.
Appeal shall be filed to the Taxes Appellate Tribunal within 60 days from the date of receiving 1 st
appeal order.
Page 63 of 74
4.
Procedure to file reference application to High Court Division of the Supreme Court
(a)
(b)
(c)
(d)
Both assessee and the Commissioner of Taxes (with prior permission from NBR) can file reference
application to High Court Division of the Supreme Court only against any question of law arising
from the order( including an order under section 173) of the Taxes Appellate Tribunal. An order of
the Tribunal dismissing an appeal as time barred or refusing to condone delay is obviously an order
of the Tribunal and consequently a reference lies against it. Where assessee is the applicant the
Commissioner of Taxes will be the respondent and where the Commissioner of Taxes is the
applicant, the assessee will be the respondent.
Application shall be filed within 90 days from the date of receipt of the Tribunal order at the form
prescribed at Rule-29 with duly signed and verified.
Fee of Tk. 2,000 is to be paid before submission of application. However no fee is needed if
application is made by the Commissioner of Taxes.
Where the assessee is the applicant then 25% or 50% of the difference between the tax as per return
and the tax as per tribunal order is to be paid followingly.
Particulars
Rate
Rate to be applied
i. If tax demand is below Tk. 1,000,000
25%
On the difference between the
tax as per Tribunal order and
ii. If tax demand is more than Tk. 1,000,000
50%
tax as per return.
However NBR has the power to waive or modify the requirement of such payment
(e)
(f)
(g)
5.
A division bench of not less than 2 Judges will hear the case as per section 98 of the Code of Civil
Procedure, 1908.If the judges are equally divided the question on which there is the difference of
judicial opinion may be referred to another judge or to a larger Bench and the decision of the
majority of the judges would prevail.
(b)
The High Court Division will decide the question of law and deliver its judgment containing the
grounds on which the decision is founded. The judgment of the High Court Division as a whole is
binding between the parties in the particular case. If the judgment expounds a wrong construction of
the Ordinance, an appeal against it is open and there is no other procedure by which it can be
corrected.
The cost of the reference shall be in the discretion of the Court.
(c)
Page 64 of 74
6.
7.
8.
9.
Page 65 of 74
Lecture # 16
03.08.2012
Individual Tax Assessment Problem.
Salient Features of Finance Act, 2012.
Asif Ahmed
Articled Student
KPMG (Bangladesh)
Rahman Rahman Huq
asif.ahmed0001@yahoo.com
01922939126
Page 66 of 74
Lecture # 17
05.08.2012
Alternate Dispute Resolutions:
Finance Act 2011 introduces new chapter titled Alternate Dispute Resolution in IT Ordinance 1984 to resolve any
dispute of an assessee lying with any income tax authority, Taxes Appellate Tribunal, or Court. This is done to
simplify and speed up dispute resolution process. The whole process is summarized in following figure:
Page 67 of 74
An assessee may apply for resolution of the dispute through the ADR process if aggrieved by an order of an income
tax authority or if a dispute is pending before any income-tax authority, tribunal or court. In case of any pending
dispute, the assessee is required to get permission from the authority where it is pending in writing before applying
for ADR and if approval is received and assessee applies for ADR, the matter shall remain stayed during ADR
negotiation process.
To resolve dispute in an alternative way, the Board may select or appoint Facilitator and determine his duties and
responsibilities. The assessee shall be allowed to negotiate himself personally or along with an authorized
representative, with the Commissioner's Representative for the concerned dispute under the facilitation and
supervision of such Facilitator. Upon receiving the application of ADR, the Facilitator shall forward a copy of the
application to the respective Deputy Commissioner of Taxes and also call for his opinion on the grounds of the
application. If the Deputy Commissioner of Taxes fails to give his opinion regarding fulfillment of the conditions, the
Facilitator may notify in writing the applicant and the Commissioner of Taxes or the Commissioner's Representative
to attend the meetings for settlement of disputes on a date mentioned in the notice. Where an agreement is reached,
either wholly or in part, between the assessee and the Commissioner's Representative, the Facilitator shall record, in
writing, the details of the agreement, sign and shall communicate the same to the assessee and the concerned Deputy
Commissioner of Taxes.
However, where no agreement is reached or the dispute resolution is ended in disagreement between the assessee and
the concerned Commissioner's Representative for noncooperation of either of the parties, the Facilitator shall
communicate it within fifteen days from the date of disagreement, to the applicant and the Board, the concerned
court, Tribunal, appellate authority and income tax authority, as the case may be, about such unsuccessful dispute
resolution.
Where an agreement is reached, it shall be binding on both the parties and it cannot be challenged in any authority,
Tribunal or court either by the assessee or any other income tax authority. Where an agreement is not reached, the
assessee may prefer an appeal in following manner:
Dispute Arises out of an order of
Appeal to
OR
Appellate Additional Commissioner of Taxes
OR
Commissioner of Taxes (Appeals)
The assessee-applicant may also appeal to the respective appellate authority or court from where he has got
permission to apply for ADR.
Page 68 of 74
Resident Vs Non-Resident:
Not only the rate of tax depends upon the residential status of the assessee but also the category of income to be
included in computing total income depends upon the residential status of the assessee. So in income tax viewpoint
firstly the residential status of the assessee is to be determined. As per section 2(55) a person will be resident if he
fulfils the following conditions:Sl.
No
1.
2.
Category of person
Individual
(Bangladeshi or
foreigner)
Analysis
Page 69 of 74
Sl.
No
3.
Category of person
Company
Analysis
Area
Income
point of
view
Resident
Non-resident
Analysis
The
entire
income
accruing or arising in
any part of the world,
irrespective of whether it
is
received
in
Page 70 of 74
Bangladesh or not is
taxable
2.
Tax point
of view
General tax
applicable.
rate
is
Investment
Tax Credit
Point of
view
Thus the incidence of tax depends upon and is determined by the question whether the assessee is resident in
Bangladesh. A non-resident entitles partial exemption from chargeability to which resident is not entitled to.
Generally speaking, the incidence of tax is higher in the case of persons who are resident and lower in the case of
persons who are non-resident.
Avoidance of tax through transactions with non-residents (Sec.104 read with rule-34 and 35)
Business may be carried on between a resident and a non resident and owing to the close connection between them,
the course of business may be so arranged that the resident makes either no profit or less than the ordinary profit in
that business. Such an arrangement might deprive Bangladesh Govt. from tax which would otherwise be payable by
the resident. In such cases the resident may be charged in respect of the profits which he has not in fact made but
which he might reasonably be expected to have made had he done the business on ordinary commercial terms.
Rule-35 read with rule-34 prescribes the method of determining the amount of notional income in respect of which
the resident may be charged under section 104.
Double Taxation Avoidance Agreement (Sec. 144 read with 7th Schedule):
Double taxation avoidance agreement is usually an agreement between 2 countries seeking to avoid double taxation
by defining the taxing rights of each country with regard to cross, border flows of income and providing tax credits or
exemptions to eliminate double taxation. The Govt. of Bangladesh also may enter into an agreement with the Govt. of
Page 71 of 74
other countries for the avoidance of double taxation and the prevention of fiscal evasion. Income tax policy wing of
the National Board of Revenue (NBR) is entrusted to negotiate the double taxation treaty with foreign countries to
promote foreign direct investment in Bangladesh. Such agreement will come into force through notification in the
official Gazette. It will be treated as an international law and accordingly its legislative position would be over and
above our Bangladesh tax law. The objectives of such agreement are:1. To provide relief from Bangladesh tax.
2. To determine income accruing or arising to non-residents from sources within Bangladesh.
3. To determine income of a non-resident carrying on business from within and outside Bangladesh.
4. To determine the income of a resident person having special relation with non-resident.
5. To recover tax.
6. To exchange the information for avoidance of double taxation and the prevention of fiscal evasion.
The Bangladesh model of Agreement on Avoidance of Double Taxation consists of 29 Articles that are as
follows:
Article
1
:
Persons Covered
Article
2
:
Taxes Covered
Article
3
:
General Definitions
Article
4
:
Resident
Article
5
:
Permanent Establishment
Article
6
:
Income from Immovable Property
Article
7
:
Business Profits
Article
8
:
Shipping and Air Transport
Article
9
:
Associated Enterprises
Article
10
:
Dividends
Article
11
:
Interest
Article
12
:
Royalties
Article
13
:
Fees for Technical Services
Article
14
:
Independent Personal Services
Article
15
:
Dependent Personal Services
Article
16
:
Director's Fees
Article
17
:
Artists and Sportsmen
Article
18
:
Pensions
Article
19
:
Government Service
Article
20
:
Students and Trainees
Article
21
:
Lecturers and Researchers
Article
22
:
Other Income
Article
23
:
Elimination of Double Taxation
Article
24
:
Non-Discrimination
Article
25
:
Mutual Agreement Procedure
Article
26
:
Exchange of Information
Article
27
:
Diplomatic Agents and Consular Officers
Article
28
:
Entry into Force
Article
29
:
Termination
Like many others developed as well as developing countries of the world, Bangladesh too cannot absolve herself
from the need to facilitate her trade and investments with the outside world through international tax treaty network
with other countries. The increased pace of industrialization coupled with increased foreign direct investment in the
country necessitated tax treaty arrangements with other countries to provide investors with certainty and guarantees in
the area of taxation. As on March, 2011, the status of Bangladesh on Avoidance of Double Taxation Agreements is as
follows:
Page 72 of 74
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29
30
31
U.K
Singapore
Sweden
Korea
Canada
Pakistan
Romania
Sri Lanka
France
Malaysia
Japan
India
Germany
Netherlands
Italy
Denmark
China
Belgium
Thailand
Poland
Philippines
Vietnam
Turkey
Norway
Indonesia
USA
Switzerland
Oman (only
business)
Myanmar
Mauritius
Saudi Arabia
32
UAE
on
airlines
SRO
No.
Date
227-L/80
124-L/82
382-L/83
433-L/84
247-L/85
221-L/88
348-L/88
365-L/88
2-L/89
67-L/90
235-L/91
45-L/93
1-L/94
267-L/94
63-L/97
72-L/97
114-L/97
11-L/98
222-L/98
39/L/99
56/L/2004
301-L/2004
308/L/2004
20-L/2006
60-L/2007
71-L/2007
52-L/2010
08/07/1980
21/04/1982
19/10/1983
02/10/1984
06/06/1985
11/07/1988
23/11/1988
10/12/1988
04/01/1989
15/02/1990
06/08/1991
27/02/1993
01/01/1994
14/09/1994
12/03/1997
17/03/1997
13/05/1997
14/01/1998
07/09/1998
03/03/1999
04/03/2004
18/10/2004
31/10/2005
12/02/2006
20/04/2007
10/05/2007
23/02/2010
10/5/2008
07/10/2008
21/12/2009
04/01/2011
(date of signing)
17/01/2011
(date of signing)
Page 73 of 74
Permanent
Establishment
183 days
183 days
183 days
183 days
183 days
183 days
183 days
183 days
183 days
183 days
6 months
183 days
183 days
6 months
183 days
183 days
6 months
183 days
183 days
183 days
6 months
6 months
12 months
6 months
183 days
183 days
Maximum tax
rate for Interest
7.5%/10%
10%
10%
10%
10%
15%
10%
15%
10%
15%
10%
10%
10%
10%
10%/15%
10%
10%
15%
10%/15%
10%
15%
15%
10%
10%
10%
10%
Page 74 of 74