You are on page 1of 32

ASSIGNMENT

on
Income Tax Authorities in Bangladesh 

Submitted to : Submitted by :
Shantanu Das (Leader) Eftekhar Anam Rasel
BBA, 29th Batch (MKT) BBA, 29th Batch (MKT)
ID: 200712883 ID: 200712029
Md. Shakhawat Hossain Selim
AUB, Dhanmondi Campus AUB, Dhanmondi Campus
Faculty, School of Business
Dhaka, Bangladesh. Dhaka, Bangladesh.
Course: Taxation [BBA-2603]
Sk. Saiful Islam Md. Zahangir Alam
AUB, Dhanmondi Campus
BBA, 29th Batch (MKT) BBA, 29th Batch (FIN)
Dhaka, Bangladesh.
ID: 200710522 ID: 200710521
AUB, Dhanmondi Campus AUB, Dhanmondi Campus
Dhaka, Bangladesh. Dhaka, Bangladesh.

Date of Submission: 12-August-2010.


This page is intentionally left blank...

National Board of Revenue (NBR), Bangladesh. Page 2 of 32


National Board of Revenue – NBR

Rajashwa Bhaban
Segunbagicha, Dhaka
Telephone: +88 02 933-3444.

http://www.nbr-bd.org

National Board of Revenue (NBR), Bangladesh. Page 3 of 32


Table of contents:

Serial Topic Page No.


I Cover Page....................................................................................... ……..........01
II Topic/Source of the ASSIGNMENT.................................................. ..................03
III Table of contents.............................................................................. ..................04
01 Letter of Transmittal.......................................................................... ..................05
02 Acknowledgement ……………………………………………………… ..................06
03 Background of NBR.......................................................................... ..................07
04 Taxation and its history..................................................................... ..................08
05 Tax Authorities of Bangladesh ……………………………................. ……………11
06 Types of Income ………………………………………………………... ……………13
07 Classification of Tax systems........................................................... ……………14
08 Types of Taxation............................................................................. ……………15
09 Methodology …………………………………..................................... ……………16
9.01 Sources of Income………………………………………………... ……………16
9.02 Tax Rate…………………………………………………………… ……………16
9.03 Tax Rebate for investment ………………………………………. ……………17
9.04 Who should submit Income Tax Return? ................................. ……………18
9.05 Time to submit Income Tax Return …………………………...... ……………18
9.06 Assessment Procedure ………………………………………….. ……………19
9.07 Tax withholding functions ……………………………………….. ……………19
9.08 Major areas for final settlement of tax liability …………………. ……………22
9.09 Fiscal incentives ………………………………………………….. ……………23
9.10 Avoidance of Double Taxation Agreement ……………………. ……………24
10 Steps for collecting Income Tax in Bangladesh................................ ……………25
11 Procedure of Assessment ……………………………………….......... ……………26
12 Problems for collecting Income Tax.................................................. ……………27
13 Conclusion........................................................................................ ……………31

National Board of Revenue (NBR), Bangladesh. Page 4 of 32


Letter of Transmittal

August 12, 2010

To

Md. Shakhawat Hossain Selim


Faculty, School of Business
Asian University of Bangladesh
Dhanmondi Campus, Dhaka.

Subject: Submission of Assignment on “Income Tax Authorities in Bangladesh”.

Dear Sir

We are pleased to submit this Assignment-report on “Income Tax Authorities in


Bangladesh” for particular fulfillment of BBA Degree. This research program was
taken by the help of “Three tax system of Bangladesh”, written by M.A. Akkas, and
“Income Tax” written by “Mr. Mahmud” and “Purohit Bhattacharjee”. Here is the
report on the observational study of “Income Tax authority in Bangladesh” you asked
us to conduct last month.

We honestly believe that this report will fulfill the requirements of the project report
for BBA, which will help us a lot to gain sufficient knowledge about the “Income Tax
authority in Bangladesh”

We appreciate having this assignment. If you need any assistance in interpreting this
report or in implementing our recommendations, please feel free to contact us:
shantanudas@live.com, Contact No.: +8801717012777.

Sincerely on behalf of my Group,

Shantanu Das (Leader)


ID: 200712883
BBA, 29th Batch (Marketing)
Asian University of Bangladesh,
Dhanmondi Campus, Dhaka.

National Board of Revenue (NBR), Bangladesh. Page 5 of 32


Acknowledgement
We are very much grateful to the God first, who has given us all the abilities to
perform this chore. Next, we would like to thank our respected Teacher Md.
Shakhawat Hossain Selim, Faculty of Business at AUB Dhanmondi Campus who
gave us the chance to submit this Assignment Report & Presentation and also co-
operated us with all kinds of rational suggestions, rehearsal and guidance.

We also like to express our gratitude to the honorable Campus Coordinator of AUB
Dhanmondi Campus, Professor (Adv.) Abul Kalam Azad- without whose
inspiration and company, this mission was not able to be accomplished.

At last but not the least, we are grateful to our ever-respected parents those who
always give us mental support and well wishes.

National Board of Revenue (NBR), Bangladesh. Page 6 of 32


Background of NBR
The National Board of Revenue (NBR) is the central authority for tax administration
in Bangladesh. It was established by President's Order No. 76 of 1972.
Administratively, it is under the Internal Resources Division (IRD) of the Ministry of
Finance (MoF). MoF has 3 Divisions, headed by 3 permanent Secretaries to the
Government, namely, the Finance Division the Internal Resources Division (IRD) and
the Economic Relations Division (ERD). The Secretary, IRD is the ex-officio Chairman
of NBR. NBR is responsible for formulation and continuous re-appraisal of tax-policies
and tax-laws, negotiating tax treaties with foreign governments and participating in
inter-ministerial deliberations on economic issues having a bearing on fiscal policies
and tax administration.

The main responsibility of NBR is to collect domestic revenue (primarily, Import


Duties and Taxes, VAT and Income Tax) for the government. Other responsibilities
include administration of all matters related to taxes, duties and other tax producing
fees. Under the overall control of IRD, NBR administers the Excise, VAT, Customs
and Income-Tax services consisting of 3434 officers of various grades and 10195
supporting staff positions (Approved set up as on 09 Feb., 2000 AD).

Negotiating tax treaties with foreign governments and participating in inter-


ministerial deliberations on economic issues having a bearing on fiscal policies and
tax administration are also NBR's responsibilities. The main responsibility of NBR is
to mobilize domestic resources through collection of import duties and taxes, VAT
and income tax for the government. Side by side with collection of taxes, facilitation
of international trade through quick clearance of import and export cargoes has also
emerged as a key role of NBR. Other responsibilities include administration of
matters related to taxes, duties and other revenue related fees/charges and
prevention of smuggling. Under the overall control of IRD, NBR administers the
excise, VAT, customs and income-tax services consisting of 3434 officers of various
grades and 10195 supporting staff positions.

National Board of Revenue (NBR), Bangladesh. Page 7 of 32


Taxation and its history
Taxation- one of the major sources of public revenue to meet a country's revenue
and development expenditures with a view to accomplishing some economic and
social objectives, such as redistribution of income, price stabilization and
discouraging harmful consumption. It supplements other sources of public finance
such as issuance of currency notes and coins, charging for public goods and services
and borrowings. The term “Tax” has been derived from the French word “Taxe” and
etymologically, the Latin word “Taxare” is related to the term 'tax', which means 'to
charge'. Tax is 'a contribution exacted by the state'. It is a non-penal but compulsory
and unrequited transfer of resources from the private to the public sector, levied
based on predetermined criteria.

According to Article 152(1) of the Constitution of Bangladesh, taxation includes the


imposition of any tax, rate, duty or impost, whether general, local or special, and tax
shall be construed accordingly. Rate is a local tax imposed by local government on
its residents or the property owners of the locality, a duty is a tax levied on a
commodity, and an impost is a tax imposed for an entry into a country. Under the
provision of article 83 of the Constitution, "no tax shall be levied or collected except
by or under the authority of an Act of Parliament".

Bangladesh inherited a system of taxation from its past British and Pakistani rulers.
The system, however, developed based on generally accepted canons and there had
been efforts towards rationalizing the tax administration for optimizing revenue
collection, reducing tax evasion and preventing revenue leakage through system
loss. Taxes include narcotics duty (collected by the Department of Narcotics Control,
Ministry of Home Affairs), land revenue (administered by the Ministry of Land and
collected at local Tahsil offices numbered on average, one in every two Union
Parishads), non-judicial stamp (collected under the Ministry of Finance), registration
fee (collected by the Registration Directorate of the Ministry of Law, Justice and
Parliamentary Affairs) and motor vehicle tax (collected under the Ministry of
Communication).

National Board of Revenue (NBR), Bangladesh. Page 8 of 32


The tax structure in the country consists of both direct (income tax, gift tax, land
development tax, non-judicial stamp, registration, immovable property tax, etc) and
indirect (customs duty, excise duty, motor vehicle tax, narcotics and liquor duty,
VAT, SD, foreign travel tax, TT, electricity duty, advertisement tax, etc) taxes.
The present land revenue system of Bangladesh has its base in the East Bengal state
acquisition and tenancy act 1950 which established a direct contract between the
taxpayer and the government.

The most important tax on the value of transferred property is the non-judicial
stamp tax (levied under the Stamp Act 1899), which has been in existence since
January 1899. Current rates of non-judicial stamp duty are provided in the First
Schedule of the Finance Act 1998, ranging from Tk. 4 to Tk. 10,000 in case of
absolute rate, or from 0.07% to 1.5% of the value of consideration in case of ad
valorem rate. The judicial stamp tax is being levied under the Court Fees Act 1870,
although the levy of court fees originated in the introduction of the Bengal Regulation
No. 38 of 1795.

The first sales tax was introduced in the former Central Provinces of India in 1938. In
Bengal, sales tax was adopted in 1941. In 1948, sales tax was transferred as a
central tax under the General Sales Tax Act of 1948. The Sales Tax Act 1951 came
into force on 1 July 1951 by repealing the Pakistan General Sales Tax Act of 1948.
Until 1982, sales tax was being collected under the 1951 Act, which was replaced by
the Sales Tax Ordinance 1982. The VAT law was promulgated by repealing the
Business.

Income tax was first introduced in the subcontinent by the British in 1860 to make
up the revenue deficit caused by the sepoy revolt, 1857. After independence of
Bangladesh, income tax was made effective under the Income Tax Act 1922 passed
on the basis of the recommendations of the All-India Income Tax Committee
appointed in 1921. Currently, income tax has been imposed under the Income Tax
Ordinance 1984 (ITO) promulgated on the basis of recommendations of the Final
Report of the Taxation Enquiry Commission submitted in April 1979. Income
taxpayers (assesses) are classified as individuals, partnership firms, Hindu undivided

National Board of Revenue (NBR), Bangladesh. Page 9 of 32


families (HUF), associations of persons (AOP), companies (publicly traded and
private), local authorities, and other artificial juridical persons. Tax rates and scope
of taxable income differ based on residential status of an assesses (resident or non-
resident).

From fiscal or assessment year, (AY) 2000-01, there is a filing threshold of annual
total income of Tk. 100,000 applicable for individuals (including non-resident
Bangladeshis), partnership firms, HUF, AOP and assesses other than companies and
local authorities. In case an identity of this group has a total annual income less than
this level, he is not required to submit tax return but if someone's income is higher,
he is to pay a minimum tax of Tk. 1,000.

Bangladesh inherited a system of taxation from its past British and Pakistani rulers.

National Board of Revenue (NBR), Bangladesh. Page 10 of 32


Tax Authorities of Bangladesh
 There are 3-divisions under the Ministry of Finance (MOF) and Secretary leads
each division.

 The Chairman of NBR (National Board of Revenue) is working under Internal


Resource Division (IRD).

 NBR is the apex body of the Tax Administration.

It consists of two parts:


(1) Customs & VAT
(2) Income Tax.
Both are under the same authority. There are 4-members under NBR.

 Under the NBR, a Commissioner of Taxes is the head of the department and
he is in charge of a taxes Zone. There are 8-Zones in Bangladesh.

National Board of Revenue (NBR), Bangladesh. Page 11 of 32


National Board of Revenue (NBR), Bangladesh. Page 12 of 32
Types of Income

Income

Assessable Income Non-Assessable


Income

Taxable Income
Non-taxable Income

Income: Income means anything received in cash or in kind unless exempted by


laws.
1) Assessable Income: Assessable Incomes are those incomes, which are
included in the determination of total income of a taxpayer.
a) Taxable Income: Taxable Incomes are those incomes that the tax is
to be paid on those incomes.
b) Non- Taxable Income: Non – taxable income is taken into total
income for taxation rate purpose but no tax is to be paid on this part
of income.
2) Non- Assessable Income: Non- assessable incomes are those incomes
which are not included in the determination of total income of a taxpayer.

National Board of Revenue (NBR), Bangladesh. Page 13 of 32


Classification of Tax systems

Classification of Tax
System

Single Tax Multiple Taxes

1. Single Tax: Only one tax for everybody. Single tax is the poll tax or the head
tax or adolescent tax, which is imposed on a person simply because he is
there in the society.

2. Multiple Taxes: A system under which different types of taxes shall be


levied by the govt. according to suitability. Ex. Income Tax, VAT.

National Board of Revenue (NBR), Bangladesh. Page 14 of 32


Types of Taxation

Types of Taxation

a) Progressive Tax
a) Direct Tax b) Regressive Tax
b) Indirect Tax c) Proportional Tax

a) Direct Tax: Direct tax is a sort of tax the impact of effect incidents and which fall
back on the person on whom it is imposed. i.e.: Income Tax, Marriage Tax etc.

b) Indirect Tax: Indirect taxes are those burden of which can be passed on others
through price vehicles.

c) Progressive Tax: The tax rate increases as the taxable income/amount


increases.

d) Regressive tax: The opposite of a progressive tax is a regressive tax where the
tax rate decreases as the taxable income/amount increases.

e) Proportional Tax: In between is a proportional tax, where tax is fixed as the


amount to which the rate is applied increases.

National Board of Revenue (NBR), Bangladesh. Page 15 of 32


Methodology
Among direct taxes, income tax is one of the main sources of revenue. It is a
progressive tax system. Income tax is imposed on the basis of ability to pay. The
more a taxpayer earns the more he should pay''- is the basic principle of charging
income tax. It aims at ensuring equity and social justice.

Sources of Income:

For the purpose of computation of total income and charging tax thereon, sources of
income can be classified into 7 categories, which are as follows:

 Salaries
 Interest on securities
 Income from house property
 Income from agriculture
 Income from business or profession
 Capital gains
 Income from other sources.

Tax Rate (Assessment Year- 2008-09):

Other than Company:

For individuals other than female taxpayers, senior taxpayers of 70 years and above
and retarded taxpayers, tax payable for the

First 1,65,000/- Nil


Next 2,75,000/- 10%
Next 3,25,000/- 15%
Next 3,75,000/- 20%
Rest Amount 25%

For female taxpayers, senior taxpayers of age 70 years and above and retarded
taxpayers, tax payable for the

First 1,80,000/- Nil


Next 2,75,000/- 10%
Next 3,25,000/- 15%

National Board of Revenue (NBR), Bangladesh. Page 16 of 32


Next 3,75,000/- 20%
Rest Amount 25%

Minimum tax for any individual assesses is Tk. 2,000

Non-resident Individual 25%


(other than non-resident Bangladeshi)

For Companies

Publicly Traded Company 27.5%

Non-publicly Traded Company 37.5%

Bank, Insurance & Financial Company 45%

Mobile Phone Operator Company 45%

If any publicly traded company declares more than 20% dividend, 10% rebate on
total tax is allowed.

Tax Rebate for investment:

Rate of Rebate:

Amount of allowable investment is either up to 25% of total income or Tk.


5,00,000/- whichever is less. Tax rebate amounts to 10% of allowable investment.

Types of investment qualified for the tax rebate are:

 Life insurance premium


 Contribution to deferred annuity
 Contribution to Provident Fund to which Provident Fund Act, 1925 applies
 Self contribution and employer's contribution to Recognized Provident Fund
 Contribution to Super Annuation Fund
 Investment in approved debenture or debenture stock, Stocks or Shares
 Contribution to deposit pension scheme
 Contribution to Benevolent Fund and Group Insurance premium
 Contribution to Zakat Fund
 Donation to charitable hospital approved by National Board of Revenue
 Donation to philanthropic or educational institution approved by the
Government
 Donation to socioeconomic or cultural development institution established in
Bangladesh by Aga Khan Development Network

National Board of Revenue (NBR), Bangladesh. Page 17 of 32


Who should submit Income Tax Return?

 If total income of any individual other than female taxpayers, senior


taxpayers of 70 years and above and retarded taxpayers during the income
year exceeds Tk 1,65,000/-.
 If total income of any female taxpayer, senior taxpayer of 70 years and above
and retarded taxpayer during the income year exceeds Tk 1,80,000/-.
 If any person was assessed for tax during any of the 3 years immediately
preceding the income year.
 A person who lives in any city corporation/paurashava/divisional HQ/district
HQ and owns a building of more than one storey and having plinth
area exceeding 1,600 sq. feet/owns motor car/owns membership of a club
registered under VAT Law.
 If any person subscribes a telephone.
 If any person runs a business or profession having trade license.
 Any professional registered as doctor, lawyer, income tax practitioner,
Chartered Accountant, Cost & Management Accountant, Engineer, Architect
and Surveyor etc.
 Member of a Chamber of Commerce and Industries or a trade Association.
 Any person who participates in a tender.
 A person who has a Taxpayer's Identification Number (TIN).
 Candidate for Union Parishad, Paurashava, City Corporation or Parliament.

Time to Submit Income Tax Return:

For Company
By fifteenth day of July next following the income year or, where the fifteenth day of
July falls before the expiry of six months from the end of the income year, before the
expiry of such six months.

For Other than Company


Unless the date is extended, by the Thirtieth day of September next following the
income year.

Consequences of Non-Submission of Return

 imposition of penalty amounting to 10% of tax on last assessed income


subject to a minimum of Tk. 1,000/-
 In case of a continuing default a further penalty of Tk. 50/- for every day of
delay.

National Board of Revenue (NBR), Bangladesh. Page 18 of 32


Assessment Procedures:

 For a return submitted under normal scheme, assessment is made after


hearing.
 For returns submitted under Universal Self Assessment Scheme, the
acknowledgement slip is determined to be an assessment order. Universal
Self Assessment is of course subject to audit.

Appeal against the order of DCT:


A taxpayer can file an appeal against DCT's order to the Commissioner
(Appeals)/Additional or Joint Commissioner of Taxes (Appeals) and to the Taxes
Appellate Tribunal against an Appeal order.

Tax withholding functions:

In Bangladesh withholding taxes are usually termed as Tax deduction and collected
at source. Under this system both private and public limited companies or any other
organization specified by law are legally authorized and bound to withhold taxes at
some point of making payment and deposit the same to the Government Exchequer.
The taxpayer receives a certificate from the withholding authority and gets credits of
tax against assessed tax on the basis of such certificate.

Heads of Income Subject to deduction or collection of income tax at source with


specified rates of deduction.

No. Heads Section/Rule Rate Chalan in


the name
of
1 Salaries Respective
Section 50 deduction at average rate
Zone
2 Discount on the real deduction at normal rate or LTU
value of Bangladesh Section 50A maximum rate whichever is
Bank Bills greater.
3 Interest on securities Section 51 10%on interest or discount LTU
4 Supply of goods and nil up to 1 lac, 1-5 lacs Zone-2
execution of contracts Section (1%), 5-15 lacs (2.5%), 15- (Partly) &
and sub-contracts 52(Rule 16) 25 lacs 3.5% and 25 lacs LTU
and above (4%)

National Board of Revenue (NBR), Bangladesh. Page 19 of 32


5 Indenting commission / 3.5% of the total receipt of Zone-2
Shipping agency Section 52 indenting commission & 5%
commission (Rule 17) of total Shipping agency
commission receipt
6 Royalty, Fees for Zone-8
professional or technical Section 52 A 10% of the fees
services
7 Stevedoring agency & Section 52 Ctg. Zone-
7.5% of the fees
Security service AA 2
8 C & F agency Section 52 Zone-2
7.5% of the fees
commission AAA
9 Sale of bandrolls ( for Respective
Section 52B 6% of the value of bandrolls.
biri) Zone
10 Compensation for 6% of the compensation Zone-2
Section 52C
acquisition of property money
11 Interest on saving 10% of the amount of Zone-2
Section 52D
instruments interest (Current rate)
12 Collection of tax from 1 Sec. = Tk.10,000/ for each Respective
brick manufacturers brick field. Zone
1.5 Sec. = Tk.12,000/ for
Section 52F
each brick field.
2 Sec. = Tk.18,000/ for each
brick field.
13 Commission on Letter of 5% of the amount of LTU
Section 52I
Credits commission.
14 Issuing & Renewal of Tk 500/- For renewal of each Zone-3
Section 52K
trade licence Lincence
15 Trustee fees Section 52L 10%
16 Frieght Forward agency
Section 52M 7.5%
Com.
17 Rental power Section 52N 4%
18 Import of goods Section 53 Zone-2
3% of the value of imports.
(Rule17A)
19 Income from house No deduction if monthly rent Zone-2
property (house rent) is below 20,000/- Dha &
Section 53A 3% (if monthly rent is Other
(Rule17B) 20,000-40,000 Tk.) and outside
5% (if monthly rent is above Zone
40,000 Tk.)
20 Shipping business of Zone-2,ctg
Section 53AA 5% of freight
resident
21 Export of manpower Section 53B Zone-2,
10% of the service charges.
(Rule 17C) dhk & ctg
22 Export of Knitwear Section 53BB 0.25% Zone-5
23 Member of Stock Section Zone-7
0.015%
Exchange 53BBB
24 Export of goods except Section 0.25% Zone-5

National Board of Revenue (NBR), Bangladesh. Page 20 of 32


Knitweare & Woven 53BBBB
garments
25 Sale of goods by public Section 53C Zone-2
5% of the sale price
auction (Rule 17D)
26 Courier Service (Non- Zone-6
Section 53CC 7.5%
resident)
27 Payment to film actors 5% of the amount paid Zone-2
Section 53D
and actresses exceeding
(Rule 17E)
Tk. 36000/-
28 Cash subsidy Section 53DD 5% Zone-5
29 Commission Fees or Zone-2 &
Section 53E 7.5% of the amount of
discount paid to LTU
(Rule 17G) commission.
distributors
30 Commission or charges Dhk.Zone-
paid to the agents of 6,
foreign buyers Ctg.Zone-3
4 % on the amount of
Section 53EE and Zone
commission or charges.
of
Respective
Division
31 Interest on bank Section 53F 10% of the amount of Zone-1
deposits (Rule 17H) interest.
32 Real Estate & In case of Bldg. 250 per sq. Zone-5
Developers meter
Section 53FF
In case of land 5% of deed
value
33 Insurance commission 3% on the amount of LTU
Section 53G
commission
34 Commission paid to the Dhk.Zone-
Surveyors of General 2,
Insurances Ctg.Zone-3
7.5% on the amount of
Section 53GG and Zone
commission.
of
Respective
Division
35 Transfer of property Section 53H 5% of the value of the Survey
(Rule 17I) property. Zone
Interest on Post Office No deduction if the amount Zone-2
Savings Bank Account of interest does not
Section 53I exceeds Tk.1,50,000 and if
exceeds then 10% on the
amount of interest .
36 Rent of vacant land, No deduction if monthly rent Zone-2
plant and machinery is below 15,000/-
Section 53J 3% (if monthly rent is
(Rule 17BB) 15,000 -30,000 Tk.) and
5% (if monthly rent is above
30,000 Tk.)

National Board of Revenue (NBR), Bangladesh. Page 21 of 32


37 Advertising bill of news Zone-5
paper, magazine, 3% of the value of the
Section 53K
private television property.
channel
38 Dividend LTU (only
(1) Resident individual 10%,
LTU’s files)
Section 54 non-resident individual 25%
all others
(2) Company 15%
Zone-2
39 Income from lottery Section 55 20% of the amount won. Zone-2
40 Income of non-resident Company - rate applicable to Zone-6
Other than non- Section 56 the com. Other than
resident Bangladeshi} company - maximum rate.

Major areas for final settlement of tax liability:


Tax deducted at source for the following cases is treated as final discharge of tax
liabilities. No additional tax is charged or refund is allowed in the following cases:-

 Supply or contract work


 Band rolls of hand made cigarettes
 Import of goods
 Transfer of properties
 Export of manpower
 Real Estate Business
 Export value of garments
 Local shipping business
 Royalty, technical know-how fee
 Insurance agent commission.
 Auction purchase
 Payment on account of survey by surveyor of a general insurance company
 Clearing & forwarding agency commission.
 Transaction by a member of a Stock Exchange.
 Courier business
 Export cash subsidy

Tax Recovery System:


In case of non-payment of income tax demand the following measures can be taken
against a taxpayer for realization of tax:-

 Imposition of penalty
 Attachment of bank accounts, salary or any other payment.
 Filing of Certificate case to the Special Magistrate.

National Board of Revenue (NBR), Bangladesh. Page 22 of 32


Advance Payment of Tax:
Every taxpayer is required to pay advance tax in four equal installments falling on
15th September; 15th December; 15th March and 15th June of each year if the
latest assessed income exceeds Taka three lakh. Penalty is imposed for default in
payment of any installment of advance tax.

Fiscal incentives :

Following are fiscal incentives available to a taxpayer:

a) Tax holiday: Tax holiday is allowed for industrial undertaking, tourist


industry and physical infrastructure facility established between 1st July 2008 to
30th June 2011 in fulfillment of certain conditions.

Industrial Undertaking Eligible for Tax holiday:


(i) An industry engaged in production of textile, textile machinery, jute
goods, high value garments, pharmaceuticals, melamine, plastic products, ceramics,
sanitary ware, steel from iron ore, MS Rod, CI Sheet, fertilizer, insecticide &
pesticide, computer hardware, petro-chemicals, agriculture machinery, boilers,
compressors, basic raw materials of drugs, chemicals and pharmaceuticals.
(ii) An industry engaged in agro-processing, ship building, diamond
cutting.

Physical Infrastructure Eligible for Tax holiday:


Sea or river port, container terminals, internal container depot, container
freight station, LNG terminal and transmission line, CNG terminal and transmission
line, gas pipe line, flyover, mono rail, underground rail, telecommunication other
than mobile phone, large water treatment plant & supply through pipe line, waste
treatment plant, solar energy plant, export processing zone.

Tourism Industry Eligible for Tax holiday:


Residential hotel having facility of three star or more.

b) Accelerated depreciation: Accelerated depreciation on cost of


machinery is admissible for new industrial undertaking in the first year of commercial
production 50%, in the second year 30% and in the third year 20%.
c) Income derived from any Small and Medium Enterprise (SME) engaged in
production of any goods and having an annual turnover of not more than taka
twenty four lakh is exempt from tax.
d) Industry set up in EPZ is exempt from tax for a period of 10 years from the
date of commencement of commercial production.
e) Income from fishery, poultry, cattle breeding, dairy farming, horticulture,
floriculture, mushroom cultivation and sericulture are exempt from tax up to 30th
June, 2011, subject to investing at least 10% of the exempted income that exceeds
one lakh Taka, in government bonds.

National Board of Revenue (NBR), Bangladesh. Page 23 of 32


f) Income derived from export of handicrafts is exempted from tax up to 30th
June, 2011.
g) An amount equal to 50% of the income derived from export business is
exempted from tax.
h) Listed companies are entitled to 10% tax rebate if they declare dividend of
20% or more.
i) Income from Information Technology Enabled Services (ITES) business is
exempted up to 30th June, 2011.

Avoidance of Double Taxation Agreement:

There are agreements on avoidance of double taxation between Bangladesh and 28


countries which are:-

(01) United Kingdom of Great Britain and Northern Ireland


(02) Singapore
(03) Sweden
(04) Republic of Korea
(05) Canada
(06) Pakistan
(07) Romania
(08) Sri Lanka
(09) France
(10) Malaysia
(11) Japan
(12) India
(13) Germany
(14) The Netherlands
(15) Italy
(16) Denmark
(17) China
(18) Belgium
(19) Thailand
(20) Poland
(21) Philippines
(22) Vietnam
(23) Turkey
(24) Norway
(25) USA
(26) Indonesia
(27) Switzerland
(28) Oman.

National Board of Revenue (NBR), Bangladesh. Page 24 of 32


Steps for collecting Income
Tax in Bangladesh
Submission of income tax returns is generally due by:
► 30th September in case of non-companies and
► 31st December in case of companies.

Assessment is made in several procedures. They are:


 Self assessment
 Presumptive assessment
 Spot assessment
 Pre-audit based assessment.

However, certain percent of self assessment cases are selected for audit.

Assesses can prefer appeal if aggrieved by his assessment. There are three primary
forums for appeal. They are to the Appellate Commissioner/Additional
Commissioner/Joint Commissioner or to the Commission for reviews. The decisions
of Appellate Commissioner/Additional Commissioner/Joint Commissioner can be
challenged to the next Appellate Court named as Appellate Tribunal.

Withholding tax is levy able on a number of items including contractors, imports,


transfer of urban land/building, bank deposits etc.

National Board of Revenue (NBR), Bangladesh. Page 25 of 32


Procedure of Assessment
Generally the followings steps are followed in case of Assessment of the Company
and the Corporation:

Computation of Business Income


Step-1

Computation of Total Income


Step-2

Determination of Total Tax Liabilities


Step-3

Determination of Net Tax Liabilities


Step-4

According to Sections 28, 29 and 30 of ITO, 1984 Income from business is to be


calculated after considering admissible and inadmissible expenses to this end.

Total Income of the Company is to be calculated by adding other income with income
from business.

Total Tax liabilities are to be determining by applying prescribed tax rate.

Net Tax liability is to be ascertained by deducting the following tax rebate from Total
Tax liabilities:

►10% Tax rebate on foreign income


►Tax rebate on increased production in case of industrial company, if applicable.
►Tax rebate on export income (at rate applicable)
►Tax rebate and average rate on tax free income.

National Board of Revenue (NBR), Bangladesh. Page 26 of 32


Problems for collecting
Income Tax
Tax avoidance is one of the main problems for collecting Income Tax by the Income
Tax Authority in Bangladesh. It is the legal utilization of the tax regime to one's own
advantage, in order to reduce the amount of tax that is payable by means that are
within the law. By contrast tax evasion is the general term for efforts to not pay
taxes by illegal means. The term tax mitigation is a synonym for tax avoidance. Its
original use was by tax advisors as an alternative to the pejorative term of tax
avoidance. Latterly the term has also been used in the tax regulations of some
jurisdictions to distinguish tax avoidance foreseen by the lawmakers from tax
avoidance which exploits loopholes in the law.

Based on these concepts arises the pillars of Tax Protesters as well as Tax
Resistance:
Some of those attempting not to pay tax believe that they have uncovered
interpretations of the law that show that they are not subject to being taxed: these
individuals and groups are sometimes called tax protesters. An unsuccessful tax
protestor has been attempting openly to evade tax, while a successful one avoids
tax. Tax resistance is the declared refusal to pay a tax for conscientious reasons
(because the resister does not want to support the government or some of its
activities). Tax resistors typically do not take the position that the tax laws are
themselves illegal or do not apply to them (as tax protesters do) and they are more
concerned with not paying for particular government policies that they oppose.

National Board of Revenue (NBR), Bangladesh. Page 27 of 32


Responses to tax avoidance:
Avoidance also reduces government revenue and brings the tax system into
disrepute, so governments need to prevent tax avoidance or keep it within limits.
The obvious way to do this is to frame tax rules so that there is no scope for
avoidance. In practice, this has not proved achievable and has led to an ongoing
battle between governments amending legislation and tax advisors' finding new
scope for tax avoidance in the amended rules.

Tax evasion:
By contrast, tax evasion is the general term for efforts by individuals, firms, trusts
and other entities to evade taxes by illegal means. Tax evasion usually entails
taxpayers deliberately misrepresenting or concealing the true state of their affairs to
the tax authorities to reduce their tax liability, and includes, in particular, dishonest
tax reporting (such as declaring less income, profits or gains than actually earned; or
overstating deductions).

Illegal income and tax evasion:


Who earn income by illegal means (gambling, theft, drug trafficking etc.) is required
to report unlawful gains as income when filing annual tax returns. Suspected
lawbreakers have therefore been charged with tax evasion when there is insufficient
evidence to try them for their non-tax related crimes. Other times, tax evasion can
be used as a "one more nail in the coffin" by prosecutors by stating that if a person
earns illegal income, s/he may also be guilty of tax evasion. Those who attempt to
report illegal income as coming from a legitimate source could be charged with
money laundering.

National Board of Revenue (NBR), Bangladesh. Page 28 of 32


Evasion of Value Added Tax (VAT):
During the latter half of the twentieth century, Value Added Tax (VAT) has emerged
as a modern form of consumption tax through the world. Producers who collect VAT
from the consumers may evade tax by under-reporting the amount of sales.

Control of evasion:
Level of evasion depends on a number of factors one of them being fiscal equation.
People's tendency to evade income tax declines when the return for due payment of
taxes is not obvious. Evasion also depends on the efficiency of the tax
administration. Corruption by the tax officials often render control of evasion difficult.
Tax administrations resort to various means for plugging in scope of evasion and
increasing the level of enforcement.

Public opinion on tax avoidance:


Tax avoidance may be considered to be the dodging of one's duties to society, or
alternatively the right of every citizen to structure one's affairs in a manner allowed
by law, to pay no more tax than what is required. Attitudes vary from approval
through neutrality to outright hostility. Attitudes may vary depending on the steps
taken in the avoidance scheme, or the perceived unfairness of the tax being avoided.

Corruption by tax officials:


Corrupt tax officials cooperate with the tax payers who intend to evade taxes. When
they detect an instance of evasion, they refrain from reporting in return for illegal
gratification or bribe. Corruption by tax officials is a serious problem for the tax
administration in a huge number of underdeveloped countries.

National Board of Revenue (NBR), Bangladesh. Page 29 of 32


The distinction in various jurisdictions of Tax Evasion and Tax Avoidance:
The use of the terms tax avoidance and tax evasion can vary depending on the
jurisdiction. In general, the term "evasion" applies to illegal actions and "avoidance"
to actions within the law. The term "mitigation" is also used in some jurisdictions to
further distinguish actions within the original purpose of the relevant provision from
those actions that are within the letter of the law, but do not achieve its purpose.

National Board of Revenue (NBR), Bangladesh. Page 30 of 32


Conclusion
Though the rate of tax revenue is to GDP is very negligible, despite the government
is trying to maximize its tax revenue through different method. But the government
should also remind the cannon of convenience while collecting tax from assesses.
As we are living in a civilized society - should come forward to pay taxes to
government in order to conduct the administrative, defense and development
activities of the country. Otherwise we would not be able to prove ourselves as
civilized people.

Tax is the most important in the hand of the government to control the economy as
well as the inflection. It also helps in push money to the economy, develop certain
source of the economy and control some other activities of the economy. No
Government can run it’s and perform administration works without collecting tax as a
source of revenue. So, the Government imposes tax over the company and the
corporations. On the other hand Government can also intensive to the infant and
certain basic industry for protection through its tax policy.

National Board of Revenue (NBR), Bangladesh. Page 31 of 32


 The End 

National Board of Revenue (NBR), Bangladesh. Page 32 of 32