KPMG in Bangladesh presents highlights of the country’s Finance Act 2017 and subsequent statutory regulatory orders (SRO’s), preserves current tax holidays for certain investments, and makes minor adjustments to corporate tax rates.
Bangladesh has shown remarkable economic performance, achieving GDP growth of 6 percent on average over the last decade and of 7.4 percent in its fiscal year 2016/17. To sustain this performance, the government of Bangladesh passed a budget on 1 June 2017 of 50 billion US dollars (USD).
Tax revenue is expected to meet about 72 percent of this outlay, with income tax and value added tax (VAT) expected to contribute about 35 percent each and the balance coming from customs duties and other taxes. As a result, the government intends to broaden the tax net for income tax and VAT in the current and future fiscal years.
Bangladesh continues to focus on developing its infrastructure and improving its energy sector. Recently signed memoranda of understanding with China, Japan, Russia and India aim to increase foreign investment in infrastructure and energy, and the tax authority has already begun issuing formal gazettes, orders and notifications in this regard.
New Value Added Tax Act 2012 has been postponed until 1 July 2019. Hence Value Added Tax 1991 and related rules are now still effective. However, all businesses must obtain 9 digit electronic business identification number (e-BIN) by 31 March 2018. There is no significant change in the year 2017.
The tax law generally maintains the previous corporate rate structure, which imposes income tax at 25 percent on listed entities and 35 percent for non-listed entities. Corporate tax rate changes announced this year include:
Certain companies remain taxed at different rates. For example:
Generally, a company’s export earnings are 50 percent exempt.
In the year 2017, Government has introduced tax exemption as mentioned below (a, b and c) for Public Private Partnership (PPP) work by Project Companies involved in the following PPP projects:
a) Income Tax exemption of the business income of PPP Project Company:
The business income is 100% exempted from Income tax for next 10 years from the date of commercial operation.
b) Income Tax exemption of capital gains arising from the transfer of share capital of PPP Project Company, Royalty, Technical Know-how and Technical assistance fee paid by such company:
The capital gains arising from transfer of share capital, Royalty, Technical Know-how and Technical assistance fee paid by such company are 100% exempted from Income tax for next 10 years from the date of commercial operation.
c) Income Tax exemption for foreign technicians employed in PPP Project
The foreign technicians appointed in PPE Project Company will get 50% tax exemption for next 3 years from the date of appointment subject to such company does not cross 5 years from the date of commercial operation i.e. the company who has crossed 5 years from the date of commercial production, their foreign technicians can not avail this benefit.
Please note that, the above exemptions are subject to the following condition being met by the project company: