SHA

Bangladesh Tax Policy and Administration

Bangladesh Tax Policy and Administration

The National Board of Revenue (NBR) is the central authority for tax administration in Bangladesh. It was established by President Order No. 76 of 1972. Administratively, it is under the Internal Resources Division (IRD) of the Ministry of Finance (MoF). MoF has 4 Divisions, headed by 4 permanent Secretaries to the Government, namely, the Finance Division the Internal Resources Division (IRD), the Banking Division and the Economic Relations Division (ERD). The Secretary, IRD is the ex-officio Chairman of NBR. NBR is responsible for formulation and continuous re-appraisal of tax-policies and tax-laws, negotiating tax treaties with foreign governments and participating in inter-ministerial deliberations on economic issues having a bearing on fiscal policies and tax administration.

The main responsibility of NBR is to collect domestic revenue (primarily, Import Duties and Taxes, VAT and Income Tax) for the government. Other responsibilities include administration of all matters related to taxes, duties and other tax producing fees. Under the overall control of IRD, NBR administers the Excise, VAT, Customs and Income-Tax services.

Tax Legislation of Bangladesh

There are three primary tax legislations in Bangladesh that dictates tax policy and lays of the framework for tax collection and regulation in Bangladesh.

Bangladesh Income Tax Ordinance 1984

Income tax is applicable in case of all -persons- which includes individuals, a firm, as association of persons, a Hindu undivided family, a local authority, a company and every other artificial juridical person.

Heads of income on which taxes are imposed

  • Salaries

  • Interest on securities

  • Income from house property

  • Agricultural income

  • Income from business or profession

  • Capital gains

  • Income from other sources

Tax rates applicability

In case of company tax-payers, taxes are imposed as per the following schedules

  • Publicly Traded Companies - In case of publicly traded companies (such companies which are formed under company law and are registered with Stock Exchange for concerned year). The tax rate is 27.5% on total income.

  • Companies not publicly traded - A company which is not publicly traded, rates of tax for such companies are as follows. The rate of tax is at 37.5% (Corporate tax) or turn over tax at rate of 0.5%, whichever is higher (tax amount).

  • Others - Bank, insurance company, leasing companies are to pay tax at the rate of 42.5%. Mobile phone operating company at 45%

Tax Procedures for Businesses in Bangladesh

  • For individuals and firms - Normally income year starts from 1st July and ends on 30th June next year and time limit for submission of income tax return is 30th September each year. The tax payer is supposed to provide all required documents and evidences with the statement of income along with the income tax return.

  • For Companies: Normally income year starts consists of 12 calendar months starting from any month of the year. The company tax-payers are supposed to file their return by the 15th of July next following the income year or where the 15th of July falls before the expiry of 6 months from the end of income year, before the expiry of such 6 months.

  • Types of income tax return- (1) Normal return and (2) Universal self-assessment.

  • Tax Audit- In case of normal return, all the returns are examined by the tax officials for determination of income and taxes. In case of universal self-assessment a certain percentage of returns are selected on random basis for audit.

  • Tax Appeal- If any disagreement arises out of the computation of income and taxes by the tax officials then the assessed (Company or individual) may proceed for appeal to the appellate authority for adjudication in the concerned situation.

  • System of Appeal- Initially the appeal is filed with the appellate authority. In this case then tax-payers representative and the representative of the tax administration adjudicate the matter after discussion. If no resolution is made to the satisfaction of both the parties then the aggrieved party or parties can file appeal before the taxes appellate tribunal. Even then if no resolution is made to the satisfaction of both the parties and if the issue involves a question of law in that case they can go for reference to the High Court Division of the Supreme Court of Bangladesh. There is a separate procedure for resolution of disputes which is known as an -Alternative Dispute Resolution- or ADR. This separate procedure was introduced for all categories of taxes through the Finance Bill 2011. It is formed by cross section of people well conversant in income tax law (Retired high level income tax official, Chartered Accountants, Advocates etc). Tax officials of the department are deputed to see the interest of revenue and applicability of the law.