Tax Authorities of Bangladesh

8/13/2019 Tax Authorities of Bangladesh

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Background of NBR

The National Board of Revenue (NBR) is the central authority for tax administration in

Bangladesh. It was established by Presidents !rder No. "# of $%"&. 'dministratively it is

under the Internal Resources ivision (IR) of the *inistry of +inance (*o+). *o+ has ,

ivisions headed by , -ermanent ecretaries to the /overnment namely the +inance

ivision the Internal Resources ivision (IR) and the 0conomic Relations ivision (0R).

The ecretary IR is the ex1officio 2hairman of NBR. NBR is res-onsible for formulation

and continuous re1a--raisal of tax1-olicies and tax1laws negotiating tax treaties with

foreign governments and -artici-ating in inter1ministerial deliberations on economic issues

having a bearing on fiscal -olicies and tax administration.

The main res-onsibility of NBR is to collect domestic revenue (-rimarily Im-ort uties and

Taxes 3'T and Income Tax) for the government. !ther res-onsibilities includeadministration of all matters related to taxes duties and other tax -roducing fees. 4nder

the overall control of IR NBR administers the 0xcise 3'T 2ustoms and Income1Taxservices consisting of ,5,5 officers of various grades and $6$%7 su--orting staff -ositions

('--roved set u- as on 6% +eb. &666 ').

Negotiating tax treaties with foreign governments and -artici-ating in inter1ministerial

deliberations on economic issues having a bearing on fiscal -olicies and tax administration

are also NBRs res-onsibilities. The main res-onsibility of NBR is to mobili8e domestic

resources through collection of im-ort duties and taxes 3'T and income tax for the

government. ide by side with collection of taxes facilitation of international trade through

9uic: clearance of im-ort and ex-ort cargoes has also emerged as a :ey role of NBR. !ther

res-onsibilities include administration of matters related to taxes duties and other revenue

related fees;charges and -revention of smuggling. 4nder the overall control of IR NBR

administers the excise 3'T customs and income1tax services consisting of ,5,5 officers ofvarious grades and $6$%7 su--orting staff -ositions.

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Taxation and its history

Taxation1 one of the ma and etymologically the ?atin word =Taxare> is

related to the term tax which means to charge. Tax is a contribution exacted by the

state. It is a non1-enal but com-ulsory and unre9uited transfer of resources from the

-rivate to the -ublic sector levied based on -redetermined criteria.

'ccording to 'rticle $7&($) of the 2onstitution of Bangladesh taxation includes the

im-osition of any tax rate duty or im-ost whether general local or s-ecial and tax shall

be construed accordingly. Rate is a local tax im-osed by local government on its residents

or the -ro-erty owners of the locality a duty is a tax levied on a commodity and an im-ost

is a tax im-osed for an entry into a country. 4nder the -rovision of article @, of the2onstitution Ano tax shall be levied or collected exce-t by or under the authority of an 'ct

of ParliamentA.

Bangladesh inherited a system of taxation from its -ast British and Pa:istani rulers. The

system however develo-ed based on generally acce-ted canons and there had been

efforts towards rationali8ing the tax administration for o-timi8ing revenue collection

reducing tax evasion and -reventing revenue lea:age through system loss. Taxes include

narcotics duty (collected by the e-artment of Narcotics 2ontrol *inistry of ome 'ffairs)

land revenue (administered by the *inistry of ?and and collected at local Tahsil offices

numbered on average one in every two 4nion Parishads) non1


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The first sales tax was introduced in the former 2entral Provinces of India in $%,@. In

Bengal sales tax was ado-ted in $%5$. In $%5@ sales tax was transferred as a central tax

under the /eneral ales Tax 'ct of $%5@. The ales Tax 'ct $%7$ came into force on $ Culy

$%7$ by re-ealing the Pa:istan /eneral ales Tax 'ct of $%5@. 4ntil $%@& sales tax was

being collected under the $%7$ 'ct which was re-laced by the ales Tax !rdinance $%@&.

The 3'T law was -romulgated by re-ealing the Business.

Income tax was first introduced in the subcontinent by the British in $@#6 to ma:e u- the

revenue deficit caused by the se-oy revolt $@7". 'fter inde-endence of Bangladesh

income tax was made effective under the Income Tax 'ct $%&& -assed on the basis of the

recommendations of the 'll1India Income Tax 2ommittee a--ointed in $%&$. 2urrently

income tax has been im-osed under the Income Tax !rdinance $%@5 (IT!) -romulgated on

the basis of recommendations of the +inal Re-ort of the Taxation 0n9uiry 2ommission

submitted in '-ril $%"%. Income tax-ayers (assesses) are classified as individuals

-artnershi- firms indu undivided families (4+) associations of -ersons ('!P)

com-anies (-ublicly traded and -rivate) local authorities and other artificial


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Tax Authorities of Bangladesh

There are 3-divisions under the Ministry of Finance (MOF) and Secretary leads each

division

The 2hairman of NBR (National Board of Revenue) is wor:ing under Internal Resource

ivision (IR).

NBR is the a-ex body of the Tax 'dministration.

It consists of two -artsF

(1) Customs & VAT

(2) Income Tax.

Both are under the same authority. There are 51members under NBR.

4nder the NBR a 2ommissioner of Taxes is the head of the de-artment and he is in charge

of a taxes Gone. There are @1Gones in Bangladesh.

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Types of Income

Income:Income means anything received in cash or in :ind unless exem-ted by laws.

1. Assessable Income:'ssessable Incomes are those incomes which are included in

the determination of total income of a tax-ayer.

a) Taxable Income:Taxable Incomes are those incomes that the tax is to be

-aid on those incomes.

b) Non- Taxable Income:Non H taxable income is ta:en into total income for

taxation rate -ur-ose but no tax is to be -aid on this -art of income.

2. Non1 'ssessable IncomeF Non1 assessable incomes are those incomes which are not

included in the determination of total income of a tax-ayer.

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Income

Assessable

Taxable Income

Non-Assessable

Non-Taxable


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Classification of Tax systems

Single Tax:!nly one tax for everybody. ingle tax is the -oll tax or the head tax or

adolescent tax which is im-osed on a -erson sim-ly because he is there in the society.

Multile Taxes:' system under which different ty-es of taxes shall be levied by the govt.

according to suitability. 0x. Income Tax 3'T.

Types of Taxation

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!i"ect Tax:irect tax is a sort of tax the im-act of effect incidents and which fall bac: on

the -erson on whom it is im-osed. i.e.F Income Tax *arriage Tax etc.

In#i"ect Tax:Indirect taxes are those burden of which can be -assed on others through-rice vehicles.

$"og"essi%e Tax:The tax rate increases as the taxable income;amount increases.

eg"essi%e tax:The o--osite of a -rogressive tax is a regressive tax where the tax rate

decreases as the taxable income;amount increases.

$"oo"tional Tax:In between is a -ro-ortional tax where tax is fixed as the amount to

which the rate is a--lied increases.

Methodology

'mong direct taxes income tax is one of the main sources of revenue. It is a -rogressive

tax system. Income tax is im-osed on the basis of ability to -ay. The more a tax-ayer earns

the more he should -ay1 is the basic -rinci-le of charging income tax. It aims at ensuring

e9uity and social


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Tax ate (Assessment ea"- 21-11):

*t+e" t+an Coman,:

+or individuals other than female tax-ayers senior tax-ayers of "6 years and above and

retarded tax-ayers tax -ayable for the

i"st 1/ Nill

Next 20 1

Next 32 1

Next 30 2

est Amount 2

+or female tax-ayers senior tax-ayers of age "6 years and above and retarded tax-ayerstax -ayable for the

i"st 2 Nil

Next 20 1

Next 32 1

Next 30 2

est Amount 2

*inimum tax for any individual assesses is T4. 2

Non1resident Individual 2(other than non1resident Bangladeshi)

o" Comanies:

$ublicl, T"a#e# Coman, 20.

Non-ublicl, T"a#e# Coman, 30.

5an4 Insu"ance & inancial Coman, 6

Mobile $+one *e"ato" Coman, 6

If any -ublicly traded com-any declares more than &6D dividend $6D rebate on total tax

is allowed.

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Tax ebate 'o" in%estment:

ate o' ebate:

'mount of allowable investment is either u- to &7D of total income or T:. 766666;1

whichever is less. Tax rebate amounts to $6D of allowable investment.

T,es o' in%estment 7uali'ie# 'o" t+e tax "ebate a"e:

?ife insurance -remium

2ontribution to deferred annuity

2ontribution to Provident +und to which Provident +und 'ct $%&7 a--lies

elf contribution and em-loyers contribution to Recogni8ed Provident +und

2ontribution to u-er 'nnuation +und

Investment in a--roved debenture or debenture stoc: toc:s or hares

2ontribution to de-osit -ension scheme

2ontribution to Benevolent +und and /rou- Insurance -remium

2ontribution to Ga:at +und

onation to charitable hos-ital a--roved by National Board of Revenue

onation to -hilanthro-ic or educational institution a--roved by the /overnment

onation to socioeconomic or cultural develo-ment institution established inBangladesh by 'ga han evelo-ment Networ:

8+o s+oul# submit Income Tax etu"n9

o If total income of any individual other than female tax-ayers senior tax-ayers of "6

years and above and retarded tax-ayers during the income year exceeds T:

$#7666;1.

o If total income of any female tax-ayer senior tax-ayer of "6 years and above and

retarded tax-ayer during the income year exceeds T: $@6666;1.

o If any -erson was assessed for tax during any of the , years immediately -receding

the income year.

o ' -erson who lives in any city cor-oration;-aurashava;divisional J;district J and

owns a building of more than one storey and having -linth area exceeding $#66 s9.

feet;owns motor car;owns membershi- of a club registered under 3'T ?aw.

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o If any -erson subscribes a tele-hone.

o If any -erson runs a business or -rofession having trade license.

o 'ny -rofessional registered as doctor lawyer income tax -ractitioner 2hartered

'ccountant 2ost K *anagement 'ccountant 0ngineer 'rchitect and urveyor etc.

o *ember of a 2hamber of 2ommerce and Industries or a trade 'ssociation.

o 'ny -erson who -artici-ates in a tender.

o ' -erson who has a Tax-ayers Identification Number (TIN).

o 2andidate for 4nion Parishad Paurashava 2ity 2or-oration or Parliament.

Time to Submit Income Tax etu"n:

+or 2om-any By fifteenth day of Culy next following the income year or where the fifteenth

day of Culy falls before the ex-iry of six months from the end of the income year before the

ex-iry of such six months.

+or !ther than 2om-any 4nless the date is extended by the Thirtieth day of e-tember

next following the income year.

Conse7uences o' Non-Submission o' etu"n

o im-osition of -enalty amounting to $6D of tax on last assessed income sub


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No. ;ea#s Section


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7 Indenting commission ;

hi--ing agencycommission

ection 7&

(Rule $")

,.7D of the total recei-t of

indenting commission K 7D

of total hi--ing agency

commission recei-t

Gone1&

# Royalty +ees for-rofessional or technical

services

ection 7& ' $6D of the fees Gone1@

" tevedoring agency K

ecurity service

ection 7&

''".7D of the fees 2tg. Gone1

&

@ 2 K + agency

commission

ection 7&

'''".7D of the fees Gone1&

% ale of bandrolls ( for

biri)ection 7&B #D of the value of bandrolls.

Res-ective

Gone

$6 2om-ensation for

ac9uisition of -ro-ertyection 7&2

#D of the com-ensation

money

Gone1&

$$ Interest on saving

instruments

ection 7&$6D of the amount of

interest (2urrent rate)

Gone1&

$& 2ollection of tax from

bric: manufacturersection 7&+

$ ec. L T:.$6666; for each

bric: field.$.7 ec. L T:.$&666; for

each bric: field.& ec. L T:.$@666; for each

bric: field.

Res-ective

Gone

$, 2ommission on ?etter of

2reditsection 7&I

7D of the amount of

commission.

?T4

$5 Issuing K Renewal of

trade licenceection 7&

T: 766;1 +or renewal of each

?incence

Gone1,

$7 Trustee fees ection 7&? $6D

$# +rieght +orward agency2om. ection 7&* ".7D

$" Rental -ower ection 7&N 5D

$@ Im-ort of goods ection 7,

(Rule$"'),D of the value of im-orts.

Gone1&

$% Income from house

-ro-erty (house rent)ection 7,'

(Rule$"B)

No deduction if monthly rent

is below &6666;1

,D (if monthly rent is&6666156666 T:.) and7D (if monthly rent is above

56666 T:.)

Gone1&

ha K

!theroutside

Gone

&6 hi--ing business of

resident

ection 7,'' 7D of freightGone1&ctg

&$ 0x-ort of man-ower ection 7,B

(Rule $"2)$6D of the service charges.

Gone1&

dh: K ctg

&& 0x-ort of nitwear ection 7,BB 6.&7D Gone17

&, *ember of toc:

0xchange

ection

7,BBB6.6$7D

Gone1"

&5 0x-ort of goods exce-t ection 6.&7D Gone17

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nitweare K Moven

garments

7,BBBB

&7 ale of goods by -ublic

auction

ection 7,2

(Rule $")7D of the sale -rice

Gone1&

2ourier ervice (Non1resident)

ection 7,22 ".7D Gone1#

&" Payment to film actors

and actressesection 7,

(Rule $"0)

7D of the amount -aid

exceeding

T:. ,#666;1

Gone1&

&@ 2ash subsidy ection 7, 7D Gone17

&% 2ommission +ees or

discount -aid todistributors

ection 7,0

(Rule $"/)

".7D of the amount of

commission.

Gone1& K

?T4

,6 2ommission or charges

-aid to the agents of

foreign buyers ection 7,00 5 D on the amount of

commission or charges.

h:.Gone1

#

2tg.Gone1,

and GoneofRes-ective

ivision

,$ Interest on ban:

de-osits

ection 7,+

(Rule $")

$6D of the amount of

interest.

Gone1$

,& Real 0state K

evelo-ers ection 7,++

In case of Bldg. &76 -er s9.

meterIn case of land 7D of deed

value

Gone17

,, Insurance commissionection 7,/

,D on the amount of

commission

?T4

,5 2ommission -aid to theurveyors of /eneralInsurances ection 7,// ".7D on the amount of

commission.

h:.Gone1&2tg.Gone1,

and Goneof

Res-ectiveivision

,7 Transfer of -ro-erty ection 7,

(Rule $"I)

7D of the value of the

-ro-erty.

urvey

Gone

Interest on Post !ffice

avings Ban: 'ccountection 7,I

No deduction if the amount

of interest does notexceeds T:.$76666 and if

exceeds then $6D on the

amount of interest .

Gone1&

,# Rent of vacant land

-lant and machineryection 7,C

(Rule $"BB)

No deduction if monthly rent

is below $7666;1

,D (if monthly rent is

$7666 1,6666 T:.) and7D (if monthly rent is above

,6666 T:.)

Gone1&

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," 'dvertising bill of news

-a-er maga8ine-rivate television

channel

ection 7,,D of the value of the

-ro-erty.

Gone17

,@ ividendection 75

($) Resident individual $6Dnon1resident individual &7D

(&) 2om-any $7D

?T4 (only?T4s files)

all othersGone1&

,% Income from lottery ection 77 &6D of the amount won. Gone1&

56 Income of non1resident

!ther than non1resident BangladeshiO

ection 7#2om-any 1 rate a--licable to

the com. !ther thancom-any 1 maximum rate.

Gone1#

Ma=o" a"eas 'o" 'inal settlement o' tax liabilit,:

Tax deducted at source for the following cases is treated as final discharge of tax liabilities.

No additional tax is charged or refund is allowed in the following casesF

o u--ly or contract wor:

o Band rolls of handmade cigarettes

o Im-ort of goods

o Transfer of -ro-erties

o 0x-ort of man-ower

o Real 0state Business

o 0x-ort value of garments

o ?ocal shi--ing business

o Royalty technical :now1how fee

o Insurance agent commission.

o 'uction -urchase

o Payment on account of survey by surveyor of a general insurance com-any

o 2learing K forwarding agency commission.

o Transaction by a member of a toc: 0xchange.

o 2ourier business

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o 0x-ort cash subsidy

Tax eco%e", S,stem:

In case of non1-ayment of income tax demand the following measures can be ta:en against

a tax-ayer for reali8ation of taxF

Im-osition of -enalty

'ttachment of ban: accounts salary or any other -ayment.

+iling of 2ertificate case to the -ecial *agistrate.

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A#%ance $a,ment o' Tax

0very tax-ayer is re9uired to -ay advance tax in four e9ual installments falling on $7th

e-tember $7th ecember $7th *arch and $7th Cune of each year if the latest assessed

income exceeds Ta:a three la:h. Penalty is im-osed for default in -ayment of any

installment of advance tax.

iscal incenti%es

olloing a"e 'iscal incenti%es a%ailable to a taxa,e":

a) Tax +oli#a,:Tax holiday is allowed for industrial underta:ing tourist industry

and -hysical infrastructure facility established between $st Culy &66@ to ,6th

Cune &6$$ in fulfillment of certain conditions.

In#ust"ial >n#e"ta4ing ?ligible 'o" Tax +oli#a,:

(i) 'n industry engaged in -roduction of textile textile machinery


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c) Income derived from any mall and *edium 0nter-rise (*0) engaged in

-roduction of any goods and having an annual turnover of not more than ta:a

twenty four la:h is exem-t from tax.

#) Industry set u- in 0PG is exem-t from tax for a -eriod of $6 years from the dateof commencement of commercial -roduction.

e) Income from fishery -oultry cattle breeding dairy farming horticulture

floriculture mushroom cultivation and sericulture are exem-t from tax u- to ,6th

Cune &6$$ sub


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$6 Mala,sia

$$ aan

$& In#ia

$, e"man,

$5 Net+e"lan#s

$7 Ital,

$# !enma"4$" C+ina

$@ 5elgium

$% T+ailan#

&6 $olan#

&$ $+iliines

&& Vietnam

&, Tu"4e,

&5 No"a,

&7 >SA

In#onesia

&" SitDe"lan#

&@ *man

teps for collecting Income Tax in

Bangladesh

Submission o' income tax "etu"ns is gene"all, #ue b,:

,6th e-tember in case of non1com-anies and

,$st ecember in case of com-anies.

Assessment is ma#e in se%e"al "oce#u"es. T+e, a"e:

elf assessment

Presum-tive assessment

-ot assessment

Pre1audit based assessment

owever certain -ercent of self assessment cases are selected for audit.

'ssesses can -refer a--eal if aggrieved by his assessment. There are three -rimary forums

for a--eal. They are to the '--ellate 2ommissioner;'dditional 2ommissioner;Coint

2ommissioner or to the 2ommission for reviews. The decisions of '--ellate

2ommissioner;'dditional 2ommissioner;Coint 2ommissioner can be challenged to the next

'--ellate 2ourt named as '--ellate Tribunal.

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Mithholding tax is levy able on a number of items including contractors im-orts transfer of

urban land;building ban: de-osits etc.

!rocedure of Assessment

enerally the folloings ste*s are folloed in case of +ssess,ent of the o,*any

and the or*oration

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tep-"

tep-#

tep-$

tep-%

Computation of Business

Income

Computation of Total Income

&etermination of Total Tax

'iabilities

&etermination of Net Tax

'iabilities


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'ccording to ections &@ &% and ,6 of IT! $%@5 Income from business is to be calculated

after considering admissible and inadmissible ex-enses to this end.

Total Income of the 2om-any is to be calculated by adding other income with income from

business.

Total Tax liabilities are to be determining by a--lying -rescribed tax rate.

Net Tax liability is to be ascertained by deducting the following tax rebate from Total Tax

liabilitiesF

o $6D Tax rebate on foreign income

o Tax rebate on increased -roduction in case of industrial com-any if a--licable.

o Tax rebate on ex-ort income (at rate a--licable)

o Tax rebate and average rate on tax free income

!roblems in collection of Income Tax

Tendency of tax avoidance is one of the main -roblems in collecting Income Tax by the

Income Tax 'uthority in Bangladesh. It is the legal utili8ation of the tax regime to ones ownadvantage in order to reduce the amount of tax that is -ayable by means that are within

the law. By contrast tax evasion is the general term for efforts to not -ay taxes by illegal

means. The term tax mitigation is a synonym for tax avoidance. Its original use was by tax

advisors as an alternative to the -e


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5ase# on t+ese concets a"ises t+e illa"s o' Tax $"oteste"s as ell as Tax

esistance

ome of those attem-ting not to -ay tax believe that they have uncovered inter-retations

of the law that show that they are not sub


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?evel of evasion de-ends on a number of factors one of them being fiscal e9uation. Peo-les

tendency to evade income tax declines when the return for due -ayment of taxes is not

obvious. 0vasion also de-ends on the efficiency of the tax administration. 2orru-tion by the

tax officials often renders control of evasion difficult. Tax administrations resort to various

means for -lugging in sco-e of evasion and increasing the level of enforcement.

$ublic oinion on tax a%oi#ance

Tax avoidance may be considered to be the dodging of ones duties to society or

alternatively the right of every citi8en to structure ones affairs in a manner allowed by law

to -ay no more tax than what is re9uired. 'ttitudes vary from a--roval through neutrality to

outright hostility. 'ttitudes may vary de-ending on the ste-s ta:en in the avoidance

scheme or the -erceived unfairness of the tax being avoided.

Co""ution b, tax o''icials

2orru-t tax officials coo-erate with the tax -ayers who intend to evade taxes. Mhen they

detect an instance of evasion they refrain from re-orting in return for illegal gratification or

bribe. 2orru-tion by tax officials is a serious -roblem for the tax administration in a huge

number of underdevelo-ed countries.

T+e #istinction in %a"ious =u"is#ictions o' Tax ?%asion an# Tax A%oi#ance

The use of the terms tax avoidance and tax evasion can vary de-ending on the


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Conclusion

Though the rate of tax revenue is to /P is very negligible des-ite the government is trying

to maximi8e its tax revenue through different method. But the government should also

remind the cannon of convenience while collecting tax from assesses.

's we are living in a civili8ed society 1 should come forward to -ay taxes to government in

order to conduct the administrative defense and develo-ment activities of the country.

!therwise we would not be able to -rove ourselves as civili8ed -eo-le.

Tax is the most im-ortant in the hand of the government to control the economy as well as

the inflection. It also hel-s in -ush money to the economy develo- certain source of the

economy and control some other activities of the economy. No /overnment can run its and

-erform administration wor:s without collecting tax as a source of revenue. o the

/overnment im-oses tax over the com-any and the cor-orations. !n the other hand

/overnment can also intensive to the infant and certain basic industry for -rotection

through its tax -olicy.

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Tax Authorities of Bangladesh

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Transcript of Tax Authorities of Bangladesh