Salient proposed changes

to Tax regulations
in Bangladesh
for
FY 2021-22

June 2021
1. Personal Income Tax

1.1 Minimum tax for individuals

Minimum income tax for individuals having gross receipts of BDT 3 crore or more (other than those individuals engaged
in mobile phone operation or in the manufacturing of cigarette, bidi, chewing tobacco, smokeless tobacco or other
tobacco products) is proposed to be reduced from 0.5% to 0.25% of the gross receipts.

This is expected to reduce tax payable by wealthy individuals.

1.2 Investment tax credit

Maximum amount of investment for the purpose of calculation of investment tax credit is proposed to be reduced from
BDT 1.5 crore to BDT 1.0 crore. This is expected to increase tax payable by individual tax payer.

www.essadvisory.com 2
1. Personal Income Tax

1.3 Wealth tax

A few changes have been proposed to rationalize the surcharge applicable on net wealth exceeding BDT 3 crore. The
existing 7 tiers are to be replaced by 5 tiers and the provision for minimum surcharge is to be annulled.
Existing Proposed
Surcharge Minimum Surcharge
rate% surcharge rate%
Net wealth = BDT 3 crore 0% Nil Net wealth = BDT 3 crore 0%

Net wealth between BDT 3 crore and BDT 5 crore; or 10% Net wealth between BDT 3 crore and BDT 10 crore; or 10%
Have more than one motor car; or Have more than one motor car; or
Have an apartment exceeding 8000 sft in area in any city Have an apartment exceeding 8000 sft in area in any city
corporation. BDT 3000 corporation.
Net wealth more than BDT 5 crore but not more than BDT 15% Net wealth more than BDT 10 crore but not more than BDT 20%
10 crore 20 crore
Net wealth more than BDT 10 crore but not more than BDT 20% Net wealth more than BDT 20 crore but not more than BDT 30%
15 crore 50 crore
Net wealth more than BDT 15 crore but not more than BDT 25% BDT 5000 Net wealth more than BDT 50 crore 35%
20 crore
Net wealth more than BDT 20 crore 30%

If net wealth BDT 50 crore or more, surcharge is the higher of 01% of net wealth or 30% of
income tax on taxable income.

www.essadvisory.com 3
1. Personal Income Tax

1.4 Expansion of tax net

Three new items are to be added to a long list of purposes for which one needs to provide evidence of having a Tax
Identification Number (TIN). The three new purposes are:

i. Purchasing savings instruments (Sanchayapatra) of more than BDT 200,000;

ii. Opening postal savings accounts of more than BDT 200,000;
iii. Obtaining registration of co-operative society;

www.essadvisory.com 4
2. Corporate Income Tax

2.1 Corporate tax rates

Nature of companies Existing Proposed

Publicly traded companies other than companies for which 25% 22.5%
tax at specific rates is charged
Private limited companies 32.5% 30%

Mobile financial services (MFS) providers

-Publicly traded 25% 37.5%
-Not publicly traded 32.5% 40%
One person company (OPC) - 25%

Private universities, medical colleges, dental colleges, 15%

engineering colleges and colleges providing ITC education

Tax rates for insurance, banks and financial institutions, merchant banks, mobile phone operators and tobacco
manufacturing companies remain unchanged.

www.essadvisory.com 5
2. Corporate Income Tax

2.2 Permissible deductible expenses

2.2.1 Recognizing the prevalence of mobile financial services

A step in the right direction, payment of the following three expenses by using mobile financial services are to be allowed
as deductible expenses as well:

i. Salary or remuneration made to an employee having gross monthly salary of BDT 15,000;
ii. Any payment exceeding BDT 50,000;
iii. Rent of any residential or commercial property.

Earlier, payments by only crossed cheques and bank transfer were allowed as deductible expenses.

2.2.2 Normal capital allowance

Existing Proposed
Buildings (general) 10% 5%
Factory buildings 20% 10%

www.essadvisory.com 6
2. Corporate Income Tax

2.3 Withholding tax

2.3.1 Withholding tax for payment to contractors

Existing Proposed

General supplies- General supplies-

Base amount not exceeding BDT 1.5 million 2% Base amount not exceeding BDT 5.0 million 3%
Based amount exceeding BDT 1.5 million but not exceeding BDT 5.0 million 3% Based amount exceeding BDT 5.0 million but not exceeding BDT 20.0 million 5%
Base amount exceeding BDT 5.0 million but not exceeding BDT 10.0 million 4% Base amount exceeding BDT 20.0 million 7%
Base amount exceeding BDT 10.0 million 5%

Supply of cement, iron and iron products 3% Supply of cement, iron and iron products 2%

These proposed changes are expected to have negative impact on small businesses, because tax deducted from general suppliers
are considered as minimum tax liability for those suppliers.

www.essadvisory.com 7
2. Corporate Income Tax

2.3.2 Withholding tax on imports

Existing Proposed

Raw materials for cement industry 3% 2%

Ocean going vessels 2% 1%

Cash register, all fruits, propellers 0% 5%

Coconut fiber 5% 3%

Alcohol and perfume 5% 20%

2.3.3 Withholding tax on sale price of goods or property sold by public auction

Withholding tax rate on sale of goods or property sold by public auction is to be increased from 5% to 10%.
However, tax rate is to be 1% on sale price of tea leaves sold by public auction.

www.essadvisory.com 8
2. Corporate Income Tax

2.3.4 Stevedoring/berth operation

Base amount BDT Base amount exceeds

2.5 million or less BDT 2.5 million
Existing withholding rates- 10% 12%

Proposed withholding rates-

On commission or fee 10% 12%

On gross bill amount 1.5% 2%

2.3.5 Collection of tax from manpower recruiting agents

Manpower recruitment agents are required to pay, as per the proposed change, BDT 50,000 at the time of getting
and renewing the license.

www.essadvisory.com 9
2. Corporate Income Tax

2.4 Tax incentives proposed

2.4.1 Tax exemption for information technology enabled services providers

Income from the following businesses as well is to be considered tax exempt up to 30 June 2024:

i. Cloud services
ii. System integration
iii. E-learning platform
iv. E-book publications
v. Mobile application development services; and
vi. IT freelancing.

2.4.2 Tax incentives for SME run by women

In general, income of an SME having annual turnover of not more than BDT 5 million is tax exempt. For SME run by
women, the threshold is to be increased to BDT 7 million.

www.essadvisory.com 10
2. Corporate Income Tax

2.4.3 Tax incentives to encourage ‘Made in Bangladesh’

Automobile (3-wheeler, 4-wheeler) manufacturers establishing plants in Bangladesh with an investment of at least BDT
100 crore are to enjoy tax exemption for 20 years.

Home and kitchen appliance manufacturers in Bangladesh are to enjoy tax exemption for 10 years.

2.4.4 Agriculture and Agro-processing industries

Fruit and vegetables processing, milk and milk based products production and child food production companies are
to enjoy tax exemption for 10 years. Manufacturers of equipment used in agriculture are also to enjoy tax
exemption for 10 years.

2.4.5 Hospitals

General hospitals with at least 250 beds and specialized hospitals with at least 200 beds established in areas other than
Dhaka, Narayangonj, Gazipur and Chittagong districts are to enjoy tax exemption for 10 years.

www.essadvisory.com 11
2. Corporate Income Tax

2.4.6 Tax exemption for micro-credit institutions

Income of Micro-credit Institutions derived from micro-credit operation is to be tax exempt.

2.4.7 Others

10-year tax exemption has been proposed for light engineering industry, education and training institutions
involved in creating skilled manpower and IT accessory manufacturers.

www.essadvisory.com 12
3. Value Added Tax (VAT)

3.1 Definition of ‘Representative’

In addition to CEO of a company, any officer nominated by the CEO can represent the company.

3.2 Registration

Central VAT registration will not be applicable to business entities supplying tobacco goods.

3.3 Cancellation of VAT registration

In addition to a Commissioner, any officer nominated by the Commissioner can cancel a VAT registration.

3.4 VAT agent for non-residents

Earlier, VAT agent for non-residents was liable for payment of all money including imposed tax, penalty, fine and interest.
Under the proposed change, VAT agent will no longer be liable for payment of such amounts.

www.essadvisory.com 13
3. Value Added Tax (VAT)

3.5 Input-output coefficient

Suppliers of services are no longer required to file Input-Output Coefficient (Mushak 4.3)

3.6 Input VAT rebate for export oriented companies

Export oriented companies can now claim input VAT rebate even when VAT on inputs is less than 15%

3.7 Period for adjustment of VDS

VAT deducted at source can now be adjusted as ‘decreasing adjustment’ in the current tax period and in the next tax
period (2 periods) instead of in 7 periods (current tax period and 6 tax periods following the current period) now allowed.

3.8 Submission of annual return

Registered companies are now required to file annual financial statements with the VAT authority within six months
following the end of the income year.

www.essadvisory.com 14
3. Value Added Tax (VAT)

3.9 Penal interest on VAT payable

Penal interest is reduced from 2% per month to 1% per month.

3.10 Penalty for non-compliance

Penalty for non-compliance or irregularity is to be reduced from twice the amount of VAT evaded to equal to the amount
of VAT evaded.

3.11 Changes in VAT rates

Goods/services Existing rates Proposed rates

Paper cone 15% 5%

Furniture manufacturing (when manufacturer directly sells to customers) 7.5% 15%

Furniture showroom (7.5% if VAT @ 7.5% is paid at manufacturing stage, 7.5% 7.5%/15%
otherwise 15%)

www.essadvisory.com 15
4. RD, SD, Customs Duty

4.1 List of items for which Regulatory Duty (RD) has been increased:

H.S.Code Descriptions Existing rates Proposed rates

1205.10.10 Low Erucic Acid Rape or Colza Seeds, Wrapped/Canned up to 2.5 kg 0% 5%

1205.10.90 Low Erucic Acid Rape or Colza Seeds In bulk 0% 5%

2501.00.10 Pure Sodium Chloride BP/USP pyrogen free 0% 3%

2501.00.91 Denatured Salt (colored) 0% 3%

2833.11.00 Disodium Sulphate 0% 3%

2833.19.00 Sodium Sulphates 0% 3%

www.essadvisory.com 16
4. RD, SD, Customs Duty

4.2 List of items those Supplementary Duty (SD) has been increased:

H.S.Code Descriptions Existing rates Proposed rates

02.01, 02.02, 02.04, 02.06, 02.07 (All Meat and edible offal of bovine animals, sheeps or goats 0% 20%
H.S. Codes)
0706.10.10 Carrots And Turnips, Fresh Or Chilled, Wrapped/Canned up to 2.5 kg 0% 20%

0706.10.90 Carrots And Turnips, Fresh Or Chilled, Wrapped/Canned in bulk 0% 20%

0802.80.10 Areca Nut Wrapped/canned up to 2.5 kg 20% 30%

0802.80.90 Areca Nut in bulk 0% 30%

1704.10.90 Other Chewing gum, whether or not sugar- coated 20% 45%

1704.90.90 Other Sugar Confectionery 20% 45%

2501.00.10 Pure Sodium Chloride BP/USP pyrogen free 0% 20%

2501.00.91 Denatured Salt (Colored) 0% 20%

2833.11.00 Disodium Sulphate 0% 20%

2833.19.00 Sodium Sulphates 0% 20%

www.essadvisory.com 17
4. RD, SD, Custom Duty

4.3 Changes in Custom Duty

H.S.Code Descriptions Existing rates Proposed rates

0602.90.10 Mushroom 5% 15%

2501.00.10 Pure Sodium Chloride BP/USP pyrogen free 10% 25%

2501.00.91 Denatured Salt (Colored) 10% 25%

7204.21.00 Of Stainless Steel BDT 1500 per MT BDT 500 per MT

2710.19.91 Mineral Oil 10% 15%

8437.80.10 Rice Huller and Wheat Crusher 10% 15%

8517.12.19 Cellular Phone 10% 25%

8501.20.99 Motor Exceeding 750 W 1% 10%

www.essadvisory.com 18
 ESS & Partners Private Ltd.

Consulting | Assurance | Tax | M&A | Private Business

© 2021, ESS & Partners Private Ltd.

6A, Rupsha Tower (6th floor), Road 17, Banani C/A, Dhaka-1213, Bangladesh
ask@essadvisory.com
www.essadvisory.com

This publication has been prepared for general informational purposes, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the
information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information
contained in this publication. The information contained in this publication was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any
government or other regulatory body. ESS & Partners and its employees shall not be responsible for any loss sustained by any person or entity that relies on the information contained in this publication.

www.essadvisory.com 19