Solution for resident foreigners in Bangladesh

As Bangladesh has diplomatic relation with many countries and representative of those countries enjoy warm entertainment here so  problem arisen regarding their paying tax . But keeping pace with the whole world Bangladesh provides facilities for them . Moreover while coming from abroad a problem arises about how much baggage or gold , silver etc. a passenger can bring with him. These solutions are provided here.

The income of following resident foreigners are excluded from total income

source : 6^th schedule part A para 7 of I T O ,1984

    

a) ambassador/high commissioner, envoy, minister, charge d’affairs , commissioner, counsellor, consul de carriere, adviser or attache of an embassy/ high commission, legation and commission from such state

b) trade commissioner or other official representative of a foreign state in Bangladesh under some conditions   

c) a member (who is not a citizen in Bangladesh ) of the staff of any officials stated above 

conditions not a citizen of Bangladesh

subject of the country represented or some other foreign state

not engaged in any other business / profession

if concerned country provides similar exemptions for similar members of staffs

How much gold or baggage can a passenger bring from abroad without duty

source: proggapon ......

          S R O  no 165ain/ 2011/2352 / customs     sec 219 of customs act 9 june ,2011

a passenger can bring gold / silver ( bar or ornaments) weighing 200 gm without any customs duty  

facilities for crew, sailor and others coming from abroad

          

           Bangladeshi crew or officer working in Bangladeshi  airlines  coming from abroad or a foreign airlines when conducting flight in Bangladesh baggage upto 100 us dollar

             Bangladeshi sailor or officer working in foreign vessel baggage upto 300 us dollar

customs declaration 

compulsory for all types of passengers from abroad

Double Taxation Avoidance Agreement & method of determining notional income

Today I am going to discuss about double taxation which is a very common problem faced by a resident  or non resident when comes from abroad .  If the country has agreement with Bangladesh , the taxpayer ( assesse) may not pay tax again under some conditions . In fact , to develop economy Govt. of many countries sign many treaties with each other. It relieves them from discrimination and misunderstanding. It develops mutual understanding and friendship. Details of it is available here. 

Double Taxation Avoidance Agreement (Sec. 144 read with 7th Schedule) :

The Bangladesh model of Agreement on Avoidance of Double Taxation consists of 29 Articles  . Bangladesh has agreement with more or less 32 countries.

name of continent	country
Asia	India, Sri Lanka, Pakistan, China, Japan,     Singapore, Korea, Philippines, Thailand, Vietnam, Myanmar, Malaysia, Indonesia, Mauritius, Saudi  Arabia, U A E, Oman, Turkey
Europe	UK, Norway, Sweden, France, Germany , Netherlands, Italy, Denmark ,Romania, Belgium , Poland, Switzerland
North America	Canada, USA

Requirements  

                       Tax clearance certificate from where he came

method of determining the amount of notional income of non resident

Sometimes non resident taxpayer may have profit/ gain/ income in Bangladesh . But at that time he may be in a foreign country. Therefore, it is necessary to address the issue here.

     Rule-35 read with rule-34 prescribes the method of determining the amount of notional income in respect of which the non resident may be charged under section 104.

who will charge ?

                         D C T

when?

                       actual amount of profit/ gain/  income accruing or arising in Bangladesh to non resident Bangladeshi cannot be determined

source

                         business connection, any property ,any asset in Bangladesh

amount :

                   to be determined by DCT on the basis of percentage of turnover accruing or arising considered reasonable or on profits computed under provisions

foreign remittance, business

Foreign Remittance  

 Today I am going to discuss about foreign remittance which is a very important issue in Bangladesh . A lot of Bangladeshies live in different parts of the world. They earn and send foreign currency . But the problem they face at the time of assessment whether the currency sent by them is exempted from tax or not .

Foreign remittance exempted from tax

 As per S.R.O. No. 216-Law/ Income tax/2004 dated 13/07/2004 foreign income of a Bangladeshi national , irrespective of resident or non-resident, is exempt from payment of tax if it comes through official channel.

Is every type of foreign income remittance? 

If any person receives  any amount of foreign currency in Bangladesh for his activities  ( service ) with that country ,it  will not be treated as remittance. For example , income from working in internet is not remittance .  

 It is to be noted that remit means send . If a person does not send / remit currency  through banking channel from a foreign country it cannot be remittance.

 Declaration at the air/ sea port

When a person comes from a foreign country he has to declare the currency he has with him before the customs at the air or sea port  . It is to be shown as income in his return.

 If tax paid by a resident  Bangladeshi in a foreign country without tax treaty-

 clearance certificate:-

 If any resident assessee ( tax payer) wants to prove to the satisfaction of the DCT that he has paid tax at foreign country with which there is no reciprocal tax treaty with Bangladesh , he has to show clearance certificate from that country

manners of paying tax to that country:-

by deduction or otherwise on any income which has accrued or arisen to him outside Bangladesh

 how to calculate tax in Bangladesh:-

tax payable by the assessee (tax payer)       _             a sum equal to the tax  

in Bangladesh                                                            calculation on such income

(doubly taxed) at the average         rate of tax of Bangladesh or the average rate of tax of the foreign country

whichever is less.

Business between resident and non resident

        Business may be carried on between a resident and a non resident .The course of business may be so arranged that the resident makes either no profit or profits less than the ordinary profit in that business. Such an arrangement might deprive Bangladesh Govt. from tax. In such cases the resident may be charged in respect of the profits which he has not in fact made but which he might reasonably be considered to have made  i. e on accrual basis. (sec.104). 

D CT will determine amount of income.

tax rate, rebate and tips for resident and non resident

Today I am going to discuss about tax rate , tax rebate for resident and nonresident for the assessment year 2013-14 and also legal time frame for filing return. A common problem for the taxpayers ( assessee) is how they can file return timely if they are in abroad at the time of filing return . Can anyone do it in their favor ? Solution of the problems is given here.

Tax rate:

               non resident non Bangladeshi / Foreign-        25% or at the maximum rate

                Bangladeshi non-resident  pays  tax in            general rate 

for assessment year 2013- 2014 income of individual
                                              
                                    from tk. 1 to tk.2,20,000 tax       nil

                                                   
                                     for next tk. 3,00,0000 tax   @    10%

                                    for next tk. 4,00,000     tax    @  15%

                                                                                            
    for  next tk. 3,00,000      tax @   20%

                                                  

      for next     tax @    25%

Exception       for women and 65years old taxpayer 
tax exempted income                  tk 2,50,000

                                  for handicapped  taxpayer 
                                  tax exempted income                  tk 3,00,000

 Investment tax rebate :

¨     non resident non Bangladeshi/ Foreigner will not get rebate

¨     Bangladeshi resident or non resident will get rebate

rate  for assessment year 2011-2012

              @ 15% (30%  of total income or actual investment or  tk. 1,50,00,000/- 1 and half crore, whichever is lower)

When to file return 

for individual/ firm/AOP/HUF –

·        from 1st day of July to 30 th day of September

for govt. official (individual) engaged in higher education on deputation or lien outside Bangladesh

·          within 3 months after return  u/s 75(c)ii

company         

                          by the 15 th day of July next following the income year      or

                           before the expiry of  six months from the end of income year (maximum 31 st December)  if 15^th July falls before the expiry of six months  

How to pay tax or file return if he is in abroad

u/s  75 b proviso  -   

              In abroad   any non resident Bangladeshi may file return and bank draft to nearest Bangladesh Mission . Mission will receive ,issue receipt with seal and send return to N B R

    or,      u/s 174  non resident may engage authorized representative (ex.  relatives) /

 Income Tax Practitioner         

    

Non resident and resident Individual

Today I shall discuss about resident and non resident  individual taxpayer with examples and through problem and solution.

Who

In the case of  Individual

   Resident-  u/s 2(55) of IT Odinance, 1984

•  If any person passes 182 days  (Half of a year) Or more than 182 days in Bangladesh continuously or non- continuously

                                                            or,

•  if any person passes 90 days  in a fiscal/ income year and 365 days in the previous 4 years continuously or not continuously in Bangladesh.

Non -Resident    u/s 2(55) of  I T O , 1984  - 

      If the assessee ( tax payer) – Bangladeshi or Non Bangladeshi 

•   is continuously out of Bangladesh during the whole year
•   lives less than 182 days in a year
•   lives less than 90 days in a year and 365 days in previous 4 years

  For example ,

                 if a Bangladeshi national lives in Australia for education , job for whole part of the year lives less than 182 days in a year or  90 days in a year and 365 days in previous 4 years he is a non resident Bangladeshi. 

              Again , if an Australian lives whole part of the year outside Bangladesh lives less than 182 days in a year or  90 days in a year and 365 days in previous 4 years he is a non resident non Bangladeshi.

Comment:

              Thus a man may be resident in 2 different countries in the same year, although he can have only one domicile. 

Problem :

             if a person lives in 2011-12 fiscal year 200 days in Bangladesh and in previous 5 yrs. outside Bangladesh what will be his status

 Ans.- Status- Resident u/s 55(a)i

Problem:

                  In  2011-12 fiscal year if a person lives 50 days  and previous 4 years in Bangladesh and the rest of the time in abroad

Ans.- Status-  non resident

Determination of resident & nonresident status for assessee other than individual

ü    To day I am going to discuss about the status of the taxpayer or assessee who are a group of people , not individual . Here I will give information about the way to determine their status.

        In the case of                  (i) Hindu Undivided Family (HUF)

                                         (ii) Partnership firm

                               (iii) Association of Persons (AOP)

determination of the place of its control and management of its affairs is necessary

§  if it is wholly outside Bangladesh it is non resident

§  if a part of it is outside Bangladesh it is  resident

For example,

 ABC is a HUF or partnership firm or AOP . Name of its  karta or director is Mr. X . In  Fiscal year 2010-11 he lives in Canada. But  income of his AOP or Firm or HUF generated in Egypt . Other members/partners of firm ,HUF, AOP control and manage it from Bangladesh in his absence.  Then  ABC is a resident assesse (tax payer) in Bangladesh.

ü Control and management 

·        Significance

§  the controlling and directive power

§   situated implies the functioning of such power at a particular place performance.

·        Place 

§  The place of control may be different from the place where the actual trading (buying and selling) is carried on. Therefore, the place where trading activities or physical operations are carried on is not  the place of control and management . 

comment

If it is controlled from more than one country and also from Bangladesh then it is resident in those countries and Bangladesh.

·        Right

§  Again, control means de facto control ( actually controlled by any member of AOP / HUF or partner of Firm in absence of responsible member or partner but whether justified or not ) not necessarily the right to control is verified at the time of assessment. 

company-

              Resident

                           two types

 

        §  Bangladeshi company

        §  foreign company 

 registered at Registrar of Joint Stock Companies of Bangladesh or not

  Control and management

If the control and management of its affairs is situated fully in Bangladesh during the income year, it is resident company. 

Significance

Here control means de facto control not merely de jure control. The control and management, the head and brain, does not reside .Where there is some ultimate power of control such as the power to alter the articles of associations by a special resolution or the power to interfere with fundamental finance.

Place

 If it keeps house and does business in Bangladesh      or

 the central management and control actually abides in Bangladesh. 

For example,

 XYZ is a company not registered in Bangladesh. It sells and buys products in Sudan but it is controlled from Bangladesh. It is a resident  assesse.