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  • Service: Tax
  • Type: Business and industry issue
  • Date: 10/18/2013

Bangladesh – Finance Act 2013 includes tax rate and other changes 

In its Finance Act 2013, the government of Bangladesh introduced several tax rate and other tax-related changes that will impact all individuals and companies. Additionally, Bangladesh increased the tax rate for publicly listed mobile phone operators, along with new rules for their amortization of license fees. A series of new tax incentives are introduced for private companies generating power other than coal-based power. Below we provide details about these changes.

New tax rates for individuals and firms


The Finance Act 2013 amends the initial exemption limit for individuals and firms, effective from 1 July 2013, as follows:


Total income New tax rate Previous tax rate
First 220,000 Bangladesh taka (BDT)* Nil Nil on first BDT200,000
Next BDT300,000 10% 10% on next BDT300,000
Next BDT400,000 15%  15% on next BDT400,000
Next BDT300,000 20% 20% on next BDT300,000
On the balance 25% 25%
* For taxpayers who are women and/or age 65 years or above, the initial exemption limit is BDT250,000, and for those physically challenged, such limit has been set to BDT300,000.

Source: KPMG in Bangladesh, 2013


Mobile phone operators – tax rate and license fee depreciation changes


The tax rate for publicly-listed mobile phone operators has increased to 40 percent, compared to 35 percent in the previous year.


Additionally, mobile phone operators will be allowed to amortize the license fees they pay, where all of these conditions are met:


  • the assessee is a company resident in Bangladesh for tax purposes
  • the license fee is paid on or after 1 July 2012, wholly and exclusively to obtain a permission from the government authority
  • the license/permission is granted for 2 or more years to run a business
  • the amortization charge/deduction is calculated as proportionate to such years, and such amortization/deduction continues until the last year of the period for which the license was granted.

License fees are defined as spectrum assignment fees paid by a cellular mobile phone operator.


Incentives for power generation companies


The following tax incentives are introduced for private power generation companies (other than coal-based power generation):


  • 15 year corporate tax exemption, starting from the date of commencement of commercial operations
  • 3-year tax income tax exemption for salaries of expatriate employees of such power generation companies, starting with the date of the expatriate’s arrival in Bangladesh
  • tax exemption for interest payments to foreign lenders
  • tax exemption and unrestricted repatriation for royalties and technical assistance fees paid by such companies
  • tax exemption for capital gains arising on the sale or transfer of shares by the investing company.

To qualify, the company must start commercial operations before 31 December 2014 and comply with the requirements of Bangladesh’s private sector power generation policy.


Incentives for power generation companies (coal-based)


The following tax incentives are introduced for coal-based private power generation companies:


  • 15-year corporate tax exemption, starting from the date of commencement of commercial operation
  • 3-year income tax exemption for salaries of expatriate employees of such power generation companies, starting with the date of the expatriate’s arrival in Bangladesh
  • tax exemption for interest payments to foreign lenders
  • tax exemption and unrestricted repatriation for royalties and technical assistance fees paid by companies
  • tax exemption for capital gains on the sale or transfer of shares by the investing company.

To qualify, the company must enter into agreement by 30 June 2020, start commercial production by 30 June 2023, and comply with the requirements of Bangladesh’s private sector power generation policy.

 

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