Taxation for Companies
A company needs to pay corporate tax on its profit (Revenue-Expenses); if it doesn’t have the profit, it doesn’t need to pay tax. This is subjected to the followings:
- File income tax return annually (usually on 15th January of next year following financial closing, usually (July-June)
- Make sure to inject paid-up capital into the company’s bank account by cheques or online transfer.
- Make sure the debit-credit in the bank statements is adequately explained.
- Minimum tax usually @.60% of gross revenue to be paid even if the company makes loss in that year.
Statutory Tax Rate
The standard corporate tax rate is 27.5% (reduced from 30% effective 1 July 2022) for private companies, including branch and liaison offices, unlisted companies, association of persons, and artificial juridical persons but can resort back to 30% if the following conditions are not met:
- All receipts and income are received through banking channels; and
- Expenses and investments exceeding BDT 500,000 individually, or BDT 3.6 million in aggregate annually, are made through banking channels.
Corporate Tax Rate in Bangladesh:
| Listed companies with more than 10% paid-up capital raised through initial public offers | 20% (reduced from 22.5% effective 1 July 2022). The rate is increased to 22.5% if the conditions mentioned above are not met. |
| Listed companies with 10% or less paid-up capital raised through initial public offers | 22.5%. The rate is increased to 25% if the conditions mentioned above are not met. |
| One person companies | 22.5% (reduced from 25% effective 1 July 2022). The rate is increased to 25% if the conditions mentioned above are not met. |
| Listed banks, insurance, and other financial institutions, including mobile financial services providers | 37.50% |
| Unlisted banks, insurance, and other financial institutions, including mobile financial service providers | 40% |
| Merchant banks | 37.5% |
| Tobacco manufacturers | 45% (plus 2.5% surcharge) |
| Listed mobile phone operators | 40% |
| Unlisted mobile phone operators | 45% |
| Ready-made garment manufacturers and exporters | 12%; 10% with green building certification. The reduced rates apply up to 30 June 2024. |
| Export-oriented companies | 12%; 10% with green building certification (reduced from 30% effective 1 July 2022). |
| Textile industries | 15% until 30 June 2025 (extended from 30 June 2024). |
| Jute goods exporters | 10% until 30 June 2023. |
| Private universities, private medical, dental, and engineering colleges, and private colleges solely dedicated to imparting education on information and communication technology | 15% |
Besides, there are several tax exemption facilities for companies based on the nature of business and the location of business.
Withholding Tax:
The business entities and organizations need to deduct tax from any payment made during their operations to be allowed as the expense of the organization and it is called withholding tax. Upon deduction, the organization must furnish a withholding tax certificate to the person/entity from which the tax had been deducted.
Withholding Tax Authorities
Every person, being a company or a co-operative society or a non-government organization registered with NGO Affairs Bureau [a Micro Credit Organization having licence with Micro Credit Regulatory Authority, [a university], a private hospital, a clinic, a diagnostic centre, [an English medium school providing education following international curriculum, artificial juridical person, local authority,] a firm or an association of persons], shall file or cause to be filed, with the Deputy Commissioner of Taxes under whose jurisdiction he is an assesses, a return of tax deducted or collected under the provisions of Chapter VII of this Ordinance.
Responsibilities:
- Monthly TDS Return Deposit:
- TDS Certificate Issuance
- Tax Return Under 75A
Find the Withholding Tax Rate of Bangladesh HERE➤
Entities Required to Register for VAT:
| Entities not required to register for BIN/VAT: | Entities eligible to register for Turnover Tax instead of BIN/VAT: | Entities are eligible for mandatory VAT registration. |
Those whose annual turnover/sales are less than 50 lakh Taka. Additionally, sellers of products/services listed in the first schedule of the VAT law do not need to register for BIN. | Those whose annual turnover/sales range between 50 lakh Taka and 3 crore Taka. These entities are required to pay only 4% VAT. | Those whose annual sales exceed 3 crore Taka. These entities must pay VAT at the prescribed rates mentioned in the VAT law. |
However, the following individuals/institutions must register for VAT/BIN and submit monthly returns regardless of their annual turnover/sales (even if zero):
All individuals/institutions engaged in import-export business.
All individuals/institutions supplying goods/services against tenders/contracts/work orders.
All individuals/institutions supplying/producing/importing goods/services subject to supplementary duty.
As per General Order-17, the following must mandatorily register for BIN/VAT:
i) Manufacturers of 75 types of products.
ii) Providers of 79 types of services.
iii) Traders of 7 types of products.
iv) Shops located in supermarkets and shopping malls.
v) Any manufacturing institution located within a city corporation/district town.
Products and services that must mandatorily register for BIN/VAT as per point 4:
Product Manufacturing: Milk products, chocolate, biscuits, chanachur (a spicy snack), pickles, paint, soap, coil, foam, plastic products, wood and leather products, lozenges, noodles, ink, packaging materials, bricks, fans, TV, bulbs, parts, etc.
Service Provision: Online product sales, ITES services, ready-made garment retailers, ride-sharing services, businesses operating on rented office spaces, architects, graphic designers, tailoring shops, courier services, hotels/restaurants, car garages, advertising agencies, printing presses, confectioneries, furniture manufacturing and sales, parlors, consultancy firms, suppliers, fitness centers, coaching centers, clinics and security services, supermarkets, shopping mall shops, rod and cement shops, electronics product sales shops, etc.
VAT Deducted at Source (VDS):
The below-mentioned business entities and organizations need to deduct VAT from any payment made during their operations to be allowed as the expense of the organization, known as withholding VAT/Source VAT Deduction. Upon deduction, the organization must furnish a VAT Deduction certificate to the person/entity from which the VAT had been deducted.
Entities required to deduct VAT at source:
(a) Any government entity;
(b) Any private institution approved by the NGO Affairs Bureau or the Department of Social Services;
(c) Any bank, insurance company, or similar financial institution;
(d) Any secondary or higher-level educational institution; or
(e) Any limited company.
Responsibilities:
- Monthly VAT Return
- Monthly VDS Return
- Providing VAT deduction Certificate in a prescribed form to the Vendor
To know about the VAT rates for different services in Bangladesh, please visit here>
Regulations for VAT collection on online sales of goods/services:
Selling Products/Services on Own Platform: If a manufacturer/business/service provider sells their own products/services through their own online platform/website/Facebook page/group, they must pay VAT at the specified rate according to the VAT law for those specific products/services. For example:
1. In the case of a product manufacturer, 15% VAT or the applicable rate for the product specified in the Third Schedule of the Ordinance.
2. In the case of a service provider, the applicable VAT rate according to the code for the relevant service.
Note: In this case, an additional 5% VAT for online services will not be applicable.
Selling Products/Services on Other Platforms: In the case of selling one’s own products/services on a third party or other online platforms, a 5% VAT will be applicable on the commission/profit/revenue sharing provided to the service provider of the relevant online platform. Additionally, the applicable VAT for the relevant product/service must be pre-paid as per the law. If this VAT is not pre-paid, then VAT on the relevant product/service must be collected from the final consumer.
Although the Income Tax Act does not provide a specific definition of supplier services, under section 52, it stipulates the rates at which tax is to be deducted at source (TDS) in the case of “supply of goods.”
However, in the VAT Act, a specific definition is provided, and it states that anyone wanting to provide services as a supplier must be VAT-registered as a supplier (service code S037). It also mentions that no manufacturer, trader, or service provider (for services with specific definitions) will be considered as a supplier.
Rates of Tax Deduction at Source (TDS) and VAT Deduction at Source (VDS) from bills for the supply of goods/supplier services are as follows:
| Particulars | TDS | VDS |
|---|---|---|
| If the base amount is less than 50 lakh BDT | 3% | |
| If the base amount is more than 50 lakh BDT but less than 2 crore BDT | 5% | 7.5% |
| If the base amount is more than 2 crore BDT | 7% |
Note:
- If the supplier does not have an ETIN or if payment is made in cash, the above TDS rates will increase by 50%.
- The base amount refers to the higher of the contract value, invoice value, or bill payment amount, which will be the base amount for TDS deduction.
- There is no base amount for VAT.
Be Cautious in Preparing Your Company’s Annual Audited Financial Statements (Profit and Loss Account and Balance Sheet)
Many of you may already know that from now on, every limited company is required to submit its annual financial statements at its office each year. Previously, this was only mandatory to be submitted to the Income Tax Office and the RJSC.
In the past, many used to prepare the financial statements of their organizations as they pleased. Some even created fake/false financial statements. Additionally, some prepared multiple types of financial statements in the name of a single company within a year and submitted them to various places for different purposes, which was entirely illegal.
Starting from last year, regulatory bodies (government, NBR, RJSC, ICAB, banks) have introduced a new rule. A company can no longer prepare more than one audit report in a year. To enforce this, ICAB has introduced a system where each audit report must include a DVC (Digital Verification Code) number through the DVS (Digital Verification System). This system generates a unique number that, once issued in the name of a company for a particular year, cannot be reissued for that company in that same year. Thus, no additional audit reports can be created for that company within that year. If someone fraudulently prepares and submits such a report somewhere, the concerned institution can easily verify the authenticity of the DVS number online. As a result, penalties and sanctions will be imposed for submitting fake audit reports.
Now, let’s discuss submitting audit reports to the VAT office. Many are not submitting monthly VAT returns, some are submitting zero VAT returns despite having sales, some are concealing actual sales, and some are not showing the actual amounts in monthly VAT returns despite transactions through banking channels. Consider this: when a VAT officer verifies the sales amount shown in your submitted audit report against the amount shown in your monthly VAT returns, or checks how much VAT you have deducted at source as a source VAT deductor against the expenses shown in your financial statements, or compares the sales amount with your bank statement, what will happen to you and your organization?
