Impact of Finance Act 2021 on income tax and VAT - Deloitte
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Impact of Finance Act 2021 on income tax and VAT July 2021
Preface The Finance Act, 2021 was published by the Government of Bangladesh on 30 June 2021; it came into effect from 1 July 2021. This publication summarises the major changes brought to income tax and value added tax law provisions through the Finance Act, 2021. It is intended to capture the major changes. Thus, it is not a comprehensive piece. The information contained here is of a general nature. Although we endeavour to provide accurate information at the time of preparation, there can be no assurance that such information would continue to be accurate in the future. No one should act on such information without appropriate professional advice. © 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 2
Corporate tax
Corporate tax rates
Change in the tax rate for listed and non-listed companies
Company type AY 2020-21 AY 2021-22 Change
Non-listed companies
(e.g., private limited companies in 32.5% 30%
general)
Listed companies (other than FI,
25% 22.5%
mobile, and tobacco companies)
One Person company (OPC) - 25% new
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 3
Company type FY 2020-21 FY 2021-22
Non-listed companies (private limited and
32.5% 30%
non-listed public limited cos)
Listed companies (other than bank, insurance, NBFI,
25% 22.5%
and mobile cos)
Listed banks, insurance cos, and NBFIs 37.50% 37.50%
Non-listed banks, insurance, and NBFIs 40% 40%
Merchant banks 37.50% 37.50%
Listed mobile companies 40% 40%
Non-listed mobile companies 45% 45%
Tobacco/cigarette companies 45% 45%
One Person Company (OPC) - 25%
Artificial juridical person and other entity Average rate 30%
Association of Persons (AoP) 32.5% 30%
Co-operative society 15% 15%
Private universities, private medical/dental colleges, private
engineering colleges and private colleges engaged in imparting 15% 15%
education on information technology
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 4
Payment through non-banking modes
Payments other than bank transfer (e.g., cash payment) are tax deductible in the following cases.
Maximum BDT Maximum BDT Maximum BDT
20,000 50,000 500,000
• Payment of gross • Payment to Government • Purchase of raw
salary/remuneration bodies materials
• Purchase of raw materials
Set-off losses
Clarification for set-off of business losses has been made with the following clauses:
• Any loss from business that is “exempted from tax” or loss from business that is taxed at a reduced
rate, shall not be set off against any income from any other source.
• Loss from any “speculation business” or “capital gains’’ shall be set off only against income from
“speculation business” or “capital gains.’’
Deduction from payment to contractors (section 52, rule 16)
New TDS rates have been applied on supply of goods and execution of contracts. The payer will deduct
tax at a 50% higher rate on payments to contractors (u/s 52), if the payee does not receive payment by
bank transfer or mobile financial services or any other digital means approved by a Bangladeshi bank.
FY 2020-21
Income limit TDS rate
Where base amount does not exceed BDT 15 lakh 2%
Where base amount exceeds BDT 15 Lakh but does not exceed BDT 50 lakh 3%
Where base amount exceeds BDT 50 lakh but does not exceed BDT 1 crore 4%
Where base amount exceeds BDT 1 crore 5%
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 5FY 2021-22
Income limit TDS rate
Where base amount does not exceed BDT 50 lakh 3%
Where base amount exceeds BDT 50 lakh but does not exceed BDT 2 crore 5%
Where base amount exceeds BDT 2 crore 7%
E-commerce platform is a tax withholding authority
The platform entities have been included as a responsible entity to withhold tax from payment made
to contractors. If annual turnover of an e-commerce platform entity exceeds BDT 1 crore, it has to
deduct tax at source at the time of payment.
Deduction from payment to a beneficiary of workers’ participation fund
The regular withholding tax (WHT) rate remains same @ 5% on payment of WPPF to employees.
However, no tax shall be deducted from the beneficiary of WPPF if:
• the beneficiary does not have taxable income; and
• amount of fund does not exceed BDT 25,000.
Collection of tax on transfer of property
Tax is collected at the time of registering property at applicable rates. No such tax will be collected, if:
• transfer of property to a trust or special purpose vehicle established only for the purpose of issuing
Sukuk approved by the government or Securities Exchange Commission and vice versa;
• sale by a bank or any financial institution; and
• mortgage of any property to any bank or financial institution.
Deduction of tax from any income remitted from abroad
Inward remittance in Bangladesh from abroad regarding any income is subject to withholding tax.
Type of income WHT rate
Income from contracts on manufacturing, process or conversion, civil
7.5%
work, construction, engineering, or works of similar nature
Income from sale of software or the ITES business NIL
Income earned in abroad by each Bangladeshi citizen NIL
Any other inward remittance 10%
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 6Collection of tax on account of import of goods
Tax collection at source during import has been capped at maximum 20%. Such tax deducted will be
considered as advance tax on the value of imported goods. It will be collected by the Commissioner of
Customs at the time of customs assessment.
Collection of tax on account of rental power
Regular WHT rate remains same as 6% on payment to any person on account of purchase of power.
If a power company is exempted from tax or subject to a reduced tax rate in an income year, it can
apply and collect a certificate from NBR to that effect. Upon production of the certificate, the payee
company will refrain from deduction of tax or deduct tax at an applicable reduced rate accordingly.
Tax Deduction at Source (TDS)
Source of income FY 2020-21 FY 2021-22
Supply of cement, iron, and iron products 3% 2%
3% on 2% on
Import of raw materials related to cement production
import value import value
Sale of goods or property by public auction 7.5% 10%
FY 2020-21 FY 2021-22
Stevedoring/berth operation
Where base Where base Where base Where base
amount does amount amount does amount
not exceed BDT exceeds BDT 25 not exceed BDT exceeds BDT 25
25 lakh lakh 25 lakh lakh
a) On commission or fee 10% 12% 10% 12%
b) On gross bill amount - - 1.5% 2%
Tax depreciation rate (changes)
Asset class FY 2020-21 FY 2021-22
Buildings (general) 10% 5%
Factory buildings 20% 10%
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 7Income tax exemptions
Sixth schedule, Part – A additions
Information technology business definition expanded
The information technology-based business was already defined in tax law. The definition has been
widened by adding the below sources of income. ITES income is exempted from income tax until 30
June 2024.
• Cloud service
• System integration
• E-learning platform
• E-book publications
• Mobile application development service
• IT freelancing
Tax holiday (new sectors)
Tax holiday has been offered for 10 years to the following sectors, subject to fulfilment of certain
conditions and commencement of the commercial production between 1 July 2021 and 30 June 2030.
Motherboard, Home and Hospital Diploma and Motor car/
UPS, sound kitchen and vocational automotive
system, USB appliances healthcare education on (3- or 4-
cable, CCTV, services agriculture, wheelers)
and pen drive fisheries,
science, and
IT
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 8Other major changes
Tax is exempted for income derived from SME business engaged in
1
production of any goods:
• having an annual turnover of not more than BDT 50 lakh; in general; and
• having an annual turnover of not more than BDT 70 lakh where the SME is
owned by a female
2 5% tax rebate facility for the employer who will employ
transgenders containing 10% of employees.
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 9Individual tax
Individual tax rates
Resident and non-resident Bangladeshi
AY 2020-21 AY 2021-22
Income Rate of tax Rate of tax
On the first TK. 300,000 of total income of male assessee Nil Nil
On the first TK. 350,000 of total income of female assessee Nil Nil
On the first TK. 350,000 of total income of third gender assessee - Nil
On the first TK. 350,000 of total income of persons aged 65 years and
Nil Nil
above
On the first TK. 450,000 of total income of person with disability Nil Nil
On the first TK. 350,000 of total of income of father/TK. 400,000 of total
Nil Nil
of income of mother of person with disability
On the first TK. 475,000 of total income for gazetted war wounded
Nil Nil
freedom fighters
On the next TK. 100,000 of total income 5% 5%
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 10Resident and non-resident Bangladeshi
AY 2020-21 AY 2021-22
Income Rate of tax Rate of tax
On the next TK. 300,000 of total income 10% 10%
On the next TK. 400,000 of total income 15% 15%
On the next TK. 500,000 of total income 20% 20%
On the balance of total income 25% 25%
Non-resident individual foreigner assessee 30% 30%
Surcharge (based on individual net wealth)
Assessment year: 2020–2021 Assessment year: 2021–2022
(Income year: 2019-2020) (Income year: 2020-2021)
Total net worth Rate Total net worth Rate
Up to TK. 3 crore Nil
Up to TK. 3 crore Nil
More than TK. 3 crore but not 10%
more than TK. 5 crore; or, More than TK. 3 crore but not more 10%
than TK 10 crore
Individual having more than 1 10%
motor vehicles in his/her own Individual having more than 1 motor 10%
name vehicles
Individual having house property in 10%
city corp. of more than 8,000 sft Individual having house property in 10%
city corp. of more than 8,000 sft.
More than TK. 5 crore but not 15%
more than TK. 10 crore More than TK. 10 crore but not 20%
more than TK. 20 crore
More than TK. 10 crore but not 20%
more than TK. 15 crore More than TK. 20 crore but not 30%
more than TK. 50 crore
More than TK. 15 crore but not 25%
more than TK. 20 crore
More than TK. 50 crore 35%
More than TK. 20 crore 30%
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 11Requirement of twelve-digit taxpayer’s identification number in certain cases
New insertion (extension of tax net)
Savings certificate Postal savings accounts Co-operative society
Purchasing savings instruments Opening postal savings Obtaining registration
(Sanchayapatra) of amount accounts of amount of co-operative society
exceeding BDT 2 lakh exceeding BDT 2 lakh
Minimum tax (Section 82C) for individual
assessee
Minimum tax rate for individual assessee
with gross receipts of BDT 300 million or
more in “business or profession” will be
Gross 0.50% 0.25%
receipt FY 2020-21 FY 2021-22
applicable as follows (other than individuals
engaged in the business of mobile phone
operation or manufacturing of cigarette,
chewing tobacco, smokeless tobacco, or
any other tobacco products)
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 12Special tax treatment in respect of undisclosed property (money whitening)
No question as to the source of any undisclosed property shall be raised by any authority, if an
individual assessee pays tax at the rate specified in the following tables and submits tax
return/revised tax return.
25% tax on the Tax of BDT 200 25% tax on the 10% tax on the
total investment + to BDT 20,000 total amount + investment
5% penalty on the payable per square 5% penalty on the amount
tax amount meter based on tax amount
location
Investment in Tax on land and Cash, bank deposits, Investment in new
securities/ shares apartment per financial instruments industrial
If the investment is specified rate based undertaking
withdrawn within on location of the between
property All kinds of deposits, 1 July 2021 and
one year, 10% saving instruments, 30 June 2022
penalty will be or certificates
imposed
Individual investment tax credit
Assessment year: 2020–2021 Assessment year: 2021–2022
(Income year: 2019-2020) (Income year: 2020-2021)
Individual assesses can claim tax Individual assesses can claim tax
rebate on investments. Allowable rebate on investments. Allowable
investment will be calculated at investment will be calculated at
the lower of the following: the lower of the following:
• 25% of taxable income; or • 25% of taxable income; or
• Actual investment • Actual investment
• 1.5 crore taka • 1 crore taka
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 13Statement of assets, liabilities, and life style
Individuals fulfilling the following conditions are required to submit the wealth statement, along
with tax return.
Individual who
a) Had gross wealth exceeding BDT 40 lakh in the last date of
income year
b) Owns a motor car Same as last year
c) Invested in a house property or an apartment in the city
corporation area
Every non-resident Bangladeshi in respect of assets located in
Bangladesh
Every foreigner in respect of assets located in Bangladesh New provision inserted
Every individual assessee, whose total income exceeded BDT this year
400,000 as on the last date of the income year
Every individual assessee, being a shareholder director of a company
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 14Value Added Tax (VAT) VAT agent of non-residents In Bangladesh, the VAT law has provisions of VAT registration for non-residents. VAT agents are required to apply to NBR for VAT registration on behalf of non-residents. Earlier, a VAT agent was jointly and severally responsible for represented non-resident’s VAT payment/liabilities. Finance Act 2021 has updated this clause as below. • Non-resident will be liable for all VAT payments (VAT, interest, and penalty). • VAT agent will be responsible for VAT compliance reporting activities of the represented non- resident. © 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 15
VAT registration and compliance of non-residents through consultant/firm acting as a VAT agent
Non- Consultant/ NBR Non- NBR to VAT agent Non-
resident to firm applies appoints resident issue a VAT to maintain resident to
submit EOI to NBR to consultant applies to registration VAT make
to act as a VAT / firm as a NBR certificate compliance applicable
consultant/ agent on VAT agent through a to non- for non- VAT
firm to act behalf of VAT agent resident resident payment
as a VAT non- for VAT through the
agent resident registration VAT agent
Input VAT credit
The exporter can claim input VAT credit.
Central VAT registration
This will not be applicable for supply of tobacco products for better monitoring by NBR
Zero VAT rate for service export
Service export outside Bangladesh is likely to be zero rated as before. The related conditions thereto
have been removed through Finance Act 2021.
Input-Output co-efficient is required for goods and not for services
The coefficient form is required to be reported for supply of goods. It is not required for supply of
service.
Advance VAT (AT)
Import stage AT Previous rate New rate
Import of raw materials for manufacturing 4% 3%
All other import of goods 5% 5%
Change in VDS rate
Particulars Previous rate New rate
S001.20: Non-AC restaurant 7.5% 5%
S001.20: AC restaurant 15% 10%
S001.10: Non-AC hotel 7.5% 7.5%
S001.10: AC hotel 15% 15%
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 16Input VAT credit
If output (sales) value is less than input (purchase) value, input VAT credit will not be allowed.
Submission of audited financials to VAT authority
Audited financial statements need to be submitted to VAT authority within six months from the end of
each income year. Timeline may be extended for additional six months through application.
Adjustment time limit for VDS
The VDS adjustment timeline starts from “date of payment” against the supply. Decreasing
adjustment for such VDS should be made in the same tax period or within the next tax period from the
date of payment.
Input VAT credit on bank, insurance, and port authority invoice
Bank, insurance, and port authorities issue invoices specifying VAT amount. These invoices do not
resemble the VDS format. However, these can also be treated as Mushak 6.3 and allowed for input VAT
credit.
VAT penalty and interest
Item Non-compliance Previous rate New Rate
VAT penalty Payment of less output tax, Two times of the VAT One time of the VAT
wrong input tax demand amount demand amount
credit/adjustment, and VAT
evasion
Interest on Any VAT non-compliance About 2% on VAT About 1% on VAT
VAT liability per month liability per month
(other than
VDS)
Connect with us
Nurul Haque
Country Managing Partner, Tax and Legal
nhaque@deloitte.com
© 2021 Deloitte Bangladesh Impact on Income Tax and VAT | Finance Act 2021 17Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. This material is prepared by Nurul Faruk Hasan & Co, a Deloitte network entity. This material (including any information contained in it) is intended to provide general information on a particular subject(s) and is not an exhaustive treatment of such subject(s) or a substitute to obtaining professional services or advice. This material may contain information sourced from publicly available information or other third party sources. Deloitte does not independently verify any such sources and is not responsible for any loss whatsoever caused due to reliance placed on information sourced from such sources. Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this material, rendering any kind of investment, legal or other professional advice or services. You should seek specific advice of the relevant professional(s) for these kind of services. This material or information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person or entity by reason of access to, use of or reliance on, this material. By using this material or any information contained in it, the user accepts this entire notice and terms of use. © 2021 Deloitte Bangladesh
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