Tax Holiday practice in Bangladesh

Wpfreeware 6:49 AM Tax Holiday practice in Bangladesh

Tax Holiday practice in Bangladesh

Tax holiday is allowed to industries subject to the relevant rules and procedures set by the National Board of Revenue (NBR). Presently, it is allowed for 5, 7, 9 and 12 years for industries set up in the developed, less developed, least developed and special economic zones respectively. The period of such tax holiday is calculated from the month of commencement of commercial production. The eligibility of tax holiday is to be determined by the NBR and the commencement of production is certified by the respective sponsoring agencies.

Condition for Tax Holiday:

Period of tax holiday has been further extended for 3 years beyond 30th June, 2008 in respect of industrial undertaking, tourist industry and physical infrastructure facility subject to following conditions:

The undertaking is set up in Bangladesh between 1st July, 2008 and 30th June 2011;
Act of Parliament having head office in Bangladesh or (ii) a company defined under Companies Act 1913 or 1994 having subscribed & paid up capital of not less than Taka1,000,000 on the date of commencement of commercial production;
The undertaking is engaged in: [Section 46(B), Para # 2]
- ✓ The Industrial Undertaking in the production of textile, jute, high value garments(Overcoats, jackets & suits), pharmaceuticals, melamine, plastic, ceramics, sanitary,
- ✓providing on commercial basis, physical infrastructure facilities;
- ✓Tourist industry as defined in the explanation to Section 46;
30% of the tax exempted income to be invested in the same undertaking or for a new industry during the period of exemption or within one year of expiring tax holiday period. An additional10% profit has to be invested each year within 3 months of closing the income year purchasing shares of listed companies in Bangladesh;
The undertaking is not formed by splitting up or by reconstruction or reconstitution of an existing business or by transfer to a new business of any machinery or plant used in Bangladesh at anytime before commencement of the new business;
An application shall be filed with the Board for approval of the undertaking within 6months from the end of the month of commencement of commercial production or operation, and the undertaking must be approved by the Board;

Computation of Tax Holiday Income

a) The profit and gain shall be computed under the head income from business or profession(section 28)
b) Loss sustained in a tax holiday undertaking shall not be set off against profits of taxable units. Loss shall be carried forward to be set off against income from same undertaking in the following years, but not beyond tax holiday period;
c) Only normal depreciation allowance, if any, shall be allowed;
d) Any dividend distributed by a tax-holiday company to its shareholders out of its exempted profit shall not be exempt from tax;
e) Capital gains earned by tax holiday undertaking shall not be exempt from tax; Income of the said undertaking resulting from disallowance made under section 30 shall not be exempted from tax;

New List of eligible sectors for Tax Holiday: [Section 46B]

(i)Industrial Undertaking Eligible for Tax holiday:

(a) Active pharmaceuticals ingredient industry and radio pharmaceuticals industry;
(b) Barrier contraceptive and rubber latex;
(c) Basic chemicals or dyes and chemicals;
(d) Basic ingredients of electronic industry (e.g. resistance, capacitor, transistor, integrator circuit);
(e) bio-fertilizer;
(f) Biotechnology;
(g) Boilers;
(h) Compressors;
(i) Computer hardware;
(j) Energy efficient appliances;
(k) Insecticide or pesticide

(ii) Physical Infrastructure Eligible for Tax holiday:

(a) Deep sea port;
(b) elevated expressway;
(c) Export processing zone;
(d) Flyover;
(e) Gas pipe line,
(f) Hi-tech park;
(g) Information and Communication Technology (ICT) village or software technology zone;
(h) Information Technology (IT) park;
(i) Large water treatment plant and supply through pipe line;
(j) Liquefied Natural Gas (LNG) terminal and transmission line;
(k) mono-rail;
(l) Rapid transit;
(m) Renewable energy (e.g. energy saving bulb, solar energy plant, windmill);
(n) Sea or river port;
(o) Toll road;
(p) Underground rail;
(q) Waste treatment plant; or
(r) Any other category of physical infrastructure facility as the Government may, by notification in the Official Gazette, specify