General info on Tax & VAT
Tax Structure and Rates of Different Taxes (As on 01 July, 2022):
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:
Tax Rate (Assessment Year- 2022-2023)
Principal Indirect Taxes are Customs Duty, VAT and Supplementary Duty.
Customs duty has four tiers. On capital machinery and spares the rate is 3%, on basic raw materials it is 5%, on intermediate raw materials it is 12% and on finished products it is 25%. Duty on capital machinery imported by export-oriented industries and garment manufacturing industries registered by Board of Investment (BOI) and enlisted with their respective association is, however only 1%.
VAT is payable on production and specified services @15% if the annual turnover is or above Taka 60 lakhs. On imports, VAT is payable at the same rate of 15% irrespective of the quantum. In respect of several services VAT is imposed at truncated rates as fixed by the National Board of Revenue. If annual turnover of production and services is less than Taka 60 lakhs, Turnover Tax is payable at the rate of 4%. In specified cases, however, VAT is payable irrespective of turnover and in such cases VAT registration is mandatory.
Truncated Base / Fixed Value Addition:
In some of the cases of goods and services producers and sellers face difficulties in availing VAT credit/adjustment facilities due to non availability of invoices from the sellers of input. In order to remove this operational difficulty fixed bases such as 10%, 25%, 30%, and 60% value addition is taken into account for calculation of VAT for a number of goods and services. In such circumstances net VAT rate for different rates of value addition comes to 1.5%, 2.25%, 4.5% and 9%.
VAT at the wholesale and retail stage:
In case of wholesalers and retailers, there is a special provision for a 1.5% percent VAT known as Trade VAT on the total sale, provided that the wholesaler/retailer do not avail the facility of input credit/adjustment. Such tax is also collected at the import stage from importers of finished goods as an advance trade VAT.
Tariff Value for imposition of VAT:
Under the VAT Law, the government is empowered to fix Tariff Value for some items for the collection of VAT. Example: tariff value for mild-steel products produced from imported/locally procured re-rollable scraps is TK 4000.00 per MT. Normal VAT input credit is also not available under this system.
Deduction of VAT at source:
As deduction at source is also practiced in case of VAT on certain services, Government, Semi-Government, Autonomous Bodies, NGOs, Banks, Insurance Companies and Limited Companies are authorized by the government to deduct applicable VAT on the services at source
This duty is imposed on the production and import of non-essential, luxury, harmful and socially undesirable goods. Except those exempted or rate of those otherwise specified, the common rate of Supplementary Duty is 20%. Considering however, the extremely harmful effects on health and environment, the rates of a few goods are much higher varying from 60% to 350%.
The system of Withholding Tax is there both for income tax and VAT at varying rates. Withholding income tax rates vary from 1% to 45% depending on the source of income, nature of business and residential status of the taxpayer. Withholding VAT rates vary from 1.5% to 15% depending on the nature of services/supplies.
Other taxes that may affect foreign investors
Charge is: On transfer of property 3% on the value of consideration.
On transfer of shares of a company 1.5% on the value of consideration.
Facilities for foreign investors (As of 01 July, 2010):
Government of Bangladesh provides lot many incentives for foreign investors. These are, in brief, as follows:
Protection of foreign investment and its repatriation:
Protection of foreign investment from expropriation by the state is fully ensured. Moreover, full repatriation of capital invested from foreign sources is allowed. Similarly, post-tax profits and dividend accruing to foreign investors are allowed to be transferred in full. Remittance of approved post-tax royalties, technical know-how and technical assistance fees is also allowed in full. Foreigners employed in Bangladesh are entitled to remit 50 per cent of their salary and full repatriation of their savings and retirement benefits.
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