The income of following resident foreigners are excluded from total income

I T O ,1984

Solution of Income Tax in Bangladesh

Friday, August 22, 2014

Solution of Company Tax of Bangladesh



Company Tax

Introduction:  Bangladesh has a developing economy. It opens its market for foreign investors since 1991. Since then various business oriented steps have been taken to attract the investors. So it is very easy to do business here. To boost up the economy her Taxation policy is progressive .   In the context of Bangladesh, Corporate Taxation means charging of tax on income or profits of companies. It differs from tax imposed on individuals. 

1. What is a Company?
A company is a business organization that makes, buys, or sells goods or provides services in exchange for money.
The owners of a company have limited liability and the business has a separate  legal personality from its owners. Corporations or company can be either owned by individuals or Govt. A non-government for-profit corporation or company is owned by its shareholders and run by board of directors. A privately owned, for-profit corporation  is listed on a stock exchange .

02. Definition of Company:

Under section 2(20) of the Income Tax Ordinance 1984, “Company” means a company as defined in the Companies Act, 1913 (VII of 1913) or Companies Act, 1994 (Act No. 18 of 1994) and includes-
(a)          A body corporate established or constituted by or under any law for the time being in force;
(b)          Any nationalized banking or other financial institution, insurance body and industrial of business enterprise;
(bb)       Any association or combination of persons called by whatever name, if any of such persons is a company as defined in the Companies Act 1913 (VII of 1913) or Companies Act, 1994 (Act No. 18 of 1994);
(bbb)  any association or body incorporated by or under the laws of a country outside Bangladesh, and’
(c)          Any foreign association or body not incorporated by or under any law, which the Board may, by general or special order, declare to be a company for the purposes of this Ordinance.


03. Classification of Companies:
There are three categories of companies
(1)   Bank, insurance or Financial institution;
(2)   a) Publicly traded company
       b) Non-publicly traded company
 (3) Mobile Phone Operator company

04.What is Publicly Traded Company:

 ‘Publicly traded Company” bears the following features:

(a)    Registered in Bangladesh under the Companies Act 1913 or 1994;
(b)   Enlisted with the Stock Exchange before the end of the concerned income year in which income tax assessment will be made.

05. Responsibilities of a Corporate Taxpayer under Income Tax Laws

A corporate taxpayer has the following responsibilities according to various sections in the Income Tax Ordinance 1984:
(1)                                                Responsibilities as an assessee (taxpayer):
(2)                                                Responsibilities  as a Tax collector on behalf of  authority:

(1)             As an assessee (taxpayer):
-        Collection of TIN (Tax-payer’s Identification Number) Certificate (u/s 184B, 184A)
-        Displaying of TIN Certificate u/s 184c
-        payment of Advance income tax u/s 48,64-73
-        Payment of tax as per tax return u/s 74
-        Filing of statements and return in prescribed forms u/s 75
-        Filing of revised return before assessment u/s 78
-        Maintenance of accounts and documents: u/s 35
-        Production of accounts and documents on receipts of a notice from the DCT: u/s 79

-     Compliance with various notices like  
·        Notice of demand u/s 135,
·        Notice to file return u/s 77,
·        Notice to produce accounts, statements and documents u/s 79
·        Notice to attend hearing u/s 83(1) in case of assessment after hearing,
·        Notice to inform re-assessment u/s 93(1),
·        Notice to attend hearing u/s 130 in case of imposing penalty u/s 123-128,
·        Notice calling for information u/s 113

(2)             As a tax collector on behalf of tax authority:

-        Having an  Account number u/s 184BB
-        Tax deduction at sources (TDS),  and deposit it to the Treasury u/s 48-63
-        Giving documents of TDS with necessary information u/s 58, and
-        Furnishing annual returns in case of payment of salary (u/s 108), interest (u/s 109) and dividend (u/s 110).

(3)             Obligations of related persons of a corporate entity.
-        Filing a return of the income of any other person for whom the company is assessable [u/s 75(1B)]
-        Joint liability in case of director of a private company (u/s 100)
-        Joint Liability in case of liquidator of a private company (u/s 101).

06. TIN (Tax-payer’s Identification Number) Certificate for a Company:

Where is it necessary?
 In following cases, a company requires mandatory submission of TIN Certificate u/s 184A:

(1)   Registration of a company under Companies Act,1994
(2)    in respect of sponsor directors u/s 184A(1).
(3)    Opening a letter of credit for  import [clause (a)];
(4)   Submitting an application for an import registration certificate [clause (aa)]
(5)   Renewal of trade license
(6)   Submitting tender documents [clause (c)];
(7)   Registration for purchase of a land, building or an apartment [clause (f)];
(8)   Registration, change of ownership or renewal of fitness of a car, jeep or a microbus [clause (g)];
(9)   for ISD connection [clause (k)].

Where to obtain TIN Certificate?
 from the Deputy Commissioner of Taxes (DCT) under whose jurisdiction Company is being assessed

What is required?
For Taxpayer’s Identification Number (TIN) it should do the following things
        an application in the form prescribed under rule (u/r) 64 B.
        documents of incorporation in Joint Stock Companies

What to do
 display such certificate at a conspicuous place of the company’s business premises.

07. Submission of Income Tax Return

When to file
 by the fifteenth day of July next following the income year
or, where the fifteenth day of July falls before the expiry of six months from the end of the income year, before the expiry of such six months u/s 75(3),
In case of company though 15th July is the last date of submission of return but every company will get at least 6 months time from the end of the accounting year to submit tax return. Some examples are tabulated below: -

Sl. No.
Year Ending
Last date of submission of Return
1.
31.12.2007
15.07.2008
2.
30.06.2008
31.12.2008
3.
31.03.2008
30.09.2008
4.
30.09.2008
15.07.2009
5.
30.07.2008
15.07.2009
6.
15.07.2008
15.07.2009
how to extend time
on application from the company, the assessing officer [DCT] may extend the return filing period up the three months from the date so specified and the date may be further extended up to another three months with the approval of Inspecting Joint Commissioner.

The return should be signed by the principal officer [75(2) (b) (iii)].
Under section 2(48), ‘principal officer’, used with reference to a company includes-

(a)     DCT has served a notice of his intention to treat him as principal officer thereof.

  
  (8)Universal self-assessment (Sec. 82 BB):
It is introduced in our country from the assessment year 2007-2008 to make assesses relieve of hassle. Before  submitting return in this method an assesse has to do the following things
  •      tick the box universal self assessment at the top of the return form
  •      return must be correct and complete.
  •  properly signed by principal officer (Managing director, manager, secretary, treasurer,    accountant or any officer responsible for management or administration of the affair
  •   submitted with Audit Report/  Statement of accounts from a CA 
  •     Separate statement is to be submitted for:
q  Any income from other sources e.g. interest, dividend, etc.
q  Tax exempted income [rule 24]
q  Information regarding name, address and TIN of the directors of the company (rule 24]
q  Evidence of tax payment on the basis of income disclosed in the return.


  •    to be submitted within the last date of submission of return or within the extended time    
                    allowed by the DCT.

  •     Tax as per return (if any) is to be paid before submission of return.
  •     Computation of income according to income tax law [rule 24]    



What to do after submission of Return
     obtain a  receipt of such return and that receipt will mean that assessment is complete



.

Tax audit  and reopen of cases :
The return submitted at this system may be selected by the NBR or its subordinate authority (if so authorized by the Board) for audit. The Board will determine the manner of such selection. But to keep himself out of audit, an assessee will have to fulfill the following conditions:
                   initial capital investment in case of new assessee should be at least 4 times of shown  income.
                    Should not transfer within 5 years from the end of the assessment year in any manner
                    Submit all necessary documents of income and investment
Reopen If any concealment has been detected in the return submitted by the assessee under universal self assessment scheme within 6 years from the end of the assessment year then the DCT may re-open the case and proceed to assess further.


If the return is selected for audit or reopen what to do
                            Giving proper answer of issue/issues of audit or reopen
respond to notice under section 83(1)/93 and appear before  concerned DCT
Submit all requirements from tax office
                     


09. Method of Accounting and maintenance of Accounts [sec 35]


q  income shall be computed with regular method of accounting followed by the company [sec 35(1).
q  if there is no regular method of accounting or if the method cannot be properly ascertained, DCT shall  compute income in a  fit method [sec 35(4)]







10.How to compute income from Business or Profession (S. 28):
Profits and gains of any business or profession run by the assessee at any time during the income year shall be classified and computed under this head. The following income shall be classified and computed under the head of “Income from business or profession”: -

a)     Profits and gains of any business or profession
b)     Value of benefit and the trading liability referred to in sec 19(15)
·        Recovery of any loss, bad debt or expenditure which was previously allowed as deduction
·        Any amount of interest on loan to any commercial bank, BSB, BSRS, any bank run on Islamic principles allowed as deduction but remains unpaid for three years
·        Trading liability remains unpaid for three years
.
c)      Excess amount referred to in sec-19 (16)
·        Gains on disposal of building, plant used for business

d)     Excess amount referred to in sec-19 (18)
·        Insurance, salvage or compensation received for building, plant being discarded, demolished
e)      Sale proceeds referred to in sec-19 (20)
·        Gains on disposal of capital asset on scientific research
f)      The amount of income under section 19(23)
           Sale of export quota by an exporter of garments
g)     Value of any benefit or perquisite arising from business

(a). Allowable expenditure for business under section-29 :

Rent;
Interest on borrowed money;
Depreciation allowance.
Any expenditure incurred wholly & exclusively for the purpose of business of profession.





(b). Inadmissible Expenses u/s 30
           
i)                 Payment of salary, if tax has not been deducted at source u/s 50[sec. 30(a)]
ii)               if tax or VAT not deducted at the time of payment [u/s 30(aa)].
iii)             Payment of brokerage or commission to a non-resident person without deduction of tax at source u/s 56 [vide u/s 30(c)].
iv)              Payment to employees’ provident fund or other funds unless deduction of tax at source while making the payments from the fund ‘u/s 30(d)].
v)               Payment of perquisites or other benefits to an employee in excess to TK. 2,50,000[u/s 30(e) ] except according to Government decision published in the official [Proviso to sec. 30(3)].
vi)              Expenditure on foreign travels of employees and their dependents, spouse and minor children including step and adopted children for holidaying and recreation
vii)            Distribution of free samples exceeding the following limit as per Rule 65C [vide u/s 30(f)(iv)]:





Turnover
Deduction for expenses for free sample as % of turnover

Pharmaceutical Industry
Other Industry
Up to Tk. 5 crore
2%
1.5%
Exceeding Tk. 5 crore, but up to Tk. 10 crore
1%
0.75%
Exceeding Tk. 10 crore
0.5%
0.375%

viii)          Entertainment expenditure exceeding the limits specified below as per Rule 65 [vide u/s 30(f) (i)].

Profits, income and gains
Admissible deduction
First Tk. 10 lakh
4% of the above profit, income and gains
On the balance
2% of the above profit, income and gains

ix)              Head Office expenses: Expenditure exceeding 10% of the profit under the head by a company not incorporated in Bangladesh under the Companied Act 1994. [u/s 30(g).
x)               Royalty or technical expenses: Payment by way of royalty, technical service fee technical know how fee or technical assistance fee exceeding 8% of the profit [u/s 30(h).
xi)              Salary not through bank: Payment by way of salary or remuneration made otherwise than by crossed cheque or bank transfer by a person to an employer having gross monthly salary of Taka 15,000/- or more u/s 30(I), inserted by the FA 2006]
xii)            Incentive bonus: Expenditure by way of incentive bonus exceeding 10% of disclosed net profit [u/s 30(f), inserted by the FA 2006].
xiii)          Overseas traveling: Expenditure by way of overseas traveling exceeding 1% of disclosed net profit [u/s 30(k), inserted by the FA 2006].



(C). Restriction on Disallowance by the DCT [sec. 30A]

The DCT shall not make any disallowance without specifying the reasons for such disallowances of deduction.


(e). Set-off and Carry-forward of Losses [Section 37-43]

Where loss is assessed in any head of income, the assessee is entitled to set off the loss against its income assessed in other heads of that year.
However, loss on speculation business and loss on capital gain cannot be set off against income from any other head. Such loss can be set off only against the income of respective speculative business or capital gains.
When loss cannot be wholly setoff, then the unabsorbed loss under the following four heads shall be carried forward but for not more than six successive assessment years:
·              Speculation business income
·              Other business income
·              Capital gain and
·              Agricultural income.
·               

Important Notes—
           
·              Loss from business or profession shall not be set off, or be carried forward for set off, against income from house property. [F.O-2007]
·              In case of capital loss, it cannot be carried forward if the loss does not exceed Taka 5,000/-.
·              Unabsorbed depreciation loss can be carried forward for unlimited period.
·              Loss so carried forward is to be set off against income of the respective source (in case of business income/head only.
·              Loss from the source of exempted income can not be set off against any source of taxable income.










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