Tax Holidav

Ranjan Kumar Bhowmik r.*o

*,,,,,T"#JitIr?,"n,"
Introduction: -
Tax holiday has been started to allow as a tax incentive for industriahzation
in this
Tax Act 1922' In
region since 1959 by introducing new section 15BB in the then Income
1i12, the tax holiday system was withdrawn by repealing section 15BB. But the incentive
was ie-introduced Uy intorporating section 14A in the Income Tax Act
1922by the Finance
(
Act l974with effect from the assessment year 1974-75 for industrial undefiakings

on or after 1st July 1973 having subscribed and paid up capital not less than
Tk. 1 Lakh and
or after 01 January
not more than Tk. 35 Lakh) anJ also for tourist industries (established on
1976 having subscribed and paid up capital not less than tk. 1 lakh and
not more than Tk' 10
core) with ihe tax holiday period or I y"utt for the prescribed areas and of 5 years for other
areas.

holiday
With the introduction of the Income tax Ordinance 1984, the provision of tax
has been maintained under sections 45 and 46 prrmatily. The provision
was applicable for
and tourist
industrial undertakings (established between 01 July 1974 and 30 June 1985)
and
industries (established between 01 January 1916 and 30 June 1985) having subscribed
was first
paid-up .upltut not less than Tk 1 lakh for any industries. The tax holiday incentive
then up to 30 June
fr.terraea for the industries up to 30 June 1990 by the Finance Act 1985 ,
restricted for the
2000 by the FA 19g9. But suisequently through FA 1991 the incentive was
industries established within 30 June 1995 with an apparent intention of
withdrawing the tax
holiday incentive since 1995-96'

New section 46A has been introduced through FA 1995 allowing the tax holiday
facilities
incentive for industrial undertakings, tourist industries and physical infrastructure
and paid up
esrablished between 0i July 1995 and 30 June 2008 with having subscribed
inserting section
capital not less that Tk. 1 Lakh. It is extended for another 3 years through
and again for 2 years through inserting section 46C with
468 with some minor changes -up
having subscribed and paid capitai not less that Tk. 20 Lakh. Tax holiday facility has
further been extended up to 30th June,2024 through Finance Act,2019'

(1) Type of Industries eligible for tax holidav'

Two types of industries are eligible to apply for tax holiday: -

1. Industrial Undertaking;
2. Physical Infrastructure facility'
Undertakings
01. Active pharmaceuticals ingredient industry and radio pharmaceuticals industry;
02. Agriculture machineries;
03. Automatic bricks;
04. Automobile;
05. Barrier contraceptive and rubber latex;
06. Basic components of electronics (e.g. resistance, capacitor, transistor, integrated
circuit, multilayer PCB etc.);
07. Bi- cycle including parts thereof;
08. Bio-fertrhzer;
09. Biotechnology based agro products;
10. Boiler including parts and equipment thereof;
1 1. Compressor including parts thereof;

12. Computer hardware;

13. Furniture;
14. Home appliances (blender, rice cooker, microwave oven, electric oven, washing
machine, induction cooker, water filter etc.);
15. Insecticide or pesticide;
16. Leather and leather goods;
17. LED TV
18. Locally produced fruits and vegetables processing;
19. Mobile phone
20. Petro-chemicals;
21. Pharmaceuticals;
22. Plastrc recycling;
23. Textile machinery;
24. Tissue gralting:
25. Toy manufacturing;
26. Tyre manufacturing;
27 . Electrical Transformer
28.Artificial fiber or manmade fiber manufacturing
2 g.Automobile parts and components manufacturing
30.Automation and Robotics design, manufacturing including parts and components
3 1 .Artifi cial Intelligence based system design and/or manufacturing;
3 2.Nanotechnolo gy based products manufacturing ;

3 3.Aircraft heavy maintenance services including parts manufacturing,

34. Any other category of industries as the Govt. may notify in the official Gazette,

'Iar Hnlidav as amcnded np to 1517 12020 Pagc 2 ol'6

nrenared bv Ranian Kunlar Bhorvmik rcN{.q
 01. DeeP sea Port;
02. Elevated exPresswaY;
03. Export Processing zone;
04. Flyover;
05. Gas piPe line;
06. Hi-tech Park;
07. ICT village or software technology zone;
08. IT Park;
09. Large water treatment plant and supply through pipe line;
l0.LiquefiedNaturalGasterminalandtransmissionline;
1 1. Mobile phone tower or tower sharing infrastructure;

12. Mono-rail;
13. Rapid transit;
14. Renewable energy (e.g. energy saving bulb, solar energy plant, windmill);
15. Sea or river Pofi;
16. Toll road or bridge;
17. Underground rail;
18. Waste treatment Plant; or
19. Any other categoiy of industries as the Govt. may notify in the official Gazette,

(2) C onditions fur-cligib!-li!

Some conditiols are recluired to be fulfilled fbr tax holiday under section
468 and 46C of the
Income Tax Ordinance, 1984. These are as follows: -
(a) The undertaking must be owned and managed by either a body corporate
established by or under an act of parliament with its head office in Bangladesh
or a company
as per Companies Act, l9l3llg94 with its registered olfice in Bangladesh having a
subscribed and paid 1p capital of not less than taka20,00,000/-(Tk. Twenty
lakh) on the date
of commencement of commercial production or operation'
(b) The undertaking is not lbrmed by splitting up or by reconstruction or
reconstitution of business alieady in existence or by transfer to a new business of
any plant
and machinery used in business, which was being carried on in Bangladesh
at any time before
the commencement of the new business.
(c) The underlaking must be approved by the NBR for the purpose of tax holiday.
(d) T'he underlaking shatl have to obtain clearance cerliflcate from the Directorate of
Environment fbr the relevant income year'
(3) Application procedure and its disposal bv the NBR'
(a) Tax holiday applicarion is to be submitted to the NBR within 6 months from the
prescribed in Rule 594,
end of the month of .o--..cial production or operations in the lbrm
in duplicate. duly signed and verified by the MD or Director of the company'
(b) NBR st al giue its decision within 45 days from the date of receipt of the
application by the Board. Otherwise the underlaking shall be deemed
to have been approved'
(c) NBR shall not reject any application unless the applicant is given a reasonable
opportunity of being heard.
review
(d) If NBR rejects any tax holiday application, the undertaking can submit a
date of receipt of the
application to the Chlirman of the Boari wiinin 4 months from the
 rejection letter. Chainnan then will either review himself or will constitute a committee
consisting of 3 Member of the NBR who will review its previous decision and pass such
order as it ttrint< fit. There is no time limit fbr disposal of the review application. The decision
of the review committee of the NBR as final and conclusive and there is no scope to submit
furlher review apPlication.
4) Withdrawal and Cancellation of tax holidav.
a) Any undertaking after getting tax holiday fiom the NBR can write to the NBR for
cancellation of tax fofiday within 1 year from the date of granting such tax holiday.
b) NBR may also cancel/suspend fully/partially any tax holiday in the public interest.
c) The DCT in the course of assessment may also withdraw the tax holiday from the relevant
assessment year if he is satisfied that one or more of the required conditions are
not fulfilled.
d) Tax holiday shall be deemed to have been withdrawn for the assessment year in which the
fbllowing transaction is made: -
(1) If the company is engaged in any commercial transaction with another compan)
having one or more sponsor shareholders.
(2) If the DCT finds that the company has purchased or sold goods at higher/lower
price than the normal market price with the intention to reduce the income of another
undertaking/companY.
(3) lf the bCf finds that the company employed/allowed any foreign national to rvork
without prior approval from the BOI or any other competent authority of the Govt.

(5) Period of Tax holidav for industrial undertakins

Area Years Rate of exemption

If it is established from If it is established fiom
0I17l13 to 3016119 01lll19 to 30/6r2-l
(a) Dhaka, Mymensingh and 1st 2 years. 100% First 1'ear 90%
Chittagang division 3'd vear----- - ---- - - -- 60% Second 1,ear tt0%
(excluding Dhaka, 4,r, year_____ - _ __ _ _ 40%
_ _ _ Third year 60%
Narayangonj, Gazipur and 5 5,h year----- ------ ---20% Fourth year 40%
Chittagong district and also Fifth year 20%
the hill district of Rangamati,
Bandarban and Khagrachari)
(b) Rajshahi, Khulna, SYlhet, lst 2 years. 100% First year and 90%
Second year
Rangpur and Barisal 3'd vear----- - ------ - -7 0%
Third year 80%
divisionfexcluding citY 4th Year----- ---------55%
corporation area] and the hill 5th year----- --- -- - - - -40% Fourth year 10%

district of Rangamati" 10
6tr' year----- - - - - -- - - -25% F fth year 60%
Bandarban and Khagrachari 7th to 1}th year------20oA S xth vear 50%
Seventh year 40%
Eighth year 30%
Ninth year 20%
Tenth year 10%

provided that bio-fe rtilizer industry and petro-chemical industry will get tax holiday for 5

years even if it is set up in the district of Dhaka, Narayangonj, Gazipur and Chittagong'

.f,,., Lr.-lil-.r hw R an ian K rrmar Bhor.vmik rr trt,t as anrended up to 1517 12020 Pagc 4 of6
 Rate of exem
If it is established within 30/6119 is established from 0ll7ll9 to 30/6124
If it
1't 2 vears. 100% l't 2 years. ... 90%

6th year---- ----50%

Sth year---- ----30%

(7) Conditions to be fulfilled after eettine tax holidav:-

(a) The profits and gains of the tax holiday company shall be computed separately;
(b) An1, loss during the tax holiday period cannot be carried forward beyond the tax holiday
period.
(c) Only normal depreciatiori is applicable for tax holiday enjoying companies
(d) 30% + l1oh : 40Yo vear u,ise tax holiday income is to be reinvested. 30%o is to be
reinyested in the same compan). or in a new industry within the tax holiday
period or
marimur11 ri'ithin 1 year f.oi, th. end of the tax holiday period. Another 10%
is to be
reinr.ested in the shaies of listed company in each year within 3 months from
the end of the
income year. Otherwise income of the year or years will subject of tax. However, the
quantum of reinvestment will be reduced by the amount of dividend if declared by the
company.
(e) Company shall not employ/allow any foreign national to work without prior approval
from the BIDA or any other competent authority of the Govt'
(f) The income of the tax holiday company under the following heads are taxable; -
(1) CaPital gain
(2) Any income arising from the disallowances u/s 30'
(3) Dividend is taxable at the hand of shareholders
(8) Documents to be submitted with tax holiday aprrlication:-

The following documents are to be submitted along with tax holiday application:-
(1) An attested copy of certificate of incorporation;
(2) An attested copy of the Memorandum and Articles of Association of the company;
(3) A certificate of commencement of business;
(a) In case the company has already commenced business, certified copy of the audited
have been
balance sheet and p.ont and loss accounts for the period fbr which the accounts
prepared:
(5) In case of industrial undertaking/physical infrastructure facility for which approval is
agreement between the
sought has been acquired lbr anothei-party, an attested copy of the
applicant company and the seller entlr into for the acquisition of the
industrial
un-dertaking/physical infrastructure with list and value of assets acquire;
facility has
(6) A certificate to the effect that the industrial undertaking/physical infrastructure
paragraph I ot I A
not applied or shall not apply for accelerated depreciation allowance under
of the Third Schedule to the Ordinance'
 income of
oil [6th Schedule (Part-A) Para 44 and 451

Income of cinema hall/Cineplex and income from industry producing rice bran oil will also
be tax free like tax holiday but without any tax holiday application to NBR if it starts
commercial exhibition/production within olloTl2ol2 to 3010612024. Ttme and condition of
fax ion is tabulated bel
Area Years Rate of exemption
1 st 2 vears. 100%
(a) Dhaka, Mymensingh and Chittagang
division (excluding the hill district of 5 2nd 2 years......... .. 50%
Rangamati, Bandarban and Khagrachari) Last year... .............25%
(b) Rajshahi, Khulna, Sylhet, Rangpur and lst 3 years. 100%
Barisal division (including the hill district of 10 2nd 3 vears ........... 50%
Rangamati, Bandarban and Khagraclarr- Last 4 years......... ...25%
(10)Tax exemption on income of industrv set up at EPZ:

Industries set up atEPZ (including private EPZ) from 0110112012 onward will automatically
get tax exemption as per SRO no 219 dated 041712011. The area and period of tax exemption
is tabulated below:

Area Years Rate of exemption

(a) Dhaka, Mymensingh and Chittagang ist 2 years. 100%
division (excluding the hill district of 5 2nd 2 years......... .. 50%
Rangamati, Bandarban and Khagra.h.r) Last year... .............25%
(b) Rajshahi, Khulna, Sylhet, Rangpur and 1st 3 years. 100%
Barisal division (including the hill district of 7 2nd 3 r'ears ........... 50%
Rangamati, Bandarban and Khagrachari) Last year... .............25%

t Economic

Industries set up at Econom rc Zone and High Tech Park w'ill automatically' get tax exemption
as per SRO no 226 + 228 dated 101812016. The period of tax exemption is tabulated below:

Year Rate of exemption

First year, Second year and Third year TOOo/o

BOo/o
Fourth year
7 Oo/o
Fifth year

Sixth year 60%

Seventh year 50%

4O%o
Eighth year

3Oo/o
Ninth year

Tenth year 20%

The End

T.., I Inlirlarr nrenared hv Ranian Kumar Bhowmik rcva as anrcnded ry to l5l7 l)020 Page 6 of6