- Facilities for foreign investors (As of 01 July, 2015):
Government of Bangladesh provides a lot of incentives for foreign investors. These are, in brief, as follows:
(1) Protection of foreign investment and its repatriation
Protection of foreign investment from expropriation by the state is fully ensured. Moreover, full repatriation of capital invested from foreign sources is allowed. Similarly, post-tax profits and dividend accruing to foreign investors are allowed to be transferred in full. Remittance of approved post-tax royalties, technical know-how and technical assistance fees is also allowed in full. Foreigners employed in Bangladesh are permitted to make monthly remittance to the country of their domicile out of their current savings up to 75% of their net income. Besides, they are entitled to remit their entire retirement benefits.
(2) Fiscal incentives
i. Avoidance of double taxation on the basis of bilateral agreements.
ii. Tax at reduced rate of 10% on capital gains of firms and companies from transfer of shares of public companies listed with stock exchanges. For sponsor shareholders and directors of banks, financial institutions, insurance companies, merchant banks, leasing companies, portfolio management companies, stock dealers or stock brokers the rate is 5%. For individuals such gains have been exempted from tax. Any capital gain from the transfer of stocks or shares of a publicly listed company made by a non-resident assessee is exempt from tax if such assessee is entitled to similar exemption in the country in which he is resident.
iii. Tax Holiday:
Tax Holiday for 5/10 years is available to defined sectors of industry set up in defined regions and for 10 years to defined physical infrastructure facilities at prescribed rates on fulfillment of certain conditions.
iv. Concessionary import of Capital Machinery
Concessionary import duty (1% in general) and exemption from VAT and Supplementary Duty are available in case of import of capital machinery subject to certain conditions.
v. Incentives to Private Sector Power Generation companies (other than coal-based electric generation companies) that will start commercial production by 31 December 2014, will continue to enjoy tax holiday for 15 years from the date of commercial production. However, such companies that will start commercial production on or after 01 January 2015 will enjoy tax holiday for 10 years-@100% for the first 5 years, @50% for the next 3 years and @25% for the remaining 2 years. The income of foreign personnel working in these companies is exempt for 3 years from the date of their arrival. The interest on foreign loan taken would be exempt. Royalties, Technical Know-How and Technical Assistance Fees paid by these companies would be exempt. The capital gain arising out of share transfer would be exempted. These companies would have to maintain regular books of accounts and file I. T. Returns on due time. Coal-based Private Power Generation companies that would enter into contract by 30 June 2020 for setting up electric plants and start commercial production by 30 June 2023 would enjoy tax holiday for 15 years and would enjoy such facilities as are enjoyed by non-coal based private power generation companies that would start commercial production by 31 December 2014 subject to fulfillment of the same conditions.
vi. Special incentives to Oil and Gas sectors
In respect of petroleum operation undertaken by a contractor entering into production sharing contract (PSC) with the Government, Government holds and keeps the contractor harmless from all present and future Bangladesh taxes except where specifically provided to the contrary.
vii. Facilities for export-oriented industries
Import of capital machineries and parts thereof is allowed on nominal duty of 1% besides the facilities of Bonded Warehouse, Back to Back Letter of Credit and Duty Draw Back in case of export-oriented industries.
viii. Additional facilities in the Export Processing Zones
There are several additional benefits for industries set up in the Export Processing Zones. If these are set up in Dhaka and Chittagong divisions (other than the three Hill Track districts) on or after 01 January 2012, these would enjoy tax holiday for 5 years, 1st two years @ 100%, and next two years @ 50% and the last year @ 25%. However, if these are set up in other divisions and the three Hill Tract districts, these would enjoy tax holiday for 7 years; 1st 3 years @ 100%, next 3 years @ years 50% and the last year @ 25%. Further facilities include duty-free import of machinery, equipment and raw materials, off-shore banking facilities, freedom from customs formalities, provision of electricity, water, gas and telecommunication connections.
- Tax Structure and Rates of Different Taxes (As of 01 July, 2015)
(1) Income Tax
Rate of tax on companies listed with stock exchange is 25% while for others the rate is 35% for the assessment year 2015-16. Tax rate of listed companies would, however, be 35% if they fail to declare at least 10% dividend or fail to distribute the declared dividend within the time specified by the Securities and Exchange Commission. For banks, financial institutions and insurance companies, the rate is 42.5% (for non-publicly traded) and 40% (for publicly traded) except merchant banks, the rate is 37.5%. For cigarette manufacturing it is 45%. For mobile phone operator companies the rate is 45%. If a mobile phone operator company is converted into a publicly traded company by transferring at least 10% of shares, of which Pre Initial Public Offer (IPO) Placement must not exceed 5%, through Stock Exchange, the rate of tax would be 40%. The rate of tax on inter-corporate dividend is 20%. Rate of tax on capital gain other than gain on trading of shares is 15% irrespective of the period of retention of the asset. Remittance of post-profit tax by branch companies is taxed @ 20% as dividend. As to individual tax, the first Taka 250,000 of total annual income of tax-payers is exempt. However, the first Taka-300,000 of the total income of the females and males aged 65 years or above is exempt while the first Taka 375,000 of the disabled is exempt where as the first taka-425,000 of total income of gazzeted war-wounded freedom fighter is exempt. The balance of the total income is taxed at five slab rates of 10, 15, 20, 25 and 30 percent, minimum tax payable being Taka 5,000 for assessees residing in Dhaka and Chittagong city corporation; Taka 4,000 for assessees residing in other city corporation; Tk. 3000 for those residing in Paura Sobhas of district towns and other areas. Non-resident individuals except non-resident Bangladeshis are taxed at the maximum rate of 30%. If capital gain arises to a person other than a company on disposal of a capital asset after five years of acquisition, tax would be payable at the rate of 15% of the capital gain or at the rate applicable to the total income including the capital gain whichever is lower. If, however, the capital gain arises on disposal of the asset within five years of acquisition, tax would be payable on the total income including the capital gain. If capital gain arises to a person other than a company on disposal of an asset after five years of acquisition, tax would be payable on the total income as reduced by the said income plus tax at the rate of 15% on the whole amount of the said income.
Principal Indirect Taxes are Customs Duty, VAT and Supplementary Duty.
(2) Customs Duty
Customs duty has now six tiers instead of earlier five tiers. On capital machinery and spares the rate is 1%, on basic raw materials it is 5%, on intermediate raw materials it is 10% and on finished products it is 25%. PSI system has been made optional.
VAT is payable on production and services @15% if the annual turnover is above Taka 80 lakh. On imports, VAT is payable at the same rate of 15% irrespective of the quantum. In respect of several services VAT is imposed at truncated rates as fixed by the National Board of Revenue. If annual turnover of production and services does not exceed Taka 80 lakh, Turnover Tax is payable at the rate of 3%. In specified cases, however, VAT is payable irrespective of turnover and in such cases VAT registration is mandatory.
(4) Supplementary Duty
This duty is imposed on the production and import of non-essential, luxury, harmful and socially undesirable goods. Except those exempted or rate of those otherwise specified, the common rate of Supplementary Duty is 20%. Considering however, the harmful effects on health and environment, the rates of a few goods are much higher varying from 0% to 500%.
(5) Withholding Tax and VAT
The system of withholding tax is there both for income tax and VAT at varying rates. Withholding income tax rates vary from 0.30% to 30% depending on the source of income, nature of business and residential status of the taxpayer. However, the rates may vary if the Tax Treaty between Bangladesh and the country concerned provides otherwise. Withholding VAT rates vary from 1.5% to 15% depending on the nature of services/supplies.
(6) Other taxes that may affect foreign investors
Stamp Duty On transfer of property - 3% of the value of consideration.
On transfer of shares of a company-1.5% on the value of consideration.
Board of Investment (E-mail: email@example.com and Web: www.boi.gov.bd) and Bangladesh Export Processing Zone Authority (E-mail: firstname.lastname@example.org and web: www.epzbangladesh.org.bd) are sponsoring agencies of the Government for foreign investment in Bangladesh. All foreign investors may contact these agencies to avail of all facilities and institutional support services as provided by the Government of Bangladesh.