Basic Laws Of Taxation:

9.1. This section consists of the essential features of Bangladesh Taxation System and the in-
built safeguard for government revenues and control mechanism available in laws and executive
instructions flowing therefrom.

9.2. The organisation that handles major portion of revenue for the government is the National
Board of Revenue (NBR). Secretary, Internal Resources Division (under Ministry of Finance) is
the ex-officio chairman of NBR. The main functions of NBR are as follows:

1. Framing of rules and regulations relating to different direct and indirect taxes.
2. Supervision and Administration of Customs, Value Added Tax, Supplementary Duty, Excise
and Income Taxes.
3. Assisting government in processing revenue policy, preparation of revenue budget, entering
into international treaty relating to taxes etc.
4. Settlement of revision cases under different tax laws and approval of exemption cases.
5. Assisting government in controlling smuggling cases, implementation of import-export policy
for development of domestic industrialisation.

9.3. Under NBR, 15 directorates are engaged in direct tax collection. In addition to these there
are 5 Appellate, 1 Inspectorate, 1 Training and 1 Survey directorate. There are 15 directorates
under indirect taxes. Of them 9 are engaged in collecting revenue, 1 directorate is for Appeal, 1 is
for Intelligence and Investigation, 1 is for Inspection, 1 is for Duty Exemption and Drawback
(DEDO), 1 is for Training and 1 for Valuation.

Direct Tax
9.4. All the direct taxes are on a progressive scale. Of the direct taxes, the following taxes are in
vogue.

9.4.1. Income Tax:

9.4.1.1. The levy of Income tax is regulated by Income Tax Ordinance XXXVI of 1984. Finance
Act is published every year after passing of national budget in the Parliament. It contains the
amendments to the income tax, if any, and prescribed tax rates. Besides rules/orders are issued
by the National Board of Revenue from time to time. Decisions are also arrived at based on
previous income tax cases. Income Tax is calculated on salaries, interest on securities, income of
residential property, income from business or profession, capital gains, income from other
sources, profit of any mutual insurance association, any income that accrued, arose, or is
received in Bangladesh.

9.4.1.2. In the income tax law, tax-payers are divided into two classes, resident and non-
resident, depending on the period of stay in Bangladesh. The tax rate is relatively higher for a
non-resident. The tax payers may be individual, firm, association of persons, undivided Hindu
family, local authority, company etc. Usually income tax-returns are to be submitted by 15th
September each year after the close of the financial year. If the income exceeds 200,000 taka,
the return is to be accompanied with statement of assets, liabilities and expenses. Income tax
officer determines taxable income on the basis of the following factors:

* Income tax returns submitted by the assessee and the facts gathered by the income tax
officer through accounts, statements, documents, files or audit report of chartered accountants
relating to assessment.
* Income Tax Act;
* Income Tax Law;
* Discretion of the Deputy Commissioner of Tax.

9.4.1.3. Since the year 1996-1997, income tax is determined in the following way:
(a) In case of individual, firm, association of persons, partnership firms:
Level of Income Rate
(i) Income up to 60,000 taka Nil
(ii) Income up to next 75,000 taka; or 1,20,000 taka, whichever is higher 15%
(iii) Income up to next 160,000 taka 20%
(iv) The rest amount of income 25%

(b) In case of company or local authority:

* All income except dividend income of the Company that is registered in Bangladesh is
taxable. The rate is as follows:-

Category Rate
(i) Income of Publicly Traded Company 35%
(ii) Income of non-Publicly Traded Company 40%
(iii) Bank, Insurance or Investment Companies, nonresident Companies 45%

The rate of income tax will be 15% on the amount representing income from dividends declared
and paid by a company formed and registered in Bangladesh under companies Act, 1913 or a
body corporate formed in pursuance of an Act of Parliament in respect of the share capital
issued, subscribed and paid after 14th August, 1947.

In the case of a person not being a Company (non-resident), the rate of income tax will be 25 %
of income.

9.4.2. Wealth Tax

9.4.2.1. Wealth tax is regulated by the provisions of Wealth Tax Act, 1963 (Act No. XV). Wealth
is assessed as per the prevailing market price in respect of the wealth of Hindu undivided family
or individual.
Value of Wealth Rate
(i) First 25,000,000 taka net wealth Nil
(ii) Next 50,000,000 taka net wealth 1/2%
(iii) Next 50,000,000 taka net wealth 3/4%
(iv) For the balance amount of Value 1%

9.4.2.2. If any tax payer pays income and wealth taxes in any year, wealth tax plus income tax
must not exceed 30% of income.

9.4.3. The number of wealth tax payers stood at 18,350 in 1994-1995. 9.4.3. Gift Tax:

9.4.3.1. Gift tax Act, 1963 was repealed in 1985, but came into force again in 1990. As per the
quoted Act, 'gift' means any transfer of ownership of movable or immovable property by one
person to another willingly and without any profit. Property is evaluated at the current market
price.

The following rates are applicable now.

Value of property Rate
(i) 5,000,000 taka beyond exempted limit 5%
(ii) On next 10,000,000 taka value 10%
(iii) On next 10,000,000 taka value 15%
(iv) On the balance amount of value

Indirect Taxes:
9.5. The following are the main indirect taxes:

9.5.1. Customs:

9.5.1.1. Wester defines customs as "duties; tolls or imposts, imposed by sovereign laws of a
country on imports and exports". This duty is imposed as per Bangladesh Customs Act, 1969 and
as per the Customs Tariff. As per the Customs Act, banned and illegal items are sold on auction
and sale-proceeds are deposited into government treasury. Smuggled gold seized at air/sea ports
are deposited into Central Bank.

9.5.1.2. In order to hasten customs clearance and thereby encourage investment in the country,
government has introduced Per-shipment Inspection (PSI) Scheme under which approved
internationally reputed inspection firms issue certificate regarding quality, quantity, price,
classification of the imported items. On the basis of that certificate (known as 'Clean Report on
Finding'), goods are cleared without delay at sea or air ports. But Revenue Audit authorities have
detected cases of under-invoicing and wrong classification by the PSI agencies, which deprive
the government of large revenues.

9.5.1.3. Moreover bonded ware houses get special duty privileges for imports. There are 2,956
bonded warehouses (private and special) in the country. There are also privileges for import
under baggage rules.

9.5.2. Excise:

9.5.2.1. Excise duty is imposed on some items that are produced within Bangladesh. Being an
indirect tax, it is paid by the manufacturer who can pass its incidence to consumers. This is
guided by Excises and Salt Act, 1944 and Statutory Rules & Order of 1984. At present excise
duty is charged on 'bidi' (local cigarette) @ 25 taka per thousand, on cotton @ Tk. 1.50 per
kilogram and cotton cloth @ Tk. 1.50 per metre. Excise duty is also imposed on Banking services.

9.5.3 VAT

9.5.3.1. Value Added Tax is imposed on production, wholesaling and retailing when value is
added. This was introduced in 1991. Maximum limit of VAT is 15% on import and home-made
goods and services. The number of registered firms/companies under VAT net is 100,000
(approx.).

9.5.4. Supplementary Duty

9.5.4.1. This is imposed on luxury items and services, like cigarette, cinema, alcohol, etc. in
addition to VAT. The rate varies from 5% to 350%.

9.5.5. Turnover Tax:

9.5.5.1. Those organisations whose annual sale is less than Taka 150,000,000 are to pay
turnover tax.