BDO Tax handbooK 2009-2010

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O

ctober

2009

Payroll Employees Benefits Management

HR Outsourcing and other BPO Services

www.bcs-bd.com

BangladeshT ax H andbook

2009-2010

Ultimate choice for managing your

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Bangladesh Tax Handbook

2009-2010Foreword

The National Budget of Bangladesh for the year (FiscalYear) 2009-2010 was presented by the honorableFinance Minister Mr. Abul Maal Abdul Muhith before thelegislators in the Parliament. On 30 June 2009 thefinance bill was approved by the parliament and it has

been effective from 01 July 2009.

We have attempted to summarize the salient features ofthe new Finance Act 2009 and basic taxation laws/rulesfor the benefit of our clients, business houses andpotential investors. This publication has been preparedfor general guidance on matters of interest only, anddoes not constitute professional advice.

The information contained in this handbook is based ontaxation laws/rules, but not intended to be acomprehensive guide. We have given our every effort toensure correctness of the information. However, readersshould always seek specific advice before acting on theinformation provided in the tax handbook. For furtherinformation and assistance you may contact our office.

Baizid Md. Faiaz, MBA

Editor

Advisory Board:

Nurul Haque, FCABadrul Ahsan, FCA

Fazle R M Hasan, FCA

Faruk U. Ahammed, FCA

Humayan Kabir, ACA

All right reserved

No part of this publication may be reproduced, stored in a retrieval system, ortransmitted in any form or by any means, electronic, mechanical, photocopyingrecording, or otherwise without prior written permission of the Publisher.

JHK Windcel, Western Block, Level 4, KA-90 Pragoti Saroni (Bishwa Road), Dhaka-1229, Bangladesh

Phone: +880-2-884 0533, Fax : +880-2-986 2819, E-mail: [email protected], Web: www.bcs-bd.com

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Index

Changes in Taxation Laws 2009-2010Income Tax 5-12

Value Added Tax 13Summary in Taxation Laws 2009-2010Income TaxDefinitions 16Income Tax Authorit ies 17Appellate Tribunal 18Heads of Income 18Income Deemed to Accrue or Arise in Bangladesh 18Deemed Income 19Scope of Total Income 20Charge of Additional Tax 20Charge of Excess Profit Tax 20Income Exemption Limit 20

Personal Tax Rate Structure 20Tax Rebate for assesses paying tax at the highest rate of 25% 21Minimum Tax (Individual) 21Incidence of Tax on Non-Resident 21Special Tax Treatment for Investments in New Industry / Infrastructural Facility 22Special Tax Treatment for Investments in BMRE of existing industry 22Special Tax Treatment for Investments in Stocks & Shares 22Special Tax Treatment for Investments in House Property 23Income fully Exempted from Tax subject to prescribed conditions and limitations 23Investment Allowance for Tax Rebate 25Income from Salary 25Income from House Property 27Income from Interest on Securities 28Income from Business or Profession 28Rates of Corporate Tax are as follows: 28Allowable Deductions on income from Business or Profession 31Normal Depreciation Allowance 35Initial depreciation 36Accelerated Depreciation 36Deductions are NOT admissible in certain circumstances 37Capital Gains 38Exemption of Capital Gains from tax 39Capital Gain Tax 39Income from Other Sources 40Set-Off of Losses 40Carry forward of loss 40Carry forward of Depreciation Allowance 41Withholding Tax / Tax Deducted at Source (TDS) 41Procedure of deduction or collection of tax at source 45Tax Holiday for newly established industrial undertaking, Tourist Industry and Physical Infrastructure facility 55Tax Holiday for Hospitals 57New List of eligible sectors for Tax Holiday 57Advance Payment of Tax 58Payment on the Basis of Return 59Mode of payment of Tax by assessee 59Filing of Return of Income and Statement 59Assessments 60Final Discharge of Tax Liability 62Avoidance of Double Taxation 64Relief in respect of Foreign Income 64Value Added TaxDeduction of VAT at source 65Gift TaxGift Tax 67Exemption from Gift Tax 67Provisions of the Gift Act shall NOT apply to following gifts made by 68Return of Gift Tax 68Rates of Gift Tax 68

Particulars Page nos.

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Major Changes in

Bangladesh Taxation Laws

2009-2010

Income Tax

Value Added Tax

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JHK Windcel, Western Block, Level 4KA-90 Pragoti Saroni (Bishwa Road),

Dhaka-1229, BangladeshPhone: +880-2-884 0533, Fax : +880-2-986 2819E-mail: [email protected], Web: www.bcs-bd.com

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Bangladesh Tax Handbook 2009-2010

Income Tax

ChangesinTaxationL

aws2009-2

010

5

1. Tax Exemption Limit:

The ceiling of minimum tax exempted income for the individual assessee has been remained

same as Taka 165,000, while this limit for the individual female, persons aged 65 years (earlier70) & more has been Taka 180,000. Limit for disabled assessee has been enhanced from

Taka 180,000 to Taka 2,00,000 with effect from Financial Year 2008-2009 (Assessment Year

2009-2010).

2. Personal Tax Rate Structure:

The 5 tier Income slabs and Tax rates for individual assessee (including Non-resident

Bangladeshi) remain same for the Income Year 2008-2009 (Assessment Year 2009-2010) as per

following table:

Income Year 2008-2009 Income Year 2007-2008(Assessment Year 2009-2010) (Assessment Year 2008-2009)

Income Slabs Tax Rates Income Slabs Tax Rates

i. On the first Taka 165,000 Nil i. On the first Taka 165,000 Nil

of total income for Male of total income for Male

On the first Taka 180,000 Nil On the first Taka 180,000 Nil of total income for Female, of total income for Female,

persons aged 65 & above persons aged 70 & above

On the first Taka 200,000 of Nil On the first Taka180,000 of Nil total income for Disabled total income for Disabled

assessees assessees

ii. On the next Taka 275,000 10% ii. On the next Taka 275,000 of 10%

of total income total income

iii. On the next Taka 325,000 15% iii. On the next Taka 325,000 15%

of total income of total income

iv. On the next Taka 375,000 20% iv. On the next Taka 375,000 20%

of total income of total incomev. On the balance of total 25% v. On the balance of total income 25%

income

Non-Resident(Foreign) assessee 25% Non-Resident(Foreign) assessee 25%

Minimum Tax: Individuals Tk. 2,000 Minimum Tax: Individuals Tk. 2,000

Minimum Tax (Company) Tk. 5,000 N/A N/A

3. Minimum Tax (Individual):

Minimum tax for individual assessees has been remained same as Taka 2,000, whose taxableincome exceeding exemption limit of Taka 165,000 or Taka 180,000 or Taka 200,000 or Taka 215,000 or Taka230,000 or Taka 250,000 ( as the case may be). If minimum tax becomes lessthan Taka 2,000 or negative after adjusting Investment Tax Credit, individual assessees have topay Taka 2,000 as minimum tax.

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Income Tax


Minimum tax exempted income for female, persons aged 65 years & more (earlier 70) and

disabled assessees having only agricultural income has been Taka 230,000 and 250,000

respectively while for other assesees this limit is Taka 215,000.

04. Minimum Tax for Companies:

Minimum Tax for Companies has been fixed at Taka 5,000 irrespective of profit or loss.

5. Investment Allowance for Tax Credit: [Section: 44]

Maximum ceiling for Investment Allowance has been enhanced from Taka 500,000 to Taka

1,000,000, subject to maximum of 25% of the total income, excluding employers contribution

to recognized PF & interest thereon, and actual investment made by assessee, whichever is

lower.

Tax Rebate @ 10% on Investment, whichever is lower among the respective three above

alternatives, shall be allowed.

06. Reduction in Tax Rate of Banks, Financial Institutions & Insurance Companies:

Corporate Tax rate for Banks, Financial Institutions & Insurance Companies has been

reduced to 42.5% from 45%.

07. Special Tax Treatment for Investments in New Industry / Infrastructural Facility

(u/s 19A):

No question as to the source of investment will be asked if money is invested in a company

for setting up new industry or physical infrastructural facility between 01 July 2009 and 30

June 2010 by paying tax @ 10% before submission of the tax return. In this regard, a

declaration under Rule 25AA shall have to be furnished. New industries include:

Textiles

Spinning

Textile machinery

Garments

Leather goods

Toys

Furniture

Tour operators

Tourism industry

Foot wear

Recycling industry

IT enabled services

Computer hardware

Drugs and Pharmaceuticals

Chemicals andPharmaceuticals

Basic raw materials ofdrugs

Insecticide, pesticide

Petro chemicals

Cosmetics and toiletries

Fertilizer

Basic chemicals and dyes

Herbal medicine

Light engineering

Melamine

Plastic products

Ceramics

Sanitary ware

Steel

MS rod & CI sheet

MS billet

Boilers

Ship building

Compressors

Agro processing industry

Agricultural machinery

Shrimp processing industry

Milk processing industry

Jute goods producing

industry

Energy saving bulbindustry

Diamond cutting industry

Accumulator & batteryindustry

Any other industry as maybe approved by Govt.

ChangesinTaxation

Laws2009-2

010

6

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Physical Infrastructure Facilities will include River or sea-port; container terminals;

internal container depot; container freight station, Liquefied National Gas (LNG) terminal &

transmission line; gas pipe line; flyover; elevated road; mono-rail; underground rail;

telecommunication other than mobile phone; large water treatment plant & supply throughpipe line; waste treatment plant; solar energy plant and any other category of industry as the

government may by notification in the official gazette specify.

08. Declaration on Investments in New Industry / Infrastructural Facility (Rule 25AA):

A declaration in the prescribed format shall have to be furnished by the person investing in a

company for setting up new industry or physical infrastructural facility by paying tax @ 10%

u/s 19A:

Declaration under section 19A for Special tax treatment:

The declaration to be furnished as required under section 19A of the Income taxOrdinance, 1984 shall be in the following manner:-

(1) Name and address of the assessee:________________________________________

(2) TIN : __________________________

(3) Name of the (a) Circle: ____________________ (b) Taxes Zone: __________________

(4) Name of the industrial undertaking in which the investment is made/to be made ______

(5) Source(s) of Investment (in figures): __________ (in words) _____________________

(6) Probable date of completion of investment ___________________________________(7) Tax paid:

(a) Amount (in figures)_____________ (in words)_____________________________

(b) Challan/Pay-order

No.:___________________________________________________

Bank:____________________________________ Date:________________________

(8) Number of employees to be employed in the industrial undertaking in which the

investment is made/to be made___________________________________________

I solemnly declare that to the best of my knowledge and belief the information given above is

correct and complete.

Name and signature of the assessee

Date: ______________


Income Tax

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Income Tax


ChangesinTaxation

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8

09. Special Tax Treatment for Investments in BMRE of existing industry (u/s 19AA):

No question as to the source of investment will be raised if money is invested by a

person in the expansion or balancing, modernization, renovation and expansion of an

existing industry between 01 July 2009 and 30 June 2010 by paying tax @ 10% of the suminvested before submission of the tax return.

10. Special Tax Treatment for Investments in Stocks & Shares (u/s 19AAA):

No question as to the source of investment will be raised if money is invested

(individuals, firm, association, private company) in the purchase of Stocks and Shares of

any listed company in Bangladesh between 01 July 2009 and 30 June 2010 by paying tax @

10% on the invested amount before submission of the tax return. Provided that such

investment shall not be withdrawn or transferred for any other purpose within 2 years from

the date of purchase. Also, this will not be applicable where concealment of incomehas been detected or proceedings u/s 93 have been initiated prior to payment of tax.

11. Special Tax Treatment for Investments in House Property (u/s 19BBBB):

No question shall be raised as to the source of investment if money is invested by any

person during the period between 01 July 2009 and 30 June 2010 in the construction or

purchase of any building or apartment by paying tax before the assessment is completed at

the following rate:.

Gulshan, Banani, Baridhara,

DOHS, Dhanmondi, Lalmatia,

Uttara, Bashundhara, Dhaka

Cantonment, Motijheel, Dilkusha,

Kawranbazar and Khulshi &

Patchlise of Chittagong.

Area other than specified in (a)

Area Plinth Area of flat/houseAreaSl. Tax RateUpto 100 Sq. meter

More than 100 but not

exceeding 200 Sq. meter

More than 200 Sq. meter

Upto 100 Sq. meter




a

b

Per SqM TK. 800

Per SqM Tk. 1,000

Per SqM Tk. 1,500

Per SqM Tk. 400

Per SqM Tk. 600

Per SqM Tk. 1,000

12. Computer / Laptop to consider as Investment (Sixth Schedule, Part-B, Para 23):

Purchase of one computer or one laptop by an individual assessee shall qualify for

investment allowance, subject ot maximum Taka 100,000 for one toptop and Taka 50,000 for

one desktop computer.

13. Normal Depreciation Allowance on Bangladeshi Software (Third Schedule):

Normal Depreciation Allowance on Bangladeshi made Computer Software has been allowed

@ 50% { Para 3, Sl (3) (2) (b) ((vi)}.

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Income Tax

ChangesinTaxation

Laws2009-2

010

9

15. Tax Holiday for Housing Income (Sixth Schedule, Part-A, Para 38):

Any income derived from any building situated in any area of Bangladesh (other than areas of citycorporation, Cantonment board, Tongi Upazila, Naryangonj Paurashava, Gazipur Paurashavaand any Paurashava under Dhaka district), not less than five storied having at least ten flats,constructed at any time between 01 July 2009 and 30 June 2014 for ten years from the date ofcompletion of construction of the building has been declared tax free.

16. Income Exempted on Interest / Profit from Pensioners Savings Certificate (Sixth

Schedule, Part- A, Para 41):

Any income received by an assessee as interest or profit from Pensioners SavingsCertificate is declared tax free.

17. Payment of Tax for new TIN (u/s 184 B & Rule 64B ):

New Tax registration and certificate will be issued on payment of tax of Tk. 1,000.

18. Tax Holiday for Power Generation Companies (SRO 188/Ain/tax/2009 dated 01 July 2009):

Power Generation Companies commencing commercial production by 30 June 2012 shall

enjoy following benefits:

Tax holiday on the Income of the company for next 15 years from the date of

commercial production.No tax on the Income of Expatriates working for the company for 3 years from the date

of their arrival.

Sl Head of withholding

Compensation against acquisitionof property (sec-52 C)

Foreign technician serving indiamond cutting industries (Sec-52O)

Shipping Business of a resident

(Sec-53AA)

Collectiuon of tax from certain

items(Sec-53BB)

Member of stock exchange (Sec-

53BBB)

Deduction from export cash

subsidy (Sec-53DD)

Withholding rate/ rates of tax

2% of the amount of suchcompensations

5% (Final settlement u/s 82C)

5% of the total freight inBangladesh.

3% of the total freight forservices rendered between twoor more foreign countries

TDS 0.25% on Export proceed

from knit wear, woven

garments, terry towel, jute

goods, frozen food, vegetables,

leather goods, packed food

0.025%

withdrawn

Last year

6% of the amount ofsuch compensations

NA

5% of the total

freight received or

receivable in or out

of Bangladesh.

TDS 0.25% on

Export of knitwear

and woven

garments

0.015%

3

4

5

6

14. Change of Rate of Withholding Tax (TDS):

a.

b.

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Income Tax


ChangesinTaxation

Laws2009-2010

0

19. Tax at reduced rate for certain Industries (SRO 172-Ain/Ttax/2009 dated 30th June 2009):

Tax at concessional rate shall be applied on the income of newly established industries to beset up between 01 July 2009 and 30 June 2012. The rate will vary from location tolocation for newly established industries:

3 Companies must be incorporated under Companies Act, 1994

3 Applicable for selected class of industries

3 This facility will not be applicable for any extension unit3 Cannot enjoy accelerated depreciation

3 Must submit annual income tax return timely alongwith audited financial statements

20. Tax on Motor Vehicles owners (SRO 187/Ain/tax/2009 dated 01 July 2009):

Imposed Tax on the owners of Motor Vehicle is payable at the time of registration or renewal

of fitness at the following rate annually:

3 Paid tax will be adjusted with the tax payable by the assessee on his/her total income

3 This tax is not applicable for vehicle owners being government & semi-

government organizations, autonomous bodies and diplomatic missions.

d.

e.

A

B

C

D

E

F

Interest on foreign loan.

Exemption of Royalty, Technical Know-how and Technical Fee payable by the company.

Exemption of tax on Capital Gain arisen by transfer of company's shares.

c.

Type of Vehicles

Car upto 1500 CC

Car upto 2000 CC

Car over 2000 CC

Jeep upto 2800 CC

Jeep over 2800 CC

Micro Bus

Income Tax per Vehicle

Tk. 3,000

Tk. 4,000

Tk. 7,000

Tk. 6,000

Tk. 8,000

Tk. 3,000

Years

1st and 2nd year

3rd and 4th year

5th year

1st ,2nd & 3rd year

4th , 5th & 6th year

7th year

Tax rate

5%

10%

15%

5%

10%

15%

Division

Dhaka and Chittagong (except Rangamati,

Bandarban, Khagrachari)

Rajshahi, Khulna, Barishal, Sylhet including

Rangamati, Bandarban, Khagrachari

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Value Added Tax

ChangesinTaxation

Laws2009-2

010

11

21. Tax on Water Transport Vehicles (passenger) and Cargo Vessels, Costars or Dump Barge, etc.

(SRO 173-Ttax/2009 dated 30th June 2009): Imposed Tax on Water Transport Vehicles

(passenger) and Cargo Vessels, Costars or Dumpbarge, etc is payable at the time of

Registration or renewal of Survey Certificate at the following rates on the basis of its capacity:

3 This tax is not applicable for Oil Tankers.

22. Enhancement of Allowable Limit of Royalty, Technical Knowhow / Service / Assistance Fees

(u/s 30h):

Allowable limit of Royalty, Technical services fees, technical know how fee, technical

assistance fee has been enhanced to 8% of the profit, in place of 5%.

23. Special Incentive for investment in business or profession [U/S 82 BB(4) & (5)]:

No question as to source of investment made by a new assessee deriving income from new

business or profession shall be raised, if he shows income at least 25% of the capital

invested and pays tax before filing return. The initial investment or part thereof shall not be

transferred or lent out in any manner within five years from the end of assessment year.

24. Revisional Power of Commissioner (u/s 121A):

The Commissioner of Taxes has been empowered to make a revision of the order passed by

his subordinate, on application by the assessee within 60 days paying undisputed amount of

tax if no appeal has been filed or decision is pending with other authority, and pass an Order

thereon, as he thinks fit.

25. Reduced Rate of payment of tax before filing Appeal against the Order of Appellate

Joint Commissioner (u/s 158):

Provision for payment of tax before an Appeal is filed against the Order of Appellate Joint

Commissioner or Commissioner (Appeal) has been reduced to 5%, in place of 10% (u/s

158). However, assessee has to pay tax @ 10% of the difference between tax as per Order of

Appellate Joint Commissioner or Commissioner (Appeal) and Appellate Tribunal (u/s 160).

A

B

C

D

E

F

Type of Vessels / Cargo vessels (not older

than 10 years)

For Passenger Vessel

Cargo Vessels or Costars

Dump Barge

Type of Vessels / Cargo vessels

(older than 10 years)

For Passenger Vessel

Cargo Vessels or Costars

Dump Barge

Income Tax per Vessel

Tk. 50 per passenger capacity

Tk. 75 per gross ton capacity


Income Tax per Vessel

Tk. 25 per passenger capacity



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Income Tax


ChangesinTaxation

Laws2009-2010

2

26. Requirement of TIN Certificate (u/s 184 A):

A TIN certificate has been made compulsory in the following cases:

a. Submission and authorization of any plan for construction of any house property by theRAJUK, RDA, CDA, KDA [u/s184A (o)]

b. Issuance of Drug License [u/s184A (o)]

27. Mode of payment of Tax by assessee : (Rule 26A)

All payments of tax shall be made by pay order or demand draft or account payee cheque of

a scheduled bank issued in favour of concerned DCT subject to any payment does not

exceed Taka 10,000 (Previous Taka 5,000) made through treasury challan.

BCS handholds end-to-end back-office factions of

world-renowned multinational companies, including

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Employees benefits (Provident Fund & Gratuity Fund) accounting

management

HR management support (Staffing services)

Operation and logistics support functions Book keeping, accounting and financial reporting functions

Receivable accounting functions through SAP systems

Payables accounting functions through SAP systems

Validation of transactions / documents

BCS uses system driven tools and unique integrated HR Management

Software comprising payroll, employees tax and benefits management

modules For providing services.

For your queries, please contact [email protected]

Vist http:// www.bcs-bd.com

Managing your Back-Office functions& maximizing your benefits as your

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Value Added Tax

ChangesinTaxation

Laws2009-2

010

13

Value Added Tax

1. VAT Impossed on House Rent (SRO # 105-Ain/2009/513)

Vat @ 15% has been introduced on any floor space, establishment, furniture, fixtures and

fittings used for commercial purpose.

2. Determination of tariff value for VAT

a. Biscuit produced in mechanized system is valued Taka 60 per kg for ordinary biscuit.

b. Biscuit produced in mechanized systems is valued Taka 80 per kg for chocolate or

cream biscuit.

3. Relieve from scope of VAT (SRO # 182 Ain/2009/535, dated 30 June 2009)

a. Refrigerator and Freezer producers will get exemption upto 30.06.2010 subject to having:

3 Poly urethane foaming plant

3 Prowder coating plant

3 Injection molding machine

3 ETP plant

3 Thermoforming plant

3 Gasket making plant and

3 Packing unit

b. Motor bike producers will get exemption upto 30.06.2010 subject to having:

3 Powder coating plant

3 Injection molding machine

3 ETP Plant

3 Computerized testing section3 Power press and

3 Hydraulic press machine

4. Enhancement of Area Regarding Turnover Tax & Cottage Industry:

Turnover Tax @ 4% if annual turnover of taxable goods or services is less than Taka

4,000,000 (Previous Taka 2,400,000);

Investment of Cottage Industry does not exceed Taka 2,500,000 (Earlier 1,500,000) and

corresponding annual turnover does not exceed Taka 4,000,000 (Earlier 2,400,000);

5. Scope of VAT (SRO # 179 Ain/2009/532-Mushak, dated 30.06.09)

3 Furniture sales centre

3 At production stage @ 4.5%

3 At trading stage @ 1.5% subject to having the treasury challan for payment at 4.5%

SRO # 176 Ais/2009/529-Mushak

Furniture sales centre means the place of production, repair and trade of ownproduction or furniture produced from other.

6. Others:

Cottage industry may involve with sub contract for production of local brand subject to

declaration of price to the VAT divisional officer. (SRO # 181-Ain/2009/534)

Registration for Taxable goods or Services must have at least annual turnover Taka4,000,000; (Previous 2,400,000)

ATV (Advance Trade VAT is 2.25% (earlier 1.5%)

a.

a.

b.

c.

b.

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JHK Windcel, Western Block, Level 4,KA-90 Pragoti Saroni (Bishwa Road),

Dhaka-1229, BangladeshPhone: +880-2-884 0533, Fax : +880-2-986 2819,E-mail: [email protected], Web: www.bcs-bd.com

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Summary in Taxation Laws

2009-2010

Income Tax

Value Added Tax

Gift Tax

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a.

b.

c.

d.

e.

f.

h.

g.

i.

ii.

1. Definitions:

Assessee [Section: 2(7)]: Assessee means a person by whom any tax or other sum of

money is payable under Income Tax Ordinance 1984.

Person [Section: 2(46)]: Person includes an individual, a firm, an association of

persons, a Hindu undivided family, a local authority, a company and every other artificial

juridical person.

Income [Section: 2(34)]: Income means any sum of income or gain from whatsoever

source derived, or accruing or arising or received or deemed to be accrue or arise or to

be received under any provision of IT Ordinance 1984

Tax [Section: 2(62)]: Tax means the income tax payable under the Income Tax

Ordinance 1984 and include any additional tax, excess profit tax, penalty, interest, fee or

other charge leviable or payable under the IT Ordinance 1984.Income Year [Section: 2(35)]: Income Year means the financial year immediately

preceding the assessment year or when accounts are closed on a date within the

financial year, the twelve months ending on the date on which accounts are closed

Assessment Year [Section: 2(9)]:Assessment Year means the period of twelve months

beginning from first day of July of every year. This is the immediate following financial

year of Income Year. Examples of Accounting Year, Income Year and Assessment year:

Accounting Period / Year Income Year Assessment Year

1 Accounting Year: July 2008 to June 2009 2008-09 2009-10

2 Accounting Year: January 2008 to December 2008 2008-09 2009-10

3 Accounting Year: April 2007 to March 2008 2007-08 2008-09

4 Accounting Year: October 2007 to September 2008 2008-09 2009-10

5 Accounting Year: August 2007 to July 2008 2008-09 2009-10

Annual Value [Section: 2(3)]: Annual value means the sum arising from letting out any

property and related furniture, fixture and fittings or any sum received as Annual Rent

which ever is higher.Basis of Residence [Section: 2(55)]:

Individual: An individual will be Resident:

if he stays in Bangladesh for a period of or for the periods all together at least

182 days or more in the income year or

if he stays in Bangladesh for a period of or for the periods all together at least 90

days or more in the income year and 365 days or more during the immediate

four preceding years of income year.

Company: The company will be resident if the management of its affairs is situatedwholly in Bangladesh in the income year.

Income Tax


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Hindu Undivided Family, Firm, Other Association of Persons: They will be

resident if its control and management of affairs is situated wholly or partly in

Bangladesh in the income year.

Non-resident [Section: 2(42)]: Non-resident means a person who is not a resident.

Perquisites [Section 2(45), 30(e)]: Perquisite limit Taka 200,000. Anything paid in

excess of allowable perquisite limit is taxed in the hands of employer.

Perquisitemeans any payment made to an employee in the form cash or in any other

form excluding: basic salary festival bonus arrear salary advance salary

overtime leave encashment leave fare assistance incentive bonus maximum upto

10% of disclosed profit of relevant income year contribution to a recognized Provident

Fund, Pension Fund and Superannuation Fund.

Salaries [Section 2(58) and 18]: Salary includes:i. any wages;

ii. any annuity, pension or gratuity;

iii. any fee, commission, allowance, perquisites or profit in lieu of, or in addition to,

salary or wages;

iv. any advance of salary;

v. any leave encashment;

2. Income Tax Authorities [Section 3]:

The Hierarchy of Incone Tax Authorities; namely-

3 National Board of Revenue (NBR)

3 Director General of Inspection (Taxes)

3 Commissioner of Taxes (Appeals)

3 Commissioner of Taxes (LTU )

3 Director General (Training)

3 Director General (CIC)

3 Commissioner of Taxes

3 Additional Commissioner of Taxes (ACT):

Appellate ACT or

Inspecting ACT

3 Joint Commissioner of Taxes (JCT)

Appellate JCT or

Inspecting JCT

3 Deputy Commissioner of Taxes (DCT)

3 Tax Recovery Offcer (TRO)

3 Assistant Commissioner of Taxes

3 Extra Assistant Commissioner of Taxes

3 Inspectors of Taxes

i.

j.

k.

iii.

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3. Appellate Tribunal [Section 11]:

Taxes Appellate Tribunal [TAT] consists of a president and other members appointed

by the Govt. A person shall not be appointed as a member unless-

a. He was or is a member or current charge of a member of the board.

b. He was or is a Commissioner of Taxes.

c. He is a CA and practice not less than 8 years.

d. He is a CMA and practice not less than 8 years.

e. He is an ITP and practice not less than 20 years.

f. He is a legislative expert having not less than 8 years experience.

g. He is an advocate and practice in any Income Tax office not less than 10 years.

4. Heads of Income [Section 20]:

a. Salaries [Section 21];

b. Interest on Securities[Section 22 & 23];

c. Income from House Property[Section 24 & 25];

d. Agricultural Income [Section 26 & 27];

e. Income from Business or Profession[Section 28, 29 & 30];

f. Capital Gains[Section 31 & 32];

g. Income from Other Sources[Section 33 & 34];

5 Income Deemed to Accrue or Arise in Bangladesh [Section 18]:The following income shall be deemed to accrue or arise in Bangladesh, namely:

a. Any income which falls under the head Salaries, wherever paid, if [Section 18(1)]:

it is earned in Bangladesh; or

it is paid by Bangladesh Government or local authority in the service of suchgovernment or authority;

b. Any income accruing or arising, whether directly or indirectly, through or from [Section 18(2)]:

any business connection in Bangladesh;

any property, asset, right, other source of income in Bangladesh;

transfer of capital assets in Bangladesh;

c. Any dividend paid outside Bangladesh by a Bangladeshi company [Section 18(3)]

d. Any income by way of interest payable [Section 18(4)]:

by the government; or

by a person who is resident / non-resident in Bangladesh;

e. Any income by way of fees for technical services payable [Section 18(5)]:



f. Any income by way of royalty payable [Section 18(6)]:



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xv

xvi

vi

ii

viii

xvii

6 Deemed Income: [Section 19]

Unexplained cash credits, investments, possession of bullion, unpaid trading liabilities/ loan

etc. will be treated as deemed income, which are mentioned below in brief with relevant

heads of income and respective sub-section:

i Unexplained Cash credit - Income from Other Source [Section 19(1)]

Unrecorded investment or possession of bullion, jewellery etc. - Income from Other

Source [Section 19(2)]

iii Unexplained expenditure - Income from Other Source [Section 19(3)]

iv Unrecorded investment - Income from Other Source [Section 19(4)]

v Ownership of any money, bullion etc. - Income from Other Source [Section 19(5)]

Income received from discontinued business - Income from Business or Profession[Section 19(6)]

vii Receipt of Dividend - Income from Other Source [Section 19(7)]

Difference between the purchase price and fair market value - Income from Other

Source [Section 19(8)]

ix Salami or Premium - Income from Other Source [Section 19(9)]

x Goodwill, compensation or damages, etc. - Income from Other Source [Section 19(10)]

xi Cancellation of indebtedness - Income from Other Source [Section 19(11)]

xii Managing Agency Commission - Income from Other Source [Section 19(12)]

xiii Lotteries, crossword puzzles etc. - Income from Other Source [Section 19(13)]

xiv Income from Insurance Business - Income from Business or Profession [Section 19(14)]

Receipt back of loss, bad debt or expenditure and unpaid trading liability etc. -

Income from Business or Profession [Section 19(15)]

Income from sale of depreciated assets having been used for the purpose of any

business or profession - Income from Business or Profession [Section 19(16)]

Income from sale of depreciated assets having been used for agricultural purpose -

Income from Agriculture [Section 19(17)]

Income from receipt of insurance, salvage or compensation moneys in respect of

assets having been used for the purpose of any business or profession - Income

from Business or Profession [Section 19(18)]

Income from receipt of insurance, salvage or compensation moneys in respect of

assets having been used in agriculture - Income from Agriculture[Section 19(19)]

Income from sale of assets of capital nature - Income from Business or Profession

[Section 19(20)]

xxi Unpaid loan Taka 100,000 (earlier Taka 50,000) is to be recognized as income immediately

after expiry of 3 years of loan taken. Income from Other Source [Section 19(21)]

xviii

xix

xx

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Un-adjustable security money taken from tenant - Income from House Property[Section 19(22)]

Income from transfer of export quota by Garments Industry - Income from Business

or Profession[Section 19(23)]Investment by a private limited company or a public limited company in its equityreceived from share holder or director not being received by cross cheque - Incomefrom Other Source[Section 19(24)]

7. Scope of Total Income [Section 17]

The total income of any income year of any person includes:

8. Charge of Additional Tax [Section 16B]:

If a publicly traded company (other than banking or insurance company) does not issue,

declare or distribute dividend or bonus share equivalent to at least 15% of its paid up capital

within 6 months following its income year, it will be charged 5% additional tax on undistributedprofit in addition to tax payable under IT Ordinance 1984. Here undistributed profit means

accumulated profit including free reserve.

9. Charge of Excess Profit Tax [Section 16C]:

If a banking company operating under Banking Companies Act 1991 shows a profit

exceeding 50% of the aggregate sum of capital and reserve, the bank shall pay @ 15% tax of

such excess amount. Such tax is payable in addition to tax payable under IT Ordinance 1984.

10. Income Exemption Limit:

Tax exemption income limit of individual assesses is Taka 165,000for male, while this limit for

female, persons aged 65 (earlier 70) years & above has been fixed at Taka 180,000and for

disabled assesses this limit ennanced from Taka 180,000 to Taka 200,000 with effect from

Income Year 2008-2009 (Assessment year 2009-2010).

11. Personal Tax Rate Structure:

Taxable income slab and tax rates have been changed for personal income tax. The Five-tier

taxable income slabs and tax rates for individual assessees (including Non-resident

Bangladeshi) applicable for the assessment year 2008-2009 and 2009-2010 are as follows:

xxii

xxiii

xxiv

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20 Bangladesh Tax Handbook 2009-2010

Resident

All income from whatever sources includingreceived or deemed to be received in

Bangladesh; accrue or arises or deemed to

accrue or arises in Bangladesh; or accrue or

arises outside Bangladesh

Non-Resident

All income from whatever sources includingreceived or deemed to be received in

Bangladesh; accrue or arises or deemed to

accrue or arises in Bangladesh

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12. Tax Rebate for assesses paying tax at the highest rate of 25%Individual assesses paid tax @ 25% during the assessment year 2008-2009 with declarationof more than 10% higher income in 2009-2010 will get 10% tax rebate on tax attributable tothat additional higher income declared in 2009-2010 assessment year.

13 Minimum Tax (Individual):

Minimum tax for individual assessees has been remained same as Taka 2,000, whose incomeexceeding exemption limit of Taka 165,000or Taka 180,000 or Taka 200,000 or Taka 215,000 orTaka 230,000 or Taka 250,000 (as the case may be). If minimum tax becomes less than Taka2,000 or negative after adjusting Investment Tax Credit, individual assessees have to pay Taka2,000 as minimum tax.

Minimum tax exempted income for female, persons aged 65 (earlier 70) years & more and

disabled assessees having only agricultural income has been enhanced from Taka 230,000

and Taka 250,000 respectively while for other assesees this limit is Taka 215,000.

14. Incidence of Tax on Non-Resident:

A person who is a non-resident is liable to tax on the incomes, profits and gains whichare received or deemed to have been received or are deemed to accrue or arise to himin Bangladesh.

a.

Income Year 2008-2009 Income Year 2007-2008

(Assessment Year 2009-2010) (Assessment Year 2008-2009)

Income Slabs Tax Rates Income Slabs Tax Rates

i. On the first Taka 165,000 Nill i. On the first Taka 165,000 Nill

of total income for Male of total income for Male

On the first Taka 180,000 Nill On the first Taka 180,000 Nill of total income for Female, of total income for Female,

persons aged 65 & above persons aged 70 & above

On the first Taka 200,000 of Nill On the first Taka180,000 of Nill

total income for Disabled total income for Disabled

assessees assessees

ii. On the next Taka 275,000 10% ii. On the next Taka 275,000 of 10% of total income total income

iii. On the next Taka 325,000 15% iii. On the next Taka 325,000 15%


iv. On the next Taka 375,000 20% iv. On the next Taka 375,000 20%


v. On the balance of total 25% v. On the balance of total income 25%

income

Non-Resident(Foreign) assessee 25% Non-Resident(Foreign) assessee 25%

Minimum Tax: Individuals Tk. 2,000 Minimum Tax: Individuals Tk. 2,000

Minimum Tax (Company) Tk. 5000 N/A N/A

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A non-resident assessee is not entitled to any sort of allowance and relief as areadmissible to a resident assessee for the purpose of tax rebate;

A non-resident assessee (other than Bangladeshi non-resident) is liable to tax on his

total income @ 25%.A Bangladeshi non-resident is subject to tax at normal rate, as applicable for a residentassessee.

16. Special Tax Treatment for Investments in BMRE of existing industry (u/s 19AA):

No question as to the source of investment will be raised if money is invested by a

person in the expansion or balancing, modernization, renovation and expansion of an

existing industry between 01 July 2009 and 30 June 2010 by paying tax @ 10% of the sum

invested before submission of the tax return.

17. Special Tax Treatment for Investments in Stocks & Shares (u/s 19AAA):

No question as to the source of investment will be raised if money is invested (individuals,

firm, association, private company) in the purchase of Stocks and Shares of any listed companyin Bangladesh between 01 July 2009 and 30 June 2010 by paying tax @ 10% on the invested

b.

c.

d.

15. Special Tax Treatment for Investments in New Industry / Infrastructural Facility (u/s 19A):

No question as to the source of investment will be asked if money is invested in a company

for setting up new industry or physical infrastructural facility between 01 July 2009 and 30

June 2010 by paying tax @ 10% before submission of the tax return. In this regard, a

declaration under Rule 25AA shall have to be furnished. New industries include:

Textiles

Spinning

Textile machinery

Garments

Leather goods

Toys

Furniture

Tour operators

Tourism industry

Foot wear

Recycling industry

IT enabled services

computer hardware

drugs and Pharmaceuticals

Chemicals andpharmaceutical

Basic raw materials ofdrugs

Insecticide, pesticide

Petro chemicals

Cosmetics and toiletries

Fertilizer

Basic chemicals and dyes

Herbal medicine

Light engineering

Melamine

Plastic products

Ceramics

Sanitary ware

Steel

MS rod & CI sheet

MS billet

Boilers

Ship building

Compressors

Agro processing industry

Agricultural machinery

Shrimp processing industry

Milk processing industry

Jute goods producing ind.

Energy saving bulbindustry

Diamond cutting industry

Accumulator & batteryindustry

Any other industry as maybe approved by Govt.

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Income fully Exempted from Tax subject to prescribed conditions and limitations

[Section 44(1) and Part A of Sixth Schedule]:

Certain incomes are totally exempted from tax and they are not includable with other income

even for rate purpose. Income specified in Part-A of the Sixth Schedule (Exclusions from Total

Income) of the Income Tax Ordinance 1984 are exempt and excluded from the computation of

total income subject to limits, conditions and qualifications laid down therein:

Income from property held under Trust but shall not apply to NGOs registered with

NGO Affairs Bureau [Para # 1]

Any income derived from micro credit operations by NGOs registered with NGOAB

[Para # 1A]

iii. Income of a religious or charitable institution derived from voluntary contributions. [Para # 2]

iv. Income of Local Government [Para # 3]

v. Income of Provident Fund and other Funds [Para # 4]

19

i.

ii.

amount before submission of the tax return. Provided that such investment shall not be withdrawn

or transferred for any other purpose within 2 years from the date of purchase. Also, this will

not be applicable where concealment of income has been detected or proceedings u/s 93 have

been initiated prior to payment of tax.18. Special Tax Treatment for Investments in House Property (u/s 19BBBB):

No question shall be raised as to the source of investment if money is invested by any

person during the period between 01 July 2009 and 30 June 2010 in the construction or

purchase of any building or apartment by paying tax before the assessment is completed at

the following rate:.

Gulshan, Banani, Baridhara,

DOHS, Dhanmondi, Lalmatia,

Uttara, Bashundhara, Dhaka

Cantonment, Motijheel, Dilkusha,

Kawranbazar and Khulshi &

Patchlise of Chittagong.

Area other than specified in (a)

Area Plinth Area of flat/houseAreaSl Tax Rate

Upto 100 Sq. meter




Upto 100 Sq. meter




a

b

Per SqM TK. 800

Per SqM Tk. 1,000

Per SqM Tk. 1,500

Per SqM Tk. 400

Per SqM Tk. 600

Per SqM Tk. 1000

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vi.

viii.

xi.

xv.

Traveling Allowances, etc. (to meet expenses wholly and necessarily incurred in

performance of the duties of an office or employment of profit) incurred [Para # 5]

vii. Income of Trustees on behalf of any recognized fund [Para # 6]

Income of the personnel of the foreign missions, not being a citizen of Bangladesh

[Para # 7]

ix. Pension [Para # 8]

x. Interest on government securities maximum upto Taka 5,000 [Para # 12]

Interest on Debentures approved by SEC upto Taka 20,000 including exemption of

interest on Govt. Securities of Taka 5000 [Para # 13]

xii. Share of Capital Gains of a Partner of a Firm [Para # 18]

xiii. Income of a member of Hindu Undivided Family [Para # 19]xiv. Gratuity [Para # 20]

Any payment received from Provident Fund and other Funds (PF, WPPF and

approved superannuation fund) [Para # 21]

xvi. Income from dividend of a mutual fund or a unit fund upto taka 25,000 [Para # 22A]

xvii. Interest on tax-free Government Securities [Para # 24]

xviii. Interest on the balance in a Recognized Provident Fund [Para # 25]

xix. Payment received on voluntary retirement [Para # 26]xx. Income of indigenous Hillman [Para # 27]

xxi. Income from export business [Para # 28]

xxii. Income from agriculture upto Taka 50,000 [Para # 29]

xxiii. Income of Mutual Fund [Para # 30]

xxiv. Capital Gains from Machinery or Plant used in business or profession [Para # 31A]

xxv. Income from Savings Instruments upto Taka 150,000 [Para # 31B]

Income from the business of Software Development and Information TechnologyEnabled Services (ITES) [Para # 33]

Income from fisheries, poultry, production & marketing of seeds, farming (cattle, dairy,

frog & mushroom), horticulture, floriculture and sericulture; if such income exceeds taka

150,000 and at least 10% of income invested in bond & govt. securities [Para # 34]

xxviii. Income from the export of handicrafts [Para # 35]

Any amount paid by govt. as tax on behalf of Petroleum Exploration Company under

Production Sharing Contract (PSC) [Para # 36]

Income from educational activities of private Agricultural College and University[Para # 37]

xxvi.

xxvii.

xxix.

xxx

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iv) Investment in Stocks and Shares [Para # 8]

v) Investment in Debentures or Debenture-Stocks [Para # 9]

vi) Investment in Unit Certificate etc [Para # 10]

vii) Contribution in any Deposit Pension Scheme (DPS) [Para # 11]

viii) Donation to a charitable Hospital [Para # 11A]

ix) Donation to organization for the welfare of the retarded people [Para # 11B]

x) Donation to Zakat Fund [Para # 13]

xi) Contribution to Benevolent Fund and Group Insurance Scheme [Para # 17]

xii) Donation of Aga Khan Development Network [Para # 21]

xiii) Donation to philanthropic or educational institution [Para # 22]

Any sum invested in the purchase of one computer or one laptop by an individual assesseesubject to maximum Taka 100,000 for laptop and Taka 50,000 for desktop. [Para # 23]

21. Income from Salary [Section 21]:Any income classifiable as salaries irrespective of its place of payment shall be deemed to beincome accruing or arising income in Bangladesh if it is earned in Bangladesh or it is paid by

the government or local authority in Bangladesh to a citizen in Bangladesh.Salary once included in any year on due basis or advance payment basis is not includible inthe income of any other year.

a.

xxxiii.

xxxi

xxxiv.

xxxii

Any income derived from any building situated in any area of Bangladesh (other than areas of

city corporation, Cantonment board, Tongi Upazila, Naryangonj Paurashava, Gazipur

Paurashava and any Paurashava under Dhaka district), not less than five storied having at

least ten flats, constructed at any time between 01 July 2009 and 30 June 2014 for ten years

from the date of completion of construction of the building has been declared tax free.

Income from any Small and Medium Enterprise (SME) having annual turnover not more

than Taka 2,400,000 [Para # 39]

Income from Zero Coupon Bond [Para # 40]

Any income received by an assessee as interest or profit from pensioners saving

certificate [Para # 41]

20 Investment Allowance for Tax Rebate [Section 44 (2) & (3) and Part B of Sixth Schedule]:

Maximum ceiling of Investment Allowance: Maximum ceiling for Investment

Allowance is Taka 1,000,000, subject to maximum of 25% of the total income excluding

employers contribution to recognized PF & Interest thereon.

b. Tax Rebate: Tax Rebate @ 10% of the eligible investment shall be allowed as Rebate.

c. Investments eligible for Tax Rebate:

i) Life insurance premium paid by an individual [Para # 1]

ii) Life insurance premium paid by Hindu Undivided Family [Para # 2]

iii) Contribution to Provident Fund and Other Funds [Para # 3, 4, 5 & 6]

xiv)

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i. Income classified under the head Salaries: Salaries include the following-

any salary due from an employer to the assessee in the income year whether paid or not;

any salary paid or allowed to him in the income year by or on behalf of an employer,

though not due or before it became due to him;

any arrears of salary paid or allowed to him in the income year by or on behalf of anemployer, if not charged to income tax for any earlier income year;

ii. Perquisites, allowances and benefits includible as income of Salaried Persons:

Extent of perquisites, etc. includible as income under the head salary has beenprescribed in rule 33A to 33J. Basic salary for the purpose of determination of value ofperquisites, allowances and benefits, means the pay and allowances payable monthly orotherwise but does not include:

dearness allowance or dearness pay unless it includes in the computation ofsuperannuation or retirement benefits;

employers contribution to a recognized provident fund or a fund to which ProvidentFund Act 1925 applies and the interest thereon;

allowances which are exempt from the payment of tax;

allowances, perquisites, annuities and benefits as referred to sub rule 1 of rule-33;

A share-holder being director of more than one company shall be entitled to the benefitunder rule-33 for one company only.

House rent allowance receivable in cash [Rule # 33A]: House rent allowance inexcess of Taka 15,000 per month or 50% of basic salary or, whichever is less, shall beincluded in income.

iii.

Rent free accommodation [Rule # 33B]: The rental value of the accommodation or25% of basic salary, whichever is less, shall be included in income.

Conveyance allowance receivable in cash with no conveyance facility [Rule #33C]:Allowable amount Taka 24,000 per annum the allowance so receivable in excessof Taka 24,000 per annum shall be included in income.

Conveyance provided exclusively for personal or private use [Rule # 33D]: Anamount equal to 7.5% of basic salary shall be included in income.

Additional conveyance allowance [Rule # 33E]: The whole amount shall be included in income.

viii. Free or concessional passage for travel abroad or within Bangladesh [Rule # 33G]:

Where free or concessional passage for travel abroad or within Bangladesh is providedby the employer to an employee (including the members of his household anddependents) shall be included in the income of the employee:

Where the passage is provided in accordance with the terms of employment:An amount equal to the sum by which the cash payments, if any, made by employerexceeds the actual expenditure incurred by the employee;

Where the passage is not in accordance with the terms of employment: The

whole of the amount paid in cash and if not paid in cash, the amount which wouldhave been expended by the employee if not provided by the employer;

iv.

v.

vi.

vii.

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Maintenance allowances: (25% of annual value in case it is used for residential

purposes, and 30% of annual value in case it is used for commercial purpose)

ii) Insurance premium

iii) Interest on mortgage or other capital charges

iv) Any tax not being a charge leviable on annual basis

v) Ground rent

vi) Land development tax

Interest payable on capital borrowed for the purpose of acquisition, construction,

reconstruction, repair or renovation of the house property; subject to owners self

occupied portion for which interest on borrowed capital not exceeding Taka 2,000,000.

viii) Proportionate vacancy allowances

Interest payable during construction period to be allowed in 3 subsequent equal

installments.

Interest or annual charge payable outside Bangladesh shall not be allowed as deduction on

which tax has not been paid or deducted at source.

i)

vii)

ix)

Where free concessional passage for travel abroad is availed more than oncein two years: The whole of the amount paid in cash, if any, for such additionalpassage. If no cash payment is made, the amount which would have beenexpended for this passage if not provided by the employer;

Where the transport is provided free of cost or at a confessional rate: By anundertaking engaged in the transport of passengers or the carriage of goods of anemployee of the undertaking in any conveyance owned or charted by theundertaking for the purpose of the transport of passengers, nothing shall be addedin his income;

Entertainment allowance [Rule # 33H]: The whole amount shall be included in incomeexcept for free tea, coffee, beverages or the like thereof provided at the office premisesduring the course of work.

Medical expenses [Rule # 33I]: Receipts / receivable from employer in excess of

actual expenditure shall be included in the income of the assessee.xi. Other benefits [Rule # 33J]: Equivalent amount shall be included in income.

Allowable exemptions on the income of Sponsor / Shareholder Directors [Rule # 33(2)(b)]: As per SRO 207-Ain/2005 dated 06.07.2005, a shareholder, being director of more thanone company, shall be entitled to the benefits under rule # 33 for one company only.

22. Income from House Property [Section 24 & 25]:

Income from house property whether used for commercial or residential purposes istaxable on the basis of its annual value. The value determined by the tax authority u/s-2(3) will be treated as annual value.

Deductions allowable in the determination of income from house property: Thefollowing deductions are allowable in determining the net income:

ix.

x.

xii.

a.

b.

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A.

B.

C.

i.

ii.

iii.

ii.

iii. value of any benefit or perquisite arising from business or exercise of profession;

receipt back of loss, bad debt or expenditure and unpaid trading liability as referred to

section 19 (15);

v. income from sale of asset of depreciated asset as referred to section 19 (16);

income from receipt of insurance, salvage or compensation money as referred to

section 19 (18);

vii. income from sale of asset of capital nature as referred to section 19 (20);viii. income from transfer of export quota as referred to section 19 (23).

25. Rates of Corporate Tax are as follows:

Irrespective of profit or loss all companies have to pay Taka 5,000 as minimum Tax.

iv.

vi.

i.

23. Income from Interest on Securities [Section 22 & 23]:

Incomes classifiable under the head Interest on Securities are:

Interest receivable by the assessee on any security of the government or any security

approved by the government;

Interest receivable by him on debenture or other securities of money issued by or on

behalf of a local authority or company;

Deductions permissible in the determination of income from interest on securities are:

Commission or charges deducted from interest by a bank realizing the interest on

behalf of the assessee;

Interest payable on money borrowed for the purpose of investment in the securities;

Interest on Debentures approved by SEC upto Taka 20,000 including exemption of

interest on Govt. Securities of Taka 5,000; [Sixth Schedule, Para # 13]

Provided that allowance or deduction on account of interest or commission in respect of

or allocable to the tax-free government securities shall not be allowed. Deduction will

also not be allowed in respect of interest payable outside Bangladesh on which tax has

not been paid or deducted.

24. Income from Business or Profession [Section 28]:

Income from business or profession includes the following:

i. profits and gains of any business or profession;

income of trade or professional association derived on account of specific services

performed for its members;

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Assessees

Publicly traded Companies (other than

Banks, Insurance & Financial Institutions):

Normal Tax Rate (paying Dividend 10% or

more)

Previous Rate

AY 2008-09

27.5%

New Rate

AY 2009-10

27.5%

SL.

NO.

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Assessees

Rebate @ 10% on applicable tax in case

where declared dividend is more than 20%

Additional Tax, if declared dividend or

bonus share rate is less than 15%

[section: 16B]

Companies declaring dividend less then 10% or

dividend not paid within the time fixed by SEC

Banks, Insurance and Financial

Institutions:

Corporate TaxExcess Profit Tax (banks only): Profit in excess

50% of Capital+ Reserve [section: 16C]

Companies not publicly traded

Mobile Operator Company:If the company is converted into publiclytraded company through at least 10%share for Initial Public Offering (IPO)Subject to not more than 5% of pre IPO

placement;If not converted into a publicly tradedcompany with 10% share for IPO;

Private University: Income accrued from privateuniversities approved by University GrantCommission and other universities which are notpublic universities shall pay tax (other than Medical,Dental, Engineering and Agricultural University).

Company engaged in Diamond cutting and

Polishing industryReadymade Export oriented Garments

Industries

Companies which manufacture of yarn

related production of fabrics, dying,

finishing and covering of yarn

Textile Industries

Jute Industries

Industries set up between July 2002 and

June 2005 and also not applying for tax

holiday(This rate will continue for five years)

Previous Rate

AY 2008-09

10%

5% on

undistributed

profit

37.5%

45%

15%

(on excess profit)

37.5%

35%

45%

15%

15%

10%

15%

15%

15%

20%

New Rate

AY 2009-10

10%

5% on

undistributed

profit

37.5%

42.5%

15%

(on excess profit)

37.5%

35%

45%

15%

15%

10%

15%

15%

15%

20%

SL.

NO.

ii.

iii.

iv.

v.

vi.

vii.

viii.

ix.

x.

xi.

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Assessees

Tax on Income Accrued from Research

Instituteunder Trust Act.

Payment of Dividend: Payment of Dividend

by companies formed under Company Act.

1994 or by foreign companies

(FED/702/2006/5743 and Finance Ordinance

2008) to:

Non Resident Assessee: Other than

non-resident Bangladeshi:

Company shareholders of tax treatycountry with more than 10% total

shareholdings;

Company shareholders of tax treaty

countriy holding less than 10% of

total shares of the company;

Company shareholders of non tax

treaty countries;

Remittance of Profit to/by a Foreign

CompanyPerson or Individual;

Resident Assessee: Including non-

resident Bangladeshi:

Company Shareholders;

Individual;

Tax in respect of Capital Gain:

In Case of Company: [Second

Schedule, Para # 2(a)]

Capital gain will be taxed as a block of

income separate from other income of the

assessee company at flat rate;

In Case of a person other than Company:

[Second Schedule, Para # 2(b)]

Where the capital gain arises as result

of a disposal after not more than 5years from the date of acquisition;

Previous Rate

AY 2008-09

15%

10 %

15%

15%

15%

25%

15%

10%

15%(Concessional

rate 10% has

been withdrawn)

At applicable

rate on totalincome including

capital gain

New Rate

AY 2009-10

15%

10 %

20%

20%

20%

25%

20%

10%

15%

At applicable

rate on totalincome including

capital gain

SL.

NO.

xii.

xiii.

xiv.

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26. Allowable Deductions on income from Business or Profession [Section 29(1)]:

The allowable deductions which have been specifically mentioned are the following:

i. Rent for the business premises [Para # 1(i)]

ii. Repairs to hired business premises [Para # 1(ii)]

Bank interest paid or any profit shared with a bank run on Islamic principles in

respect of capital borrowed for the purpose of business or profession [Para # 1(iii)]

iv. Share of profit paid by a bank run on Islamic principles [Para # 1(iv)]

An amount not exceeding 5% of the profit transferred to Special Reserve by

financial institutions approved by the Government [Para # 1(v)]

vi. Repairs to own buildings, plants, machinery, furniture etc. [Para # 1(vi)Insurance premium for insurance against risk of damage etc. of buildings plant etc.

used in business or profession [Para # 1(vii)]

iii.

v.

vii.

Assessees

Where the capital gain arises as result

of a disposal after 5 years from the

date of acquisition;

Income accrued outside Bangladesh to any

of her citizen, if such income is brought

into Bangladesh.

Income from business of software and IT

Enabled Services (ITES) including IT

Support & Software maintenance services,

data entry, data processing, call centre,

BPO Services, etc.

Capital gain arising out of transfer of govt.

securities and stock & shares of public

companies listed with Stock Exchanges

[Section 32(7)]

Previous Rate

AY 2008-09

At the rate

applicable on

total income

including said

income

OR

@ 15% on the

capital gain

whichever is

lower

Nil

(SRO-

Ain/IT/2004,

dated 13.09.04

Nil

(6th Schedule-

Part A, Para 33)

Nil

New Rate

AY 2009-10

At the rate

applicable on

total income

including said

income

OR

@ 15% on the

capital gain

whichever is

lower

Nil

(SRO-

Ain/IT/2004,

dated 13.09.04

Nil

(6th Schedule-

Part A, Para 33)

Nil

SL.

NO.

xv.

xvi.

xvii.

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Depreciation of building, machinery, plant or furniture being owned by the

assessee and used for business or profession; the allowances are admissible

under Third Schedule [Para # 1(viii)]

Investment allowance for a passenger vessel or a fishing trawler, which is entitledto special depreciation is allowable at 20% of the original cost subject to stipulated

conditions (Third Schedule, Para # 8) [Para # 1(ix)]

Obsolescence allowance for building, machinery or plant, which has been

discarded, demolished or destroyed, under the stated circumstances and to the

prescribed extent (Third Schedule, Para # 10) [Para # 1(xi)]

Obsolescence allowance and allowance on account of death or useless animals;

[Para # 1(xii)]

xii. Land development tax or rent, local rate, etc. [Para # 1(xiii)]

xiii. Bonus paid to employees including festival bonus [Para # 1(xiv)]

The amount of bad debt, which is established to have become irrecoverable, under

the stated circumstances [Para # 1(xv)]

The amount of bad debt written off as irrecoverable but deduction not allowed on

the ground that it was not then irrecoverable, the amount which was established to

be irrecoverable [Para # 1(xvi)]

The amount for bad debt having been irrecoverable in an earlier year, is allowable

for the earlier year under the stated circumstances and with the consent of the

assessee [Para # 1(xvii)]

Provision for bad and doubtful debt and interest thereon made by a commercial

bank including the Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and

Karmosangsthan Bank for a sum equal to 1% of the outstanding loan including

interest thereon or the amount of actual provision, whichever is less, subject to the

specified conditions, allowable during the assessment years 2001-2002,2002-

2003,2003-2004 and 2004-2005, 2005-06 and 2006-07;

If any amount out of the provision for bad and doubtful debt and interest thereon,

which has been allowed, is ultimately recovered, the amount so recovered shall be

deemed to be profit of the year in which it is recovered [Para # 1(xviiiaa)]

Any expenditure, not being capital expenditure, laid out or expected on scientificresearch related to the business [Para # 1(xix)]

Any expenditure of a capital nature laid out or expended on scientific research

related to the business subject to the stipulated conditions [Para # 1(xx)]

Any sum paid to scientific research institute etc. subject to the stipulated conditions

[Para # 1(xxi)]

Any sum, not being of capital nature laid out or expended on any educational

institute or hospital established for the benefit of employees subject to the

stipulated condition [Para # 1(xxii)]

viii.

ix.

x.

xi.

xiv.

xv.

xvi.

xvii.

xviii.

xix.

xx.

xxi.

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Handholding of Payrollfunctions

Salary Surveys / PayRestructuring

Headhunting/HR Outsourcing/Recruitment and work Permitfor Expatriates

Employees' Provident Fund &Gratuity Fund Accounting functions

Employees and Corporate taxationmatters and US Citizens tax return filing

Handholding of Accounting functions

Transaction / Payment Processing

IT Audit / Compliance Audit

Business Advisory Services on Corporate Tax,Accounting and related matters

Implementation of Fixed Asset Management System

Design and Implementation of Software like TaxTool, HR/Administration, Paypack, Asset, and Benipack

Imparting Training on basic Accounting and Computer systems

Handholding of Company Secretarial Functions and formation of Company, Branchand Liaison Office

Design and development of Financial systemsand Manuals

Due Diligence Review, Financial Modeling,Financial Reviews and Marger/Acquisition

Ou

rV

alue

AddedServices

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Expenditure (including capital expenditure) incurred on any educational institution or

hospital established for benefit of employees and their dependents is deductible

provided no charge is made for the services rendered by such hospital or institution.

Expenditure incurred on the construction, maintenance or running of any institute forthe training of industrial workers will be similarly deductible [Para # 1(xxiii)]

Any expenditure laid out or expended on the training of citizens of Bangladesh in

connection with a scheme approved by the National Board of Revenue [Para # 1(xxiv)]

Expenses incurred in connection with visits abroad in a Trade Delegation

sponsored by Government [Para # 1(xxv)]

Subscription paid to a registered trade organization or to a recognized professional

institution is allowable expenditure for the purpose of computation of income from

business [Para # 1(xxvi)]

Any expenditure, not being in the nature of capital expenditure or personalexpenses of the assessee laid out or expended wholly and exclusively for the

purpose of the business or profession of the assessee [Para # 1(xxvii)]

Allowance in respect of expenditure on publicity and advertisement [Section 30,

Para # f(iii)]

Any allowance in respect of expenditure on entertainment not in excess of the

amount prescribed in this behalf, Ceiling of admissible expenditure has been

prescribed in Rule 65 of Income Tax Rules, 1984 [Section 30, Para # f(i)]

On the first Taka 1,000,000 of income from business or profession: 4%

On the balance income : 2%Foreign travel expenses for holidaying and recreationincurred by business houses on

account of their employees and their dependants not exceeding the amount prescribed in

this behalf under Rules 65A of the Income Tax Rules, 1984 [Section 30, Para # f(ii)]

The amount has been restricted upto 3 months basic salary or three-fourth of the

actual expenditure whichever is less, not oftener than once in every 2 years;

subject to sum exceeding taka 10,000 shall not be allowed as deduction unless

such payment is made through bank.

Allowable expenditure on distribution of Free-Sample {(Rule: 65C), ( Section 30,

Para # f(iv)}In respect of industry other than pharmaceutical industry:

Turnover upto Taka 5 crore : 1.50%

Turnover exceeding Taka 5 crore but not exceeding Taka 10 crore : 0.75%

Turnover exceeding Taka 10 crore : 0.375%

In respect ofpharmaceutical industry:

Turnover upto Taka 5 crore : 2.0%

Turnover exceeding Taka 5 crore but not exceeding Taka 10 crore : 1.0%

Turnover exceeding Taka 10 crore : 0.50%

xxiii.

xxiv.

xxv.

xxvi.

xxvii.

xxviii.

xxix.

xxii.

xxx

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Income Tax



010

SL.

NO.

Class of Assets

Ships-

1) Ocean-going ships (new)

2) Ocean-going ships (Secondhand) age at the time of purchase

Less than 10 years

10 years or more

Inland ships including steamers,

motor vessels, iron or steel flats

for cargo, wooden cargo boats,

motor launches and speed boats.

Batteries, X-Ray and electric-

therapeutic apparatus and

accessories thereto.

Machinery used in the production

and exhibition of cinematographic

films

3) Motor vehicles, not plying for hire

4) Motor vehicles plying for hire

5) Computer & Computer Equipments

6) Bangladeshi made computer software1) Professional and reference books

Remarks

The allowance is tobe calculated onthe original cost

Rate/percentage of

the written down

value except as

otherwise indicated

27. Normal Depreciation Allowance (Third Schedule, Para # 3): [section: 29(1) (viii) & (ix)]

i. a) Building (general) 10%

b) Factory building 20%

ii. Furniture and fittings 10%

iii. Machinery and plant:

a) General rate 20%

b) Special rates-

3)

12%

12%

24%

24%

Head Office Expensesfor a Company not incorporated in Bangladesh, allowable

upto 10% the Profit (Section 30g)

Technical Assistance Fee / Royalty allowable upto 5% of the profit (Section 30h)

Incentive Bonusallowable upto 10% of the disclosed net profit (Section 30j)

xxx

1)

2)

20%

20%

24%

20%

30%

50%30%

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SL.

NO.

Class of Assets

Aircraft, aero-engines and aerial

photographic apparatus

Moulds used in the manufacture

of glass or plastic goods or

concrete pipe.

Mineral oil concerns

1) Below ground installations

Above ground installations, thatis to say, portable boilers, drilling

tools, well-head tanks and rigs.

RemarksRate/percentage of

the written down

value except as

otherwise indicated

30%

30%

30%

30%

2)

2)

3)

In case of motor vehicles, being passenger vehicles or sedan cars, not plying for hire cost for

the purpose of depreciation is restricted to Taka 2,000,000.

28 Initial depreciation: [Third Schedule, Para # 5A]

Where any building has been newly constructed or any machinery or plant has been in

Bangladesh after 30th June 2002, an amount by way of initial depreciation allowance in

respect of the year of construction or installation or the year in which such building,machinery or plant is used by the assessee for the first time for the purpose of his business or

profession or the year in which commercial production is commenced, whichever is later,

shall be allowed at the following rates:

In the case of building - 10% of the cost;

In the case of machinery or plant other than ships or motor vehicles not plying for hire -

25% of the cost;

For the first year in which the undertaking

starts commercial production

For the next following second year

For the next following third year

29. Accelerated Depreciation: [Third Schedule, Para # 7 & 7A]

In the case of any machinery or plant (other than office appliance and road transport vehicles)which not having been previously used in Bangladesh, has been or is used in an industrial

undertaking set up in Bangladesh between the first day of July, 1977 and the thirtieth day of

June 2010 (both days inclusive) accelerated depreciation allowance shall be allowed and

computed as follows:

50% of the actual cost of plant and machineryto the assessee

30% of the actual cost of plant and machineryto the assessee

20% of the actual cost of plant and machinery tothe assessee

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i.

ii.

iii.

The assets enjoying accelerated depreciation will not be eligible for any other depreciation

under the Income Tax Ordinance.

The undertaking must fulfill all the prescribed conditions and apply to Board in the prescribed

manner for approval for the purpose of deprecation of this category within six months fromthe end of the month of commencement of commercial production. Board is to give decision

on the application within 45 days [Section 46A (3) or 46B (6)].

Accelerated depreciation is also allowable on machinery and plant other than office

appliances and road transport vehicles which having not being previously used in

Bangladesh, has been or is used in the expansion unit of any existing undertaking or in

the treatment and disposal of toxic and environmentally hazardous wastes or in the

collection or processing of biodegradable waste or in the research and development in

any industrial undertaking owned by a company. In this case accelerated depreciation is

allowed at 80% for 1st year (starts commercial production or operation) and 20% for thenext following year [Para # 7A (1)].

30. Deductions are NOT admissible in certain circumstances: [Section 30]

The following expenditures are not admissible deductions in the determination on income

from business or profession:

Payment of salaries if tax is not deducted at the time of payment and paid thereon in

accordance with section 50 [Para # 30(a)]

Any payment made by an assessee to any person if tax thereon has not been deducted

and credited in accordance with Chapter VII and VAT thereon has not been collectedordeducted and credited in accordance with VAT Act. 1991 [Para # 30(aa)]

Payment of interest, salary, commissionor remunerationby a firm or an association

of persons to any partner of the firm or any member of the association as the case

may be [Para # 30(b)]

Brokerageor commissionpaid to a non-resident if tax has not been deducted there

from under section 56 [Para # 30(c)]

Payment to a provident or other fund unless effective arrangement has been made for

deduction of tax at source while making the payments from the fund which are taxable

under the head Salaries [Para # 30(d)]

Amount of perquisitesor other benefitspaid, as defined under Section 2(45), to any

employee in excess of Taka 200,000 [Para # 30(e)]

Provided that this ceiling shall not be applicable to an employer where perquisites

were paid to an employee in pursuance of any government decision to implement the

recommendation of a Wage Board constituted by the government;

The amount of expenditure in excess of the prescribed ratesand as is not, in the

case of sales and services liable to excise duty, supported by excise stamp or seal in

respect of the following items [Para # 30(f)]

iv.

v.

vi.

vii.

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Entertainment (Rule # 65)

Foreign travels of employees and their dependants for holidaying and recreation

(Rule # 65A)

Distribution of free samples (Rule # 65C)

Any expenditure exceeding 10% of the profit under the head office expensesby a

company not incorporated in Bangladesh under Companies Act 1994 [Para # 30(g)]

Any payment by way of royalty, technical services fee, technical know how fee or

technical assistance feeexceeding 8% of the profit [Para # 30(h)]

Any payment by way of salary or remuneration made otherwise than by crossed

cheque or bank transfer by a person to any employee having gross monthly salary of

Taka 15,000 or more [Para # 30(i)]

Any expenditure by way of incentive bonusexceeding 10% of the disclosed net profit

[Para # 30(j)]

Any expenditure by way of overseas traveling exceeding 1% of the disclosed

turnover [Para # 30(k)]

31. Capital Gains: [Section 31]

Any gains arising from transfer of a capital asset (both movable and immovable) as defined in

Section 2(15) of the Income Tax Ordinance is chargeable to income tax in accordance with

the Second Schedule, Para # 2of the Income Tax Ordinance, 1984 which prescribes ratesof income tax in certain special cases;

In determination of the gain on transfer of any expenditure incurred solely in connection with

transfer of the capital asset and the cost of acquisition including expenditure, if any, incurred

for the improvement of asset are deductible from the sale value. In case of acquisition of

asset:

viii.

ix.

x.

xi.

xii.

i.

ii.

Value of cost capital assets

Actual cost of the previous owner as reduced

by depreciation allowance;

Where actual cost of the previous owner as

reduced by depreciation allowance. Where

actual cost to the previous owner can not be

ascertained, fair market value of assets on the

date on which it became the property of

previous owner, shall be taken to be the cost

of acquisition in the hand of present owner;

Events

By purchase the actual cost of

the asset;

Property acquired by gift,

bequest or will or under a

transfer on a trust or distribution

of capital asset on liquidation of

company or dissolution of a firm

or association of persons;

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32. Exemption of Capital Gains from tax: [Section 32]

Capital gains or portion thereof arising out of transfer of certain capital assets are exempted

from the income tax under certain circumstances and upon fulfillment of certain conditions.

Following are the cases of full or partial exemptions:

Transfer of capital asset used in the businesswith following rules: [Section 32(5)]

A declaration shall have to be made before the assessment is made;

A new capital asset for the purpose of business or profession has to be purchased

within 1 year before or after the date of transfer;

When capital gain is greater than the cost of new asset, capital gain upto the extent of

cost of acquisition of new asset shall be exempted and balance shall be charged to tax;

When capital gain is equal or less than the cost of new asset, no tax shall becharged on the capital gain;

Capital gain arising out of transfer of Government Securities and Stocks &

Sharesof public companies listed with a stock exchange in Bangladesh is exempted

from tax [Section 32(7)]

Transfer of Buildings and Lands to a new company for setting up an industry and

the whole amount of capital gain arising out of such transfer is invested in the equity of

the said company, the capital gain shall not be charged to tax as income of the year of

transfer [Section 32(10)]

Transfer of Capital Asset of a firm to a new company: Capital gain arising fromtransfer of capital asset of a firm to a new company registered under companies Act

1994 and the whole amount of capital gain is invested in the equity of the said company

by the partners of the firm, then the capital gain shall not be charged to tax as income

of the year of transfer [Section 32(11)]

Transfer of Stocks and Shares of a public company by a non-resident: Capital

gain arising in the hand of a non-resident from transfer of stocks or shares of a list

BDO Tax handbooK 2009-2010

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