Corporate Tax Planning: Bangladesh Perspective

Corporate Tax PlanningM.K. Jahid Shuvo

Dept. of A&IS

Jahangirnagar University

TaxA tax is a compulsory payment levied on the persons or

companies to meet the expenditure incurred on conferring common benefits upon the people of a country.

Corporate TaxTax that is levied on the income of a corporation or a company.

THERE IS NOTHING WHICH HURTS MORE THAN PAYMENT OF TAXES…..

Three Common Practices to save Taxes

Tax PlanningTax Avoidance

Tax Evasion

Corporate Tax Planning

Corporate Tax planning is the arrangement of financial activities in

such a way that maximum tax benefits are enjoyed by making use

of all beneficial provisions in the tax laws.

It entitles the assessee to avail certain exemptions, deductions,rebates and reliefs, so as to minimize his tax liability.

Corporate Tax

Planning

Maximize after tax rate of return

Keep proper record

Deduct TDS

Pay Advance

Tax

Submit Return on

time

Comply with the

rules

Is it legal to keep taxes as low as possible?

Yes. It is

Case Reference: (Justice Learned Hand, Comm. vs. Newman, 159 F.2d 848 [CA-2, 1947]).

There is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. ……… nobody owes any public duty to pay more than the law demands: taxes are enforced extractions, not voluntary contributions”

Objectives of corporate tax planning

Reduction of tax liability

Minimization of litigation

Healthy growth of economy

Economic stability

Taking maximum advantages of the exemptions, deduction, rebates,

reliefs and other concessions

Key Points To Be Remembered

It is not avoidance to payment of taxes

Tax planning should not be done with an intent to defraud the revenue.

All transactions with respect to tax planning should be in correct form and

substance.

Tax planning work should be done within the framework of law and its not

illegal.

What is a Company/Corporation

A company is incorporated under the Companies Act in Bangladesh andincludes:

• A body corporate established or constituted by or under any law in force

• Any nationalised bank or industrial or commercial organisation

• Any association or combination of persons, if any of such persons areregistered as a company

• An association or body incorporated by or under any laws of a countryoutside Bangladesh

• Any foreign association or body which the NBR declares to be a company.

Tax Rates

Publicly Traded Companies

25%

Non-Listed Companies

35%

50% of export income is exempt from tax

Tax Rates

Publicly Listed- Banks, insurance and other financial institutions

40%

Non Listed- Banks, insurance and other financial institutions

42.5%

Merchant Bank

37.5%

Tax Rates

Cigarette,

Zarda,

Bidi,

Gul or

Any other tobacco product manufacturing companies

45%

Tax Rates

Publicly Traded Mobile phone operator companies

40%

Non-Listed Mobile phone operator companies

45%

If mobile phone operator companies list at least 20% of their paid up capital through IPO, they

shall receive a rebate of 10% in the year of listing.

Reduced rates of Corporate TaxCompanies Tax Rate

Textile industries (time extended up to 30 June 2019) 15%

Jute industries (time extended up to assessment year 2019-2020) 10%

Knit wear and woven garments manufacturer and exporter 20%

Research Institutes at national level, registered under the Trust Act, 1882 or Societies

Registration Act, 186015%

Private Universities, Private medical college, Private dental college, Privateengineering college or Private college engaged in imparting education on information technology

15%

Co-operative society registered under Co-operative Society Act 2001 other than income

from agricultural or cottage sector15%

Production of pelleted poultry feed, Production of pelleted feed for fish, shrimp andcattle, Production of seeds marketing of locally produced seeds, cattle farming,dairy farming, horticulture, frog farming, sericulture, mushroom farming andfloriculture:

Income up to Tk 1,000,000 Next Tk 2,000,000 On the balance amount

3%10%15%

Reduced tax rates applicable to local authority

25% reduced tax rate will be applicable for following local bodies:

• WASA (Dhaka, Chittagong, Khulna and Rajshahi)

• Bangladesh Civil Aviation Authority

• RAJUK

• RDA

• KDA

• CDA

• National Housing Authority

• Chittagong Port Authority

• Mongla Port Authority

• Pyra Port Authority

• Bangladesh Inland Port Authority

• Bangladesh Television

• Bangladesh Betar

• BIWTA

• BRTA

• BTRC

• BPDP

• BREB

• BWAPDA

• BEPZA

• Bangladesh Bridge Authority

• Borendra Multipurpose Development Authority (Rajshahi)

• Bangladesh Hi-Tech Park Authority

• IDRA

• Sustainable and Renewable Energy Development Authority

Capital gains tax

Capital gain tax is levied when the investor sells a capital asset for a price that is higher than the purchase price.

It is different from normal gain.

It only triggered when an asset is realized, not while it is held by an investor

Capital gains tax

Capital gains tax on sale of shares of listed companies

Capital gain from transfer of stocks and shares of public limited companies listed with stock exchange except listed Govt. securities.

Tax Rate

a) For resident companies and firms 10%

b) Capital gain tax of non-resident shareholders 15%

c) For sponsor shareholder and shareholder director 5%

d) For resident individual holding at least 10% of the total share

capital of the company5%

Capital gains tax

Capital gains tax other than sale of shares of listed companies

Capital gain from transfer of stocks and shares of public limited companies listed with stock exchange except listed Govt. securities.

In the case of a company,

Income from capital gains will be separated from total income

Tax at 15% is payable on such capital gains regardless of the period of holding of the asset from the date of its acquisition.

Capital gains tax

In the case of an assessee other than a company,

If the asset is transferred before the expiry of five years from the date of acquisition, the capital gains will be taxed at the usual rate applicable to the assessee’s total income including the capital gains.

If the asset is transferred at any time after expiry of five years from the date of its acquisition, the capital gains will be taxed at the usual rate applicable to the assessee’s total income including the capital gains or at the rate of 15% on the amount of capital gains whichever of the two is lower.

Thank You…