Bangladesh Company Tax Return Guide for 2023-2024

OVERVIEW

  1. Company Tax Rate in Bangladesh:
  2. Withholding Tax Rates:
  3. VAT Rates in Bangladesh:
  4. Online Product Selling Regulations :
  5. TDS, VDS on Procurement & Supply Business:
  6. General Compliance Guidance
  7. DVS Audit Report Compliance
  8. Company Tax Return Checklist

ANNUAL TAX FILLINGS

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:

  1. File income tax return annually (usually on 15th January of next year following financial closing, usually (July-June)
  2. Make sure to inject paid-up capital into the company’s bank account by cheques or online transfer.
  3. Make sure the debit-credit in the bank statements is adequately explained.
  4. Minimum tax usually @.60% of gross revenue to be paid even if the company makes loss in that year.

 

    Corporate Tax Rate in Bangladesh:

    Publicly traded companies (listed companies on stock market) 25%
    Non-publicly traded companies (private companies limited by shares) 27.5%
    Publicly traded banks, insurance, and financial institutions other than merchant banks 37.5%
    Non-publicly traded bank, insurance, and financial institutions 40%
    Publicly Traded mobile network operators 40%
    Non-publicly Traded mobile network operators 45%
    Publicly Traded cigarette manufacturers 45%
    Non-publicly Traded cigarette manufacturers 45%
    One Person Company.

    22.5%

     

     

    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.

    General Compliance Guidance

    No deduction on account of allowance from income from business or profession as expense shall be admissible in respect of the following, if;

    1. Any payment made by way of salary to an employee for whom the statement under section 108A was not provided
    2. Any payment by way of salary or remuneration made otherwise than by crossed cheque or bank transfer by a person to any employee having gross monthly salary of taka twenty thousand or more;
    3. Any expenditure by way of incentive bonus exceeding ten per cent of the [ net profit disclosed in the statement of accounts];
    4. Any expenditure by way of overseas traveling exceeding [zero point five zero percent (0.50%)] of the disclosed turnover
    5. Any payment by a person exceeding taka fifty thousand or more, otherwise than by a crossed cheque or bank transfer excluding-

    i. Salary or remuneration made to any employee, without prejudice to an obligation referred to in clause (i)

    ii. Any payment on account of purchase of raw materials

    iii. Any payment for government obligation

    Any promotional expense exceeding zero-point five-zero percent (0.50%) of the disclosed business turnover.

    For the purpose of this clause, promotional expense means any expense incurred by way of giving any benefit in kind or cash or in any other form to any person for the promotion of business or profession.

    1. If the Entertainment expense surpasses the 4% of the first 10 lac of the Income and 2% of the subsequent profits and gains of the business.
    1. The expenditure or aggregate of the expenditure by an assesse by way of royalty, technical services fee, technical know-how fee or technical assistance fee or any fee of similar nature, as exceeds the following:

    Ten percent (10%) of the [net profit from business or profession, excluding any profit or income of subsidiary or associate or joint venture, disclosed in the statement of accounts in the first 3 years & 8% on the subsequent years.

     

    a. Where a company, not listed with any stock exchange, receives paid up capital from any shareholder during any income year in any other mode excepting by crossed cheque or bank transfer, the amount so received as paid-up capital shall be deemed to be the income of such company for that income year and be classifiable under the head “Income from other sources.

    b. If the earning of a person or entity exceeds or presumed to be exceeded taka Six Lakh in a fiscal year, Advance tax shall be payable in four equal instalments on the fifteenth day of September, December, March and June of the financial year for which the tax is payable.

    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?

    Company Tax Return Checklist

    1. Company Trade License
    2. TIN Certificate
    3. AOA & MOA of the Company
    4. Form 12 of the Company
    5. Bank Statements of all bank accounts up to 30th June of the Financial Year
    6. All TDS deposit Slips
    7. All VAT deposit Slips
    8. All VDS deposit Slips
    9. ALL 9.1 Return Forms
    10. All 75A returns & Salary Return or other Statutory Return Forms
    11. Update Schedule 10
    12. Annual General Meeting
    13. Business Identification Number (BIN)
    14. Previous Years Audited Reports
    15. Pervious Years Tax Return Submission Forms, Acknowledgements & Clearance Certificates
    16. Employee Salary Sheets
    17. Journals, Monthly Ledger or Expense Book
    18. Sales Reports & Sales Book
    19. Tax Exemption Certificate (if any)
    20. Auditor Appointment Letters

     

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