KPMG in Bangladesh summarizes the tax updates in the Finance Act 2018 regarding the definition of permanent establishment and indirect relation to share transfer, reduced or nil withholding tax certificate as well as the definition of Taxed dividend.
PE definition & indirect relation to share transfer:
The definition of permanent establishment has formally been incorporated into the tax legislation this year. Therefore, any foreign entities having PE in Bangladesh as defined in Finance Act 2018 will be required to pay tax on the profit generated through PE in Bangladesh. In respect of non-residents any income accruing or arising, through or from will be deemed to accrue or arise in Bangladesh whether directly or indirectly as below:
As a result, the transfer of any share in a company that is not a resident of Bangladesh shall be deemed to be the transfer of an asset situated in Bangladesh to the extent that the value of the share transferred is directly or indirectly attributable to the value of any assets in Bangladesh; hence such transfer is now taxable as per tax law of Bangladesh.
Reduced or nil withholding tax certificate:
It is now required to obtain for non-resident (both for individual and entity) from National Board of Revenue if there is any benefit available based on Double Tax Treaty (DTT) or any other reason. Earlier it is not directly addressed in the withholding tax section for non-resident.
Insertion of the definition of “Taxed dividend”; it means the dividend income on which tax has been paid by the recipient as per tax law of Bangladesh and tax is not required to be deducted for subsequent distribution.