The Finance Minister, AHM Mustafa Kamal, presented a plan to reduce taxes for companies in the upcoming budget for the year 2023-2024. The goal is to help businesses grow faster and promote trade.
Listed companies’ tax rates will decrease from 22.5% to 20%. Non-listed companies will see a reduction from 30% to 27.5%, while one-person companies will lower their taxes from 25% to 22.5%.
This isn’t the first time the government has tried to boost the economy. In the last budget, they reduced the corporate tax rate from 32.5% to 30%.
What is Corporate Tax
A corporate tax is a tax on the profits of a corporation. The taxes are paid on a company’s taxable income, which includes revenue minus the cost of goods sold, general and administrative expenses, selling and marketing, research and development, depreciation, and other operating costs.
Corporate Income Tax in Bangladesh
Bangladesh’s corporate income tax is crucial in financial rules and regulations, where budgets are crafted and tax laws shape. It’s a significant government income source supporting the nation’s progress and prosperity.
In 2019, the Finance Act introduced a new and controversial section known as “Treatment of Disallowances” in the Income Tax Ordinance, called Section 30B.
Section 30B has gained a reputation as one of Bangladesh’s most aggressive and perceived unfair tax measures. But before we dive into its details, let’s first understand its predecessor, section 30, which lays out various restrictions, rules, and compliance requirements related to specific business expenses.
One contentious issue is about extra benefits given to employees, such as house rent and conveyance. If these perks go beyond Tk 550,000 per year, they come under the scrutiny of the tax authorities.
Another point of debate arises regarding royalties or fees for technical services. If these payments exceed 8% of the disclosed net profit, they also attract attention from tax authorities, sparking discussions about whether this threshold is appropriate.
Even overseas travel costs have become a focus of contention. If these expenses go beyond 1.25% of the disclosed turnover, they also come under the tax collector’s watchful eye.
Corporate Tax Refund in Bangladesh
In corporate taxation, Bangladesh unfolds with different rates and rules woven into the fabric of its financial system.
For those companies treading the public markets, a standard rate of 22.5% awaits, a tribute paid on their profits.
However, a special path is reserved for publicly traded companies that embark on an adventure through an initial public offering, allowing them to bask in a reduced tax rate of 20% if they raise over 10% of their paid-up capital through this endeavor.
Amongst the corporate clans, certain entities, such as banks, insurance companies, and financial institutions (excluding merchant banks), tread a path less taken, facing a higher tax burden of 40%.
Stepping onto a different stage, the listed mobile phone companies are entangled in a 40% tax realm. At the same time, their non-listed counterparts and the makers of cigarettes and other tobacco products face an even higher tribute of 45%.
Most businesses, including private limited companies and foreign subsidiaries, wander along a path taxed at 27.5%, each contributing their share to the fiscal coffers.
As the financial tale unfolds, an enchantment is cast upon transactions and sums of significant worth. Income, receipts, and individual transactions crossing BDT 500,000, along with various expenses and investments surpassing BDT 3.6 million, must gracefully traverse the realm of bank transfers.
Should this magical path be neglected, a penalty awaits, and the corporate income tax rate on the taxpayer’s total income swells by 2.5 percentage points.
Bangladesh Corporate Taxation Rate
An annual pilgrimage to the tax altar is a must. Income tax returns must be filed, typically on or before the 15th of January in the following year after the financial closing, usually from July to June. Here is the full list of corporate tax rates in Bangladesh.
|Company Type||Tax Rate|
|Publicly traded companies (listed companies on the stock market)||25%|
|Non-publicly traded companies (private companies limited by shares)||30%|
|Publicly traded banks, insurance, and financial institutions other than merchant banks||37.5%|
|Non-publicly traded banks, insurance, and financial institutions||40%|
|Publicly Traded mobile network operators||40%|
|Non-publicly Traded mobile network operators||45%|
|Publicly Traded cigarette manufacturers||45%|
|Non-publicly Traded cigarette manufacturers||45%|
Private Company Tax Rate In Bangladesh
In Bangladesh, private companies play a vital role in the economy. Understanding the tax rates for various entities, from publicly traded companies to educational institutions and tobacco producers, is essential for compliance and financial planning.
Here are various types of private company tax rates in Bangladesh.
Private universities, medical colleges, dental colleges, engineering colleges, and colleges dedicated to ICT education: A tax of 15% will be imposed on their income.
- Association of Persons: The tax rate is 27.5%, but non-compliance can lead to an increased rate of 30%.
- One Person Company (OPC): OPCs are subject to a tax rate of 22.5%, but non-compliance may raise the rate to 25%.
- Tax Rates on Tobacco Producing Companies: Companies producing tobacco items (cigarettes, bidi, chewing tobacco, gul): Tax rate is 45% + 2.5% surcharge.
- Tax Rates on Mobile Operator Companies: Publicly traded mobile operator companies’ tax rate is 40%. Non-publicly traded mobile operator companies’ tax rate is 45%.
- What is the standard corporate tax rate in Bangladesh?
Ans: For publicly traded companies, Bangladesh’s standard corporate tax rate is 22.5% of their taxable income.
- Are there any special tax rates for certain types of companies in Bangladesh?
Ans: There are special tax rates for specific types of companies. Banks, insurance companies, and financial institutions (except merchant banks) pay a higher rate of 40% on their taxable income.
- How are mobile phone companies and tobacco manufacturers taxed in Bangladesh?
Ans: Listed mobile phone companies pay corporate tax at a rate of 40%, while non-listed mobile phone companies and cigarette and other tobacco manufacturing companies are subject to a higher tax rate of 45% on their taxable income.
- Do all companies need to pay corporate tax in Bangladesh?
Ans: Companies are required to pay corporate tax on their profits. If a company has no profit, it cannot pay corporate tax for that financial year.
- When are income tax returns filed in Bangladesh?
Ans: Income tax returns in Bangladesh are filed annually. The usual deadline for filing tax returns is on or before the 15th of January in the year following the company’s financial closing, which generally runs from July to June.
Filing income tax returns annually is a vital obligation for companies, with a deadline usually set on or before the 15th of January of the following year after the financial closing.
Injecting paid-up capital into the company’s bank account through checks or online transfers is necessary to fortify financial resources and meet tax compliance criteria.