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.
