Income Taxation in BangladeshIncome Tax is the tax collected on various types of income under the provisions of the Income Tax Ordinance 1984.

Basic Principles of Charging/Imposing Income Tax: Sec. 16General Principles u/s 16(1): 1. Income taxpayer: Income tax is payable by every person [section 16(1)]. 2. Income tax rate: Income tax rate is provided by an Act of Parliament, which is called the Finance Act [section 16(1)]. When the Parliament is not in a session or it is not available, then Finance Ordinance promulgated by the President of the Peoples Republic of Bangladesh in accordance with the power provided in article 93(1) of the Constitution will provides the tax rates. 3. Income tax base: Income tax base is the total income of the taxpayer during the income year [section 16(1)]. 4. Timing of income tax base: Income tax base, i.e., total income is to be computed for the income year [section 16(1)]. 5. Timing of income tax payment: Income tax is to be paid in the assessment year [section 16(1)]. Exceptions to General Principles: 1. Income tax payment otherwise: Tax deducted at sources or advanced payment of income tax where applicable [section 16(2)]. 2. Special income tax rate: For capital gain, accidental income or non-corporate non-residents income tax rates are special and given in the Second Schedule [section 16(3)]. 3. Imposition of surcharge: There may be surcharge to be imposed as a percentage of normal income tax (section 16A). 4. Imposition of additional tax: By inserting section 16B by the FA 2002, a provision has been made to impose additional tax on undistributed profit @ 5% (in addition to normal tax) if a listed public limited company (not being a banking or insurance company) has not issued, declared or distributed dividend or bonus share equivalent to at least 15% of paid up capital within 6 months after the end of the income year. For AYs 2002-03 and 2003-04, undistributed profit means total income with accumulated profit including free reserve as reduced by the aggregate of dividend or bonus share issued, declared or distributed for that year, the tax which is payable under section 74 and the paid-up capital. From AY 2004-05, undistributed profit means accumulated profit including free reserve (changed by FA 2004). 5. Imposition of excess profit tax: Under section 16C (inserted by the FA 2002), a bank company operating under the Bank Companies Act 1991, if shows, in the return, profit exceeding 50% of the aggregate sum of capital and reserve, shall pay tax @ 15% of such excess profit as excess profit tax in addition to normal tax. 6. Charge of minimum tax for corporate taxpayer (new section 16CCC): From AY 2011-12, under this section 16CCC, every company shall, irrespective of its profits or loss in an assessment year for any reason whatsoever, including the sustaining of a loss, the setting off of a loss of earlier year or years or the claiming of allowances or deductions (including depreciation) allowed under the ITO, be liable to pay minimum tax at the rate of zero point five zero (0.50%) percent of the amount representing such companys gross receipts from all sources for that year. Here, gross receipts means (a) all receipts derived from the sale of goods; (b) all fees or charges for rendering services or giving benefits including commissions or discounts; (c) all receipts derived from any heads of income. If there is no gross receipt, then the question of minimum tax will not arise. Previously the annual minimum tax was Tk.5,000. 6. Imposition of tax on sale of share in a premium over face value: Under section 16E (inserted by the FA 2010), where a company raises its share capital through book building or public offering or rights offering or placement or preference 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 the ITO, tax @ 3% on the difference between the value at which the share is sold and its face value.

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General Principles: Sec. 16(1)Income tax shall be imposed on total income of the income year of every person and payable in the assessment year at the tax rate determined by the Finance Act/Finance Ordinance. Taxpayer: Tax-base: Tax Period: Tax rate: Assessee every person Total income Period for tax-base income year Period for tax-rate and tax-payment assessment year Prescribed by an Act of the Parliament (the Finance Act/Finance Ordinance)

Exceptions to Basic Principles: 1. TDS (tax deducted at source)/AIT (advance income tax) 2. Special tax rates for selective income in Second Schedule 3. Provision of surcharge and special taxes

Scope of Income Tax Laws in Bangladesh:1. Income Tax Manual, Part I: Income Tax Ordinance 1984 2. Income Tax Manual, Part II: Income Tax Rules 1984 3. Annual Finance Act/Finance Ordinance to amend the Income Tax Ordinance 1984 4. Statutory Rules and Order (S.R.O.) to make amendments to Income Tax Rules 1984 and to issue various statutory general or special orders made by the Direct Tax Wing of the NBR (National Board of Revenue), the apex tax authority 5. Other general or special orders and circulars made or explanations given by the Direct Tax Wing of the NBR 6. Verdicts of court cases on income tax issues.

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Assessment Cycle under Income Tax Assessment cycle is the sequential steps followed in case of submission of income tax return, assessment thereof, and other administrative and judicial actions taken by the income taxpayers and the income tax authority.Assessee TDS/AIT

Refund of Tax

Preparation of Return

Recovery of Tax Payment of tax as per Return Appeal/Revision/ Reference Tax Payment as per Notice of Demand Submission of Return Issuance of Notice of Demand Assessment If further tax liability arises

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Obligations under Income Tax LawsFollowing are the tax compliance activities as per various sections the Income Tax Ordinance 1984: (1) Obligations as an assessee (taxpayer): (2) Obligations as a tax collector on behalf of tax authority: (3) Obligations as related persons. (1) Compliance as an assessee (taxpayer): - Collection of TIN (Tax-payers Identification Number) Certificate u/s 184B, 184A - Displaying of TIN Certificate u/s 184C - Advance income tax payment u/s 48, 64-73 - Preparation of tax return u/s 75 - Payment of tax as per tax return u/s 74 - Filing of tax return and statements in prescribed forms u/s 75 - Filing of revised return if any omission or incorrect statement in the previously filed return discovered before the assessment is made u/s 78 - Maintenance of accounts and documents: u/s 35 - Production of accounts and documents on receipts of a notice from the DCT: u/s 79 - Cooperation with income tax authority during inspection (u/s 114), survey (u/s 115), enquiry (u/s 116), search and seizure (u/s 117) and verification regarding deduction or collection of tax at source (u/s 117A) - Compliance with various notices: Notice of Demand u/s 135, Notice to file return u/s 77, Notice to produce accounts, statements and documents u/s 79, Notice to file statement of assets, liabilities and life style u/s 80 [normally applicable for individual assessee], Notice to attend hearing u/s 83(1) in case of assessment after hearing, Notice to inform re-assessment u/s 93(1), Notice to file statement of assets, liabilities and life style u/s 80 [normally applicable for individual assessee], Notice to file information u/s 113, Notice to the transferor, the transferee and the person in occupation of the immovable property to initiate the proceedings for acquisition of the immovable property u/s 32(4) and u/r 42 if the fair market value of the property exceeds the transferors declared value and others], and so on.4

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Compliance as a tax collector on behalf of tax authority: - Collection of Tax Collection Account number u/s 184BB - Tax deduction at sources (TDS), if applicable, and deposit thereof to the Treasury u/s 48-63 - Giving documents of TDS with necessary information u/s 58, and - Furnishing annual returns in case of payment of salary (u/s 108), interest (u/s 109) and dividend (u/s 110). (3) Compliance obligations of related persons of a business entity. - Appearance on behalf of the assessee at any income tax proceedings u/s 174, - Legal representative to be treated as deemed to be assessee in case of a deceased person u/s 92, - Liability in certain cases (as a representative of another person u/s 95, as an agent of a non-resident principal u/s 96, 102 and 103A), - Filing a return of the income of any other person for whom the company is assessable [u/s 75(1B)], - Joint liability in case of director of a private company (u/s 100), and - Joint liability in case of liquidator of a private company (u/s 101).

Enforcements/Consequences for Non-ComplianceIn case of non-compliance with any of the above issues, a person may face the following: different types of enforcements by the tax authority such as: inspection of register of companies u/s 114, survey u/s 115, enquiry and production of documents u/s 116, search and seizure u/s 117, verification of deduction or collection of tax u/s 117A, best judgment assessment u/s 84 and thereafter recovery of tax u/s 134-143, imposition of penalty u/s 123-133, prosecution u/s 134-171, disallowances of deductions u/s 30, disallowances of exemptions due to not having appropriate evidence of the income, imposition of penalty interest u/s 57 & 73, etc. litigations

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What Taxpayers can do?A taxpayer may seek appeals u/s 153-159, apply for revision u/s 120, and go for references u/s 160-162. But everything is costly and is subject to not only pecuniary costs, but also political and psychic costs.

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Formula to Calculate Income Tax Liability: = = = = = = Aggregate Income Exclusions Gross Income Allowable Deductions Taxable Income [Total Income as defined under ITO] Tax Rate Gross Tax Tax Credit on investment allowance Net Tax Tax Rebate & Tax Relief Tax PayableTax deducted at sources (TDS) & Advance income tax (AIT)

Tax Payable at the time of submitting return

Taxpayers/Assessee [section 2(7)]Taxpayers under the Income Tax Ordinance is referred to as assessee which is defined u/s 2(7) as follows: Assessee means a person by whom tax or any sum is payable under the Income Tax Ordinance 1984 and includes: (a) every person in respect of whom any proceedings has been taken for (i) assessment of his income, or (ii) for assessment of other persons income for which he is assessable, or (iii) refund due to him or such other person; (b) every person who is required to file a return u/s 75 (regular return), u/s 89 (return to be submitted for a discontinued business along with a notice of discontinuance within 15 days thereof), or u/s 91 (return to be submitted by a person leaving Bangladesh with no intention of returning) (c) every person desiring to be assessed and submits his return; and (d) every person deemed to be an assessee, or an assessee in default.

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Person [section 2(46)] Person includes: Individual Firm (partnership firm) Association of persons (AOP) Hindu undivided family (HUF) Local authority Company Every other artificial juridical person.

Tax-base Tax-base of income tax is the total income (taxable total income) as defined in section 2(65) of the Income Tax Ordinance 1984.Total income: section 2(65) Total income means Total amount of income referred to in section 17 [i.e., scope of total income of an assessee, where both domestic and foreign income shall be included in total income of a resident assessee, but only domestic income shall be included in total income of a nonresident assessee], computed in the manner laid down in the Income Tax Ordinance [section 43 deals with the provisions of computation of total income and covers provisions regarding: (i) allocation of partnership firms income among the partners, and (ii) extent of income of the spouse or minor child of an assessee or other prescribed related persons that is to be included in the total income of the assessee. and includes any income which, under any provision of the ITO, is to be included in the total income of the assessee.

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Tax period Income Year [section 2(35)] Income year is the year used to determine the tax-base of income tax (for separate source of income). Following are the provisions: Normally this is the financial year (1 July of one year to 30 June of next year). Income year may be any year (not exceeding 12 months) as opted by the assessee. For a newly set up business, this may less than 12 months for the first year of business. Income year may be prescribed for any person or a class of persons. For share of income from a partnership firm, firms income year is applicable. Assessment Year [section 2(9)] This is the financial year succeeding the income year.Income Year ended Financial Year in Assessment Year on which last date of Income Year Falls 30-06-2007 2006-2007 2007-2008 31-12-2007 2007-2008 2008-2009 13-04-2007 2006-2007 2007-2008 31-11-2007 2007-2008 2008-2009 26-04-2009 2008-2009 2009-2010 31-10-2009 2009-2010 2010-2011 30-06-2009 2008-2009 2009-2010 31-05-2010 2009-2010 2010-2011 30-06-2011 2010-2011 2011-2012

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Income Tax Rates:Tax Rate for Non-Corporate Taxpayers:Resident individual assessee, non-resident Bangladeshi, association of persons, firm and other artificial juridical persons: There are changes in income slabs, without any changes in layers of tax-rates in AY 2011-12, but tax rebate for high income group on enhanced tax (tax rebate @ 10% on tax payable for showing at least 10% higher income than last year for those who paid tax at 25% slab last year) has been withdrawn. However, wealth-based income tax surcharge on individual assessees has been introduced from AY 2011-12. Tax Rates for AY Type of Income 2010-11 2011-12 (1) Capital gain on transfer of securities or mutual fund of: - a partnership firm [u/s 2(32) [SRO No. 269-Ain/Aykar/2010, dated 1.7.2010] 10% 10% - a sponsor shareholder or director or placement-holder of a 5% 5% listed company [source tax u/s 53M and settled tax u/s 82C] - a sponsor shareholder or director of bank, financial institution, 5% 5% merchant bank, insurance company, leasing company, portfolio management company and stock dealer company [SRO No. 269Ain/Aykar/2010, dated 01.07.2010]

- other shareholder or director of a listed company having more 5% than 10% of share capital of a company at any time in income year [SRO No. 269-Ain/Aykar/2010, dated 01.07.2010] (2) Other capital gain 15% or Average Tax Rate (ATR) on total income (long-term) including capital gain, lower one (3) Income from lottery, As per Second Schedule, 20% or ATR on total income etc. u/s 19(13) including accidental income, lower one; but 20% TDS is applicable u/s 55, which is treated as settled tax (4) Other income Total Income-Slab 2010-11d 2011-12d On first Tk. 165,000a 180,000c Nil On next Tk. 275,000 300,000 10% On next Tk. 325,000 400,000 15% On next Tk. 375,000 300,000 20% On balance Tk. Balanceb Balance 25% Minimum tax (Tk.) 2,000a b

5% Same Same

Nil 10% 15% 20% 25% 2,000

c

d

Initial exemption limit for women taxpayers and taxpayers having age of 65 years or more is Taka 180,000. Initial exemption limit for retarded taxpayers is Taka 200,000 (GOB, 2009 & 2010). But 10% tax rebates on the additional tax paid by those individual taxpayers paying tax at the highest rate of 25% disclosing more than 10% higher income in preceding AY (GOB, 2009 & 2010). Initial exemption limit for women taxpayers and taxpayers having age of 65 years or more is Taka 200,000. Initial exemption limit for retarded taxpayers is Taka 250,000 (GOB, 2011a). For AYs 2009-10 and 2011-12, if an assessee is the owner of a small or cottage industry situated in Less Developed Area or Least Developed Area and engaged in producing cottage industry goods, he will obtain income tax rebate at 5% of payable income tax (if income years production is higher by more than 15% but not more than 25%) or 10% of payable income tax (if income years production is higher by more than 25%) [GOB, 2009, 2010 & 2011a].

Imposition of surcharge (Second Part of the Schedule-3 of the FA 2011; vide sec.57 of the FA 2011): Individual assessee having total net worth exceeding Tk. 2 (two) crore as shown in the statement of assets, liabilities and expenses (Form IT-10B) u/s 80 of the ITO (i.e., as on 30.06.2011 for AY 2011-12) has been made liable to pay surcharge @ 10% on income tax applicable..

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o Tax Rate for Corporate Taxpayers: A separate tax rate has been prescribed for a cigarette manufacturing company and minimum tax has been introduced for every company under section (u/s) 16CCC newly inserted by the FA 2011. Types of Company Any Company Type of Income (1) Capital gain arising out of - Transfer of securities of listed company[SRO No. 269-Ain/Aykar/2010, dated 1.7.2010]

2010-11

Tax Rates for AY 2011-12 10% 10% 10% 15% 42.5% 10% 15% 42.5%

- Transfer of stocks and shares of private limitedcompany[S.R.O. No. 220-Ain/Aykar/2004 dated 13.07.2004]

Bank*, insurance, financial institutions Mobile phone operator companies Cigarette manufacturing company Other company**

- Transfer of other capital assets (2) Dividend income Income other - Both for publicly traded and not publicly traded company than dividend income and capital gain - Company being converted into a publicly Income other traded through transfer of at least 10% shares than dividend through stock exchanges, of which maximum income and 5% may be through Pre-Initial Public Offering capital gain Income other than dividend income and capital gain Income other than dividend income and capital gainPlacement - For other company - Company being a publicly traded - For other company

35%

35%

45% 27.5% 37.5%

45% 35% 42.5%

- For publicly traded company *** i. Dividend declared by less than 10% or failure to pay declared dividend within SEC stipulated time (60 days as per SECs SRO No.385-Ain/91, dated 15.12.1991; 30 days from 9.2.2010 as per SEC Notification on same date)

37.5%

37.5%

ii. Other situationAll companies*

- For other company (including local authority)

27.5% 37.5%

27.5% 37.5%

**

***

Minimum tax (Tk.) u/s 16CCC 5,000 Under section (u/s) 16C (inserted by the FA 2002), a bank company, if shows, in the return, profit exceeding 50% of the aggregate sum of capital and reserve, shall pay tax @ 15% of such excess profit as additional tax. Under section 16B (inserted by the FA 2002), a listed company other than a banking or insurance company, if has not issued, declared or distributed dividend or bonus share equivalent to at least 15% of paid-up capital within six months immediately following any income year, shall pay tax @ 5% of undistributed profit (accumulated profit including free reserve) as additional tax. If a publicly traded company (other than a banking or insurance company or mobile phone operator company for AYs 2009-10 to 2011-12 and other than a cigarette manufacturing company for AY 2011-12) pays dividend at more than 20%, it will obtain income tax rebate at 10% on applicable income tax (GOB, 2009, 2010 & 2011a). Under section 16E, where a company raises its share capital through book building or public offering or rights offering or private placement or preference share or in any other way, at a value in excess of face value (FV), the company shall be charged, in addition to tax payable under this Ordinance, premium tax at the rate of 3% on the difference between the value at which the share is sold and its FV. Under section 53L, this premium tax shall be collected at source by the Securities & Exchange Commission (SEC) and this is a settled tax u/s 82C [vide sec. 49(1)(zu), 82C(2)(bb) and 82C(4)] (GOB, 2010). For AY 2010-11, the cigarette manufacturing company was under equivalent condition of dividend announcement and payment to get the reduced rate of 27.5% (applicable for other company) and also subject to 10% tax rebate for dividend payment at more than 20%.

Charge of minimum tax for corporate taxpayer (new section 16CCC): From AY 2011-12, under this section 16CCC, every company shall, irrespective of its profits or loss in an assessment year for any reason whatsoever, including the sustaining of a loss, the setting off of a loss of earlier year or years or the claiming of allowances or deductions

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(including depreciation) allowed under the ITO, be liable to pay minimum tax at the rate of zero point five zero (0.50%) percent of the amount representing such companys gross receipts from all sources for that year. Here, gross receipts means (a) all receipts derived from the sale of goods; (b) all fees or charges for rendering services or giving benefits including commissions or discounts; (c) all receipts derived from any heads of income. If there is no gross receipt, then the question of minimum tax will not arise. Previously the annual minimum tax was Tk.5,000. Withdrawal of tax exemption from Mutual Fund [para 30 of Part A, Sixth Schedule]: Any income of the mutual fund of the person issuing such mutual fund was exempted from payment of tax. This facility is withdrawn through deleting para 30. Withdrawal of the reduced tax rate of new industries [new SRO No. 225Ain/Aykar/2011, dated 04.7.2011]: Reduced tax rate was applicable for new industry established between 01.07.2009 to 30.06.2012 (SRO No. 172-Ain/Aykar/2009, dated 01.07.2009) and not enjoying tax holiday or accelerated depreciation. This SRO is withdrawn. The reduced rates were: 5-year reduced for industries in Dhaka and Chittagong Divisions except for Rangamati, Bandarban and Khagrachari hill districts (5% for first 2 years, 10% for next 2 years and 15% for next 1 year); and 6-year reduced for industries in Rajshahi, Khulna, Sylhet, Barisal Divisions and Rangamati, Bandarban and Khagrachari hill districts of Chittagong Divisions (5% for first 3 years and 10% for next 3 years). Extension of the reduced tax rate facility of 15% for another 2 years for both textile and jute industries [new SRO No. 221-Ain/Aykar/2011, dated 04.7.2011]: The reduced tax rate facility of 15% is extended for another two (2) years, i.e., up to 30/06/2013 for both textile and jute industries. Previously it was up to 30.06.2011 under SRO No. 207Ain/Aykar/2008, dated 30.6.2008. Tax Rebate on Corporate Social Responsibility (CSR) Expenditures: Ceiling Fixed and Expanded Activities [new SRO No. 229-Ain/Aykar/2011, dated 04.7.2011 u/s 44(4)(b)]: A corporate entity was given a tax rebate at the rate of 10% of CSR expenditures. There was no ceiling of CSR expenditure. Now the ceiling has been fixed at Tk. 8 crore or 20% of total income, whichever is lower. Moreover, area of CSR has been re-shuffled and 3 more donations are included in the list: (a) Donation to national level institution set up in memory of the liberation war; (b) Donation to national level institution set up in memory of Father of the Nation; and (c) Donation to Prime Ministers Higher Education Fund. However, five areas for CSR (allowed under SRO No. 270-Ain/Aykar/2010, dated 01.7.2010) have been withdrawn: (1) Donations to organizations engaged in clean water management; (2) Donations to organizations engaged in afforestation; (3) Donations to organizations engaged in beautification of cities; (4) Donations to organizations engaged in waste management; (5) Donations to organizations distributing freely at the level of use of birth-control products with a view to solving the population problem and to conduct camps for voluntary sterilization.

Increase in Presumptive Tax Rates for Taxpayers having income from Water vessel, Cargo/coaster or Dump barge: Only in following three situations, presumptive tax rates have been increased from last year. Annual tax rate for each of the transports (Taka) Up to 10 years from the registration date AY 2010-11 AY 2011-12 Tk.50 per passenger Tk.75 per passenger Tk.75 per ton goods Tk.100 per ton goods Tk.60 per ton goods Tk.75 per ton goods Increase over last year 50% 33% 25%

Types of Transport (i) Water vessel (ii) Cargo/coaster (iii) Dump barge

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Presumptive Tax Rates for Taxpayers having income from Transports:Types of Transport (a) Bus with more than 52 seats (b) Bus with 52 or less seats (c) Two-storey bus AC luxury bus (d) AC minibus/coaster (e) Other minibus/coaster (f) Prime mover used in container transport (g) Truck or tank-lorry having more than 5-ton capacity (h) Truck or tank-lorry having more than 1.5-ton but not more than 5-ton capacity (i) Truck or tank-lorry having 1.5-ton or less capacity (j) AC taxi cab (k) Non-AC taxi cab Annual tax rate for each of the transports (Taka) Up to 10 years from the 10 years exceeded from the registration date registration date AY 2009-10 AY 2010-11 AY 2009-10 AY 2010-11 7,000 7,000 3,500 3,500 5,000 5,000 2,500 2,500 10,000 10,000 5,000 5,000 10,000 20,000 5,000 10,000 5,000 10,000 3,000 6,000 4,000 4,000 2,000 2,000 7,000 7,000 4,000 4,000 5,000 3,000 1,000 3,500 2,500 5,000 3,000 1,000 7,000 2,500 3,000 1,500 500 1,500 1,000 3,000 1,500 500 3,000 1,000

Source : SRO No. 171-Ain/2009, dated 30.06.2009, published on 01.07.2009, amended by SRO No. 267-Ain/Aykar/2010, dated 1.7.2010. Increase in Income Tax on Notional Income due to ownership of Motor Car and Jeep, but not on Microbus: The advance income tax [not applicable for government, semigovernment, autonomous body and foreign embassies and diplomatic missions, public universities, and those not included in the definition of person under section 2(46)] imposed since AY 2009-10 on the owner of the vehicle has been increased further (25% to 178%) in 201112 except for microbus as follows: Types of Car (a) (b) (c) (d) (e) (f) Per motor car up to 1500 cc Per motor car up to 2000 cc Per motor car above 2000 cc Per jeep up to 2800 cc Per jeep above 2800 cc Per microbus Rate of income tax payable FY 2010-11 FY 2011-12 Taka 8,000 Taka 10,000 Taka 10,000 Taka 15,000 Taka 16,000 Taka 30,000 Taka 14,000 Taka 35,000 Taka 18,000 Taka 50,000 Taka 8,000 Taka 8,000 Increase over last year 25.00% 50.00% 87.50% 150.00% 177.78% No change

Special Tax Rate for Legalizing Undisclosed/Black Money: a. Special Tax Treatment for investment in the purchase of Bangladesh Government Treasury Bond (new section 19D): According to the provision of section 19D, Notwithstanding anything contained in any other provision of the ITO, no question as to the source of any sum invested by any person, being an individual, in the purchase of Bangladesh Government Treasury Bond shall be raised if such person pays, before the filing of return of income for that income year u/s 75(2), tax at the rate of 10% on such sum invested. Previous provision of legalizing undisclosed income by 10% tax on investment in the purchase of bond issued or caused to be issued under Bangladesh Infrastructure Finance Fund (BIFF) during the period between July 1, 2010 and June 30, 2012 u/s 19C is also still valid. b. Investment in the Stock Market (new SRO No. 237-Ain/Aykar/2011, dated 06.7.2011): It has been provided that anyone will be allowed to invest his/her undisclosed fund between 1.7.2011 and 30.6.2012 in stock market by paying 10 percent tax and no explanation will be sought for this investment. However, the invested money cannot be withdrawn or transferred within 30.6.2013. However, if any tax evasion is discovered and any proceeding for income

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escaped assessment has already been started within 30.6.2011, then this facility is not applicable. c. Investment in bond under BIFF (section 19C): Last years provision of legalizing undisclosed income by paying 10% tax on investment in the purchase of bond issued or caused to be issued under Bangladesh Infrastructure Finance Fund (BIFF) during the period between July 1, 2010 and June 30, 2012 u/s 19C is also still valid. d. Raising the amount of tax from 200% to 1,000% in case of legalizing the investment in bus, minibus, coaster, truck etc. without raising any question [amendment by SRO No. 223-Ain/Aykar/2011, 06.7.2011]: No question will be raised as to the source of purchase price if an assessee pays tax @ 1,000% of tax to be paid per year per bus, minibus, coaster, truck etc. (instead of 200% in the earlier year under SRO No. 171-Ain/Aykar/2009, dated 30.6.2009).

Tax Rate for Local Authority: There is no change in tax rates.Type of Income Tax Rates for AY2011-12

(1) Long-term capital gain (2) Dividend income (3) Other income

2010-11 15% or ATR on total income including capital gain, lower one

20% 37.5%

Same 20% 37.5%

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Taxpayers Status and Residence Taxpayers Personal Status Taxpayers personal status may be the following: Individual Company Firm Association of Persons Local Authority Hindu Undivided Family Artificial Juridical Person Taxpayers Residential Status Taxpayers residential status may be the following: Resident [section 2(55)]:Type of Assessee Individual Condition of being a Resident Period of stay in Bangladesh: At least 182 days in the concerned income year, or At least 90 days in the concerned income year, and at least 365 days in the preceding 4 income years. HUF (Hindu undivided Control and management of affairs family), Firm (partnership situated wholly or partly in firm), or AOP (association Bangladesh in the concerned income of persons) year. Company Control and management of affairs situated wholly in Bangladesh in the concerned income year.

Non-resident [section 2(42)]: Person who is not a resident.

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Implication of Residential Status: section 17 Type of Income Resident Non-Resident Domestic income Taxable Taxable Foreign income Taxable Not Taxable Provisions of section 17 are as follows: Included in Total Income Sl. Type of Income of an Assessee being Resident Non-Resident (i) Income received in Yes Yes Bangladesh (ii) Income deemed to be Yes Yes received in Bangladesh (iii) Income accrued or arisen Yes Yes in Bangladesh (iv) Income deemed to accrue Yes Yes or arise in Bangladesh (v) Income accrued or arisen Yes No outside Bangladesh Income u/s 2(34)"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 : 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 the Companies Act, 1994 (Act No. 18 of 1994) to its shareholders with a view to increase its paid-up share capital shall not be included as income of that shareholder.

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Income received in BangladeshSec. 19(7): Dividend to be treated as income in the year of receipt (from AY 2007-08) SRO No. 454-L/80, dated 31.12.1980: sub-clause (18) of clause (a) Exemption on such part of rental income from house property payable for a year but not paid by a tenant and so proved to be lost and irrecoverable.

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Income deemed to be received in BangladeshSec. 48(2): Sec. 102(3): Any sum deducted or collected at source or paid by way of advance payment, in accordance with the provisions of Chapter VII of the ITO [sec. 48-74]Amount paid or payable by the master of a ship [engaged in shipping business of non-residents], whether in or out of Bangladesh to the principal, or to any person on his behalf, on account of the carriage of passengers, livestock, mail or goods shipped at the port The aggregate of the receipts arising from the carriage of passengers, livestock, mail or goods loaded at the airport for air transport business of non-residents

Sec. 103A(1):

Paragraph 4, Part B, First Schedule:Annual accretion to the Recognized Provident Fund [Contribution by employee, Contribution by employer, Income out of investment of accumulated balance of the Fund]

Income deemed to Accrue or Arise in Bangladesh [sec. 18]Sec. 18(1): Sec. 18(2):(a) (b) (c) (d) (e) (f)

Salaries Income accruing or arising from different assets, business connection or right

Income from Business or Profession Income from House Property Agricultural Income Capital Gains Income from other assets [Interest on securities] Income from Other Sources

Sec. 18(3): Sec. 18(4): Sec. 18(5): Sec. 18(6):

Any dividend paid outside Bangladesh by a Bangladeshi Company. Any income by way of interest. Any income by way of Fees for Technical Service Any income by way of Royalty

Income from Other Sources Income from Other Sources Income from Other Sources

Income from Other Sources

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Sec. 18(1): Salaries Salaries, wherever paid, it shall be deemed to accrue or arise in Bangladesh, if: (a) it is earned in Bangladesh; or (b) it is paid by the Government or a local authority in Bangladesh to a citizen of Bangladesh in the service of such or authority. Sec. 18(2): Income accruing or arising, whether directly or indirectly, through or from: (a) any business connection in Bangladesh; (b) any property, asset, right or other source of income in Bangladesh; or (c)transfer of capital assets in Bangladesh. Provided that in the case of a business all the operations of which are not carried in Bangladesh, only such part of the income as is reasonably attributable to the operation carried out in Bangladesh shall be deemed to accrue or arise in Bangladesh. Sec. 18(3): Sec. 18(4): Any dividend paid outside Bangladesh by a Bangladeshi Company. Any income by way of interest.

Interest (other than Interest on Securities to be computed u/s 22 & 23)Under section 18(4), any income by way of interest shall be deemed to accrue or arise in Bangladesh, if its payable -(a) by the Government of Bangladesh; or (b) by a person who is a resident, except where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person outside Bangladesh or for the purpose of making or earning any income from any source outside Bangladesh; or (c) by a person who is a non-resident where the interest is in respect of any debt incurred, or moneys borrowed and used for the purposes of a business or profession carried on by such person in Bangladesh or for the purposes of making or earning any income from any source in Bangladesh.

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Sec. 18(5):

Any income by way of Fees for Technical Service

Under section 18(5), any income by way of fees for technical services shall be deemed to accrue or arise in Bangladesh, if it is payable-(a) by the Government of Bangladesh; or (b) by a person who is a resident, except where such fees are payable in respect of services utilised in a business or profession carried on by any such person outside Bangladesh or for the purposes of making or earning any income from any source outside Bangladesh ; or (c) by a person who is non-resident where such fees are payable in respect of services utilised in a business or profession carried on by such person in Bangladesh or for the purposes of making or earning any income from any source in Bangladesh.

Sec. 18(6):

Any income by way of Royalty

Under section 18(6), any income by way of royalty shall be deemed to accrue or arise in Bangladesh, if it is payable-(a) by the Government of Bangladesh; or (b) by a person who is a resident, except where the royalty is payable in respect of any right, property or information used or services utilized for the purposes of a business or profession carried on by such person outside Bangladesh or for the purposes of making or earning any income from any source outside Bangladesh; or (c) by a person who is a non-resident where the royalty is payable in respect of any right, property or information used or services utilized for the purposes of a business or profession carried on by such person in Bangladesh or for the purposes of making or earning any income from any source in Bangladesh.

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