Corporate Tax Planning: Bangladesh Perspective
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Transcript of Corporate Tax Planning: Bangladesh Perspective
Corporate Tax PlanningM.K. Jahid Shuvo
Dept. of A&IS
Jahangirnagar University
TaxA tax is a compulsory payment levied on the persons or
companies to meet the expenditure incurred on conferring common benefits upon the people of a country.
Corporate TaxTax that is levied on the income of a corporation or a company.
THERE IS NOTHING WHICH HURTS MORE THAN PAYMENT OF TAXES…..
Three Common Practices to save Taxes
Tax PlanningTax Avoidance
Tax Evasion
Corporate Tax Planning
Corporate Tax planning is the arrangement of financial activities in
such a way that maximum tax benefits are enjoyed by making use
of all beneficial provisions in the tax laws.
It entitles the assessee to avail certain exemptions, deductions,rebates and reliefs, so as to minimize his tax liability.
Corporate Tax
Planning
Maximize after tax rate of return
Keep proper record
Deduct TDS
Pay Advance
Tax
Submit Return on
time
Comply with the
rules
Is it legal to keep taxes as low as possible?
Yes. It is
Case Reference: (Justice Learned Hand, Comm. vs. Newman, 159 F.2d 848 [CA-2, 1947]).
There is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. ……… nobody owes any public duty to pay more than the law demands: taxes are enforced extractions, not voluntary contributions”
Objectives of corporate tax planning
Reduction of tax liability
Minimization of litigation
Healthy growth of economy
Economic stability
Taking maximum advantages of the exemptions, deduction, rebates,
reliefs and other concessions
Key Points To Be Remembered
It is not avoidance to payment of taxes
Tax planning should not be done with an intent to defraud the revenue.
All transactions with respect to tax planning should be in correct form and
substance.
Tax planning work should be done within the framework of law and its not
illegal.
What is a Company/Corporation
A company is incorporated under the Companies Act in Bangladesh andincludes:
• A body corporate established or constituted by or under any law in force
• Any nationalised bank or industrial or commercial organisation
• Any association or combination of persons, if any of such persons areregistered as a company
• An association or body incorporated by or under any laws of a countryoutside Bangladesh
• Any foreign association or body which the NBR declares to be a company.
Tax Rates
Publicly Traded Companies
25%
Non-Listed Companies
35%
50% of export income is exempt from tax
Tax Rates
Publicly Listed- Banks, insurance and other financial institutions
40%
Non Listed- Banks, insurance and other financial institutions
42.5%
Merchant Bank
37.5%
Tax Rates
Cigarette,
Zarda,
Bidi,
Gul or
Any other tobacco product manufacturing companies
45%
Tax Rates
Publicly Traded Mobile phone operator companies
40%
Non-Listed Mobile phone operator companies
45%
If mobile phone operator companies list at least 20% of their paid up capital through IPO, they
shall receive a rebate of 10% in the year of listing.
Reduced rates of Corporate TaxCompanies Tax Rate
Textile industries (time extended up to 30 June 2019) 15%
Jute industries (time extended up to assessment year 2019-2020) 10%
Knit wear and woven garments manufacturer and exporter 20%
Research Institutes at national level, registered under the Trust Act, 1882 or Societies
Registration Act, 186015%
Private Universities, Private medical college, Private dental college, Privateengineering college or Private college engaged in imparting education on information technology
15%
Co-operative society registered under Co-operative Society Act 2001 other than income
from agricultural or cottage sector15%
Production of pelleted poultry feed, Production of pelleted feed for fish, shrimp andcattle, Production of seeds marketing of locally produced seeds, cattle farming,dairy farming, horticulture, frog farming, sericulture, mushroom farming andfloriculture:
Income up to Tk 1,000,000 Next Tk 2,000,000 On the balance amount
3%10%15%
Reduced tax rates applicable to local authority
25% reduced tax rate will be applicable for following local bodies:
• WASA (Dhaka, Chittagong, Khulna and Rajshahi)
• Bangladesh Civil Aviation Authority
• RAJUK
• RDA
• KDA
• CDA
• National Housing Authority
• Chittagong Port Authority
• Mongla Port Authority
• Pyra Port Authority
• Bangladesh Inland Port Authority
• Bangladesh Television
• Bangladesh Betar
• BIWTA
• BRTA
• BTRC
• BPDP
• BREB
• BWAPDA
• BEPZA
• Bangladesh Bridge Authority
• Borendra Multipurpose Development Authority (Rajshahi)
• Bangladesh Hi-Tech Park Authority
• IDRA
• Sustainable and Renewable Energy Development Authority
Capital gains tax
Capital gain tax is levied when the investor sells a capital asset for a price that is higher than the purchase price.
It is different from normal gain.
It only triggered when an asset is realized, not while it is held by an investor
Capital gains tax
Capital gains tax on sale of shares of listed companies
Capital gain from transfer of stocks and shares of public limited companies listed with stock exchange except listed Govt. securities.
Tax Rate
a) For resident companies and firms 10%
b) Capital gain tax of non-resident shareholders 15%
c) For sponsor shareholder and shareholder director 5%
d) For resident individual holding at least 10% of the total share
capital of the company5%
Capital gains tax
Capital gains tax other than sale of shares of listed companies
Capital gain from transfer of stocks and shares of public limited companies listed with stock exchange except listed Govt. securities.
In the case of a company,
Income from capital gains will be separated from total income
Tax at 15% is payable on such capital gains regardless of the period of holding of the asset from the date of its acquisition.
Capital gains tax
In the case of an assessee other than a company,
If the asset is transferred before the expiry of five years from the date of acquisition, the capital gains will be taxed at the usual rate applicable to the assessee’s total income including the capital gains.
If the asset is transferred at any time after expiry of five years from the date of its acquisition, the capital gains will be taxed at the usual rate applicable to the assessee’s total income including the capital gains or at the rate of 15% on the amount of capital gains whichever of the two is lower.
Thank You…