Tax Planning

Key Aspects of Corporate Tax Planning in Bangladesh

1. Corporate Tax Rates and Incentives

• General Corporate Tax Rates:

  • Publicly traded companies: 20%

  • Non-publicly traded companies: 27.5%

  • Banks, financial institutions, and insurance companies: 37.5% to 40%

  • Mobile phone operators: 45%

  • Export-oriented industries: 12% for general industries and 10% for green industries ​Corporate Practice BD

• Tax Incentives:

  • Tax holidays for businesses in specific sectors and Special Economic Zones (SEZs).

  • Reduced tax rates for export-oriented industries.

  • Investment tax credits and accelerated depreciation allowances for specified regions or sectors .​Corporate Practice BD+1ReCom Consulting Limited+1

2. Withholding Taxes and Transfer Pricing

• Withholding Taxes:

  • Dividends: 20% (unless a Double Taxation Agreement (DTA) applies).

  • Royalties and fees for technical services: 10%-15% .​Corporate Practice BD

• Transfer Pricing:

  • Ensure transactions between related entities are conducted at arm’s length to comply with regulations and avoid disputes .​

3. Deductions and Allowable Expenses

• Depreciation:

  • On tangible and intangible assets to reduce taxable income.​

• Interest on Loans:

  • Deductible for corporate tax purposes, subject to certain restrictions.​

• Research and Development (R&D) Expenses:

  • May qualify for additional tax credits or deductions .​

4. Advance Income Tax (AIT) and Minimum Tax

• Advance Income Tax (AIT):

  • Prepaid tax based on the company’s past performance, ensuring tax is paid in installments throughout the fiscal year.​Corporate Practice BD

• Minimum Tax:

  • A certain minimum percentage of turnover is payable as tax, irrespective of profitability, to prevent tax avoidance through declared losses .​

5. Tax Compliance and Reporting

• Companies are required to file annual tax returns with the National Board of Revenue (NBR), including financial statements and supporting documents to verify income and deductions.

• Accurate and timely filings are crucial to avoid penalties and audits .​

6. International Tax Considerations

• Double Taxation Agreements (DTAs):

  • Bangladesh has DTAs with many countries to avoid the double taxation of income earned abroad, typically reducing or eliminating withholding taxes on cross-border income like dividends, interest, and royalties .​Corporate Practice BD+1ReCom Consulting Limited+1

• Transfer Pricing Regulations:

  • Proper planning and documentation are essential to ensure compliance with regulations governing transactions between related entities .​

Strategic Tax Planning Approaches

• Short-Term Tax Planning:

  • Focused on minimizing tax liabilities within the current fiscal year, utilizing available deductions and exemptions.​

• Long-Term Tax Planning:

  • Involves structuring business operations and investments to optimize tax efficiency over an extended period, considering factors like capital expenditures and international operations .​Bangladesh Incorporation Network

• Tax Advisory Services:

  • Engaging with tax professionals can provide tailored strategies to navigate complex tax regulations, ensuring compliance and identifying opportunities for tax savings .​

For a comprehensive understanding, you may refer to the Tax Planning & Compliance Manual (Direct Tax Portion)%20%20CA%20PL%20Tax%20Palnning%20&%20Compliance%20Manual%20(Direct%20Tax-Portion).pdf) by the Institute of Chartered Accountants of Bangladesh (ICAB), which provides detailed insights into tax planning and compliance in Bangladesh.