Changes in Income Tax brought by the Finance Act 2017

Transcription

1 Changes in Income Tax brought by the Finance Act 2017 September

2 Personal Income: Individual/Firm Tax Rates For Bangladeshi individuals, resident foreigners, and firms Income First Tk. 250,000 Next Tk. 400,000 Next Tk. 500,000 Next Tk. 600,000 Next Tk. 3,000,000 On Balance Tax Rate Nil 10% 15% 20% 25% 30% For non-resident foreigner, flat tax rate of 30% will remain unchanged 2

3 Personal Income: Nil Tax Limit Type of Individual Tax payer FY 16/17 Income FY 17/18 Income General Individuals & Firms Women and senior citizens (65+) Physically challenged persons War-wounded gazetted freedom fighters Tk. 250,000 Tk. 300,000 Tk. 375,000 Tk. 425,000 Tk. 250,000 Tk. 300,000 Tk. 400,000 Tk. 425,000 For parents or legal guardians of physically challenged persons the Nil Tax Limit will be increased by Tk 25,000. 3

4 Personal Income: Perquisites and allowance House rent allowance Lower of 50% of basic salary; or Tk. 25,000 per month will be exempted Conveyance provided for personal or private use Higher of 5% of basic salary or Tk. 60,000 per year would be added to the income 4

5 Personal Income: Perquisites and allowance Medical expenses General Individual Mentally Retarded Person Lower of 10% of BS and Tk. 120,000 Tk. 1,000,000 5

6 Personal Income: Surcharge on Tax Liability Wealth Rate Tk. 20 Crore 30% Tk. 15 Crore 25% Tk. 10 Crore 20% Tk. 5 Crore 15% Tk Crore 10% 6

7 Statement of assets, liabilities and life style If gross wealth exceeds FY 2016/17 Limit FY 17/18 Limit Statement of assets, liabilities and life style return need to be submitted BDT 20 Lakh BDT 25 Lakh 7

8 Personal Tax: Minimum Tax Amount Minimum Tax Amount at Tax Return Level Location FY 2016/17 Dhaka and Chittagong City Corporation Tk. 5,000 Other City Corporations Tk. 4,000 Other areas Tk. 3,000 8

9 Personal Income: Investment Rebate 15% of Allowable Investment (Eligible Amount) Whichever is lower of: 25% of Total Income TK. 15,000,000 Actual Investments 9

10 Corporate Tax: Rates (1) Companies Non listed companies including branch companies Listed Companies Banks, insurance and other FIs Listed Banks, insurance and other FIs Non- listed Merchant Banks Listed and Non listed Cigarette manufacturer Listed and Non-listed Mobile phone operators Listed Mobile phone operators Non-listed Co-operative Society Rate of Tax 35% 25% 40% 42.5% 37.5% 45% 40% 45% 15% 10

11 Corporate Tax: Rates (2) Rate of Tax Companies FY 2016/17 FY 2017/18 Ready-Made Garments 20% 12% Ready-Made Garments with internationally recognised green building certification 20% 10% 11

12 Corporate Tax: Rates (3) Cigarette, bidi, zarda, chewing tobacco/gul, or any other tobacco products manufacturers FY 2016/17 Rate Rate of Tax 45% FY 2017/18 Rate 45% Rate of Surcharge 0% 2.5% on income 12

13 Clarification in Definition of Income Year January to December Banks Insurance Company July to June Others Multinational companies are allowed to follow parent companies' accounting year Subsidiaries of FI Other FIs Branch and liaison offices are also allowed to follow it s head office accounting year 13

14 Corporate Tax: Disallowances Section 30(aaaa) 1 Employers are required to ensure that the tax returns of their employees were submitted who are required to submit return on or before the Tax Day i.e. 30 November (of employees) or as extended 2 Failure to ensure this requirement will result in related salary expenses disallowance 14

15 Corporate Tax: Allowable Perquisites Section 30(e) Generally Tk. 475,000 *For a person with disability Tk. 2,500,000 an individual registered as person with disability under sec 31 of Protection of the Rights of the Persons with Disabilities Act,

16 Corporate Tax: Allowable Overseas Travel Section 30(k) Up to 1.25% of the disclosed turnover are allowed Not applicable for an assesse engaged in providing any service to the Government where overseas traveling is a key requirement of that service. 16

17 Corporate Tax: Disallowance Section 30(o) Payment made to following persons without TIN will result in disallowance: Agency or distributorship of a company Commission, fee or other sum for money transfer Advisory, consultancy etc. by a resident company 17

18 Unexplained investments deemed to be Income Section 19(31) Fiscal year 2016/17 Additional income subjecting to tax exemption or reduced tax rates shown in the revised returns under sections 78 or 93 will be considered as Income from Other Sources Fiscal year 2017/18 Includes revised or amended return under section 82BB 18

19 Unexplained investments deemed to be Income Section 19(28) Fiscal year 2016/17 Loans or gifts received for amount(s) over Tk. 500,000 other than through Crossed cheque or Bank transfer, will be treated as Income Fiscal year 2017/18 Will not be income if such amount is received from spouse or parents as long as banking or formal channel is involved in process 19

20 Tax DAY An assessee is required to file income tax return on or before the Tax Day Company 15th day of seventh month following the end of income year Or 15th September following the end of the income year where said 15th day falls before the 15th September Others 30th November *In case of a holiday, the next working day following the Tax Day! 20

21 Return of Income: Who will File? If the total income exceed Nil Tax Amount If he has assessed in one of 3 years preceding the income year If the person full-fills any of the specified conditions Those whose income are exempted from tax or subject at lower tax other than a charitable institution or fund, Mentions few persons specifically Few changes to the conditions specified* Includes employee holding executive or management position 21

22 Electronic filing and system generated notice, etc. 1 Production of accounts: Now onwards, the DCT may request for information in electronic forms 2 System or computer generated notice, order, requisition, certificate, communication, letter or an acknowledgment of receipt may be served 3 Return, statement, application or documents may be filed in electronic form and manner as may be specified by NBR 22

23 82BB: Universal Self Assessment Assessee DCT Mentions 12-digit E-TIN in the return Issues acknowledgement Submits return on time Pays tax while submitting tax return Acknowledgement acts as Assessment Order No notice shall be served after 12 months from the date of return submission 23

24 82BB: Universal Self Assessment I made a mistake, can I amend my return? If the DCT finds out the mistake, will I be allowed to amend my return? Shall I still be assessed under section 82BB? 24

25 82BB: Universal Self Assessment Can voluntarily file amended return after paying unpaid taxes and interest thereon If errors identified by DCT, he will give opportunity to defend and file amended return paying unpaid amount Assessment will still be under section 82BB If the return shows 15% more income, it would not be picked for audit subject to meeting certain conditions No notice will be served after 12 months of (amended) return submission 25

26 82BB: At a Glance DCT will check for arithmetic accuracy of the return submitted. DCT will serve notice to the assessee communicating any difference. DCT will give the assessee an opportunity to defend him/her self and file amended return. DCT will issue a letter of acceptance of amended return given the differences are resolved duly within 60 days of such submission. If the assessee does not respond within the required deadline, DCT will serve demand notice within 6 months of serving the original notice. 26

27 82BB: At a Glance (cont ) Assessee can file amended return if s/he voluntarily finds out any mistake. A written statement explaining the nature and reason for the mistake needs to be attached with the return. Balance tax has to be paid duly along with 2% monthly interest on the unpaid amount. Amended return needs to be submitted within 180 days of filing the original return and before start of audit. No notice can be served after 12 months of submitting return or amended return unlike previously which is 12 months from the end of the financial year in which the return is submitted. 27

28 82BB: At a Glance (cont ) NBR may select a number of returns for audit. However, returns fulfilling certain conditions will not be picked for audit. Except for 15% income increase, all other conditions remain same. In calculating 15% income increase, like for like income between two years will be considered. If any anomaly is found, then DCT will serve a notice requiring the assessee to file an amended return. If the DCT is satisfied with the amended return, he will issue a letter of acceptance. If the DCT is not satisfied, then s/he will proceed to make assessment under section 83 or 84, whichever is applicable. 28

29 82BB: At a Glance (cont ) No question of the initial capital will be asked if at least 20% of such is shown as income, which is lower than the previous threshold of 25%. Initial capital will have to be kept for the next subsequent income years. If it gets reduced, then the shortfall amount will be considered as income in the income year in which it falls short. 29

30 93: Tax, etc. escaping payment Other than the following, the section remains the same DCT may issue a notice asking to submit return and pay the sum that escaped payment. Letter of Acceptance will be issued upon fulfilling certain conditions. Will proceed to make assessment under section 83 or 84 if the conditions are not fulfilled. IJCT s approval will only be required in case of completed assessment or for returns filed in compliance with section 82BB. 30

31 93: Tax, etc. escaping payment Conditions Notice to be issued No return is filed, No assessment was made No return is filed, assessment completed All other cases At any time Within 6 years from the end of AY Within 5 years from the end of AY Commissioner may extend the time up to 6 years if the escape of payment was due to failure in making full disclosure by the assessee 31

32 Specification of escaped payment Understated Income Lower tax computed or paid because of lower base Income escaped assessment Application of tax rate lower than the due rate Concealment or misrepresentation of any income, asset or expenditure Excessive relief or loss or deduction or allowance 32

33 Corporate Tax: limitation of assessment Section 94 Fiscal year 2016/17 Fiscal year 2017/18 82BB - 2 years 107C - 3 years In other case- 6 months from the end of assessment year 82BB 2 years 107C 3 years In other case- 6 months from the end of assessment year 93(3)(a) & (b) 2 years 93(3)(c) 1 years 93 - within 2 years. 33

34 Corporate Tax: Computation of Depreciation 3rd Schedule FY 2017/18 An inconsistency has been resolved by updating the cross referencing as in the proviso. In case of motor vehicle, 25 lac will be maximum limit. It also states that nothing of this clause will apply for bus and minibus used for transportation of students, teachers, employees of business organization and profession. 34

35 Requirements of 12-digit TIN replaced entirely The entire section has been replaced and mainly enhancement of service area has been done. New items added, namely: i. Agency distributorship of a company; ii. Commission, fee or other sum in relation to money transfer through mobile banking or other electronic means; iii. Advisory or consultancy services, catering service, event management service, supply of man power or providing security service; iv. Bill of entry for import or export. Board can exempt from having twelvedigit TIN; The responsible person need to ensure that the required person has twelve-digit TIN. 35

36 Enhancement of penalty for failure to verify TIN The entire section has been replaced and mainly enhancement of penalty has been done. Previously Failure to ensure the authenticity of twelve-digit TIN of the required person by the responsible person. Penalty will be not more than BDT 50,000. New inclusion Failure to ensure of having twelve-digit TIN of the required person by the responsible person. Penalty will be not more than BDT 200,

37 Inclusion of Revision of penalty based on the revised amount of income New Section 133A added DCT shall revise penalty at the time of revising the income The affected parties has been given a reasonable opportunity of hearing Affected parties can apply for revision of penalty to DCT if not revised after revision of assessment order. If no order is made within 180 days, penalty amount is deemed revised 37

38 Changes in TDS Sections (1) Deduction from payment to contractors, etc. Section-52 FY 2016/17 FY 2017/18 Execution of contract 0% to 7% Manufacture, process or conversion; or printing, packaging or binding 3% to 5% 2% to 7% 38

39 Changes in TDS Sections (2) Deduction from payment to contractors, etc. Section-52 Supply of goods 2% to 7% No deduction required for purchase of direct materials as part of cost of sales or cost of goods sold For supply of imported goods, tax deduction would be reduced by AIT paid at import stage Risk of disclosing business secret/margin 39

40 Changes in TDS Sections (3) Deduction or collection at source from (commission, discount or fees)- Section-53E FY 2016/17 FY 2017/18 Payment of commission discount, fees, incentives, performance bonus/related incentives or similar benefits for distribution or marketing 10% of payment 10% of payment/ benefits Payment for promotional activities 10% of payments 1.5% of payments 40

41 Changes in TDS Sections (4) Deduction or collection at source from (commission, discount or fees)- Section-53E Fiscal year 2016/17 Fiscal year 2017/18 Sells to distributor at lower than retail price 5% x 6% x selling price 5% x 5% x selling price 41

42 Changes in TDS Sections (5) No change in substance Section 52BB and 52BBBB withholding tax on export Fiscal year 2016/17 Fiscal year 2017/18 Withholding tax on export (except Jute products) In tax law 1% which subsequently reduced to 0.7% through SRO effective up to 30 June 2017 In tax law 1% which subsequently reduced to 0.7% through SRO effective up to 30 June

43 Changes in TDS Sections (6) Section 52AA : Creative media service, Public relations service, organization and management service and any other service of similar nature Withholding Tax Rates on Based Amount Base amount up to Tk. 25 Lakh Base amount exceeds Tk. 25 Lakh (a) On commission 10% 12% (b) On gross receipts 1.5% 2% 43

44 Changes in TDS Sections (7) Section 52AA : Media buying agency service Withholding Tax Rates on Based Amount Base amount up to Tk. 25 Lakh Base amount exceeds Tk. 25 Lakh (a) On commission 10% 12% (b) On gross receipts 0.5% 0.65% 44

45 Changes in TDS Sections (8) Section 52AA: Advisory or consultancy service, Professional service, Technical service fee, or Technical assistance fee, Meeting fees, training fees or honorarium, Credit rating agency, Stevedoring/berth operation commission Withholding Tax Rates on Base Amount Base Amount less than Tk. 25 Lakh Base Amount exceeding Tk. 25 Lakh 10% 12% 45

46 Changes in TDS Sections (9) Section 52AA: Mobile network operator, technical support service provider or service delivery agents engaged in mobile banking operations Withholding Tax Rates on Base Amount Base Amount less than Tk. 25 Lakh Base Amount exceeding Tk. 25 Lakh 10% 12% 46

47 Changes in TDS Sections (10) Section 52AA: Any other service which is not mentioned in Chapter VII of this Ordinance and is not a service provided by any bank, insurance or financial institutions Withholding Tax Rates on Based Amount Base Amount less than Tk. 25 Lakh Base Amount exceeding Tk. 25 Lakh 10% 12% 47

48 Changes in TDS Sections (11) Section 52AA: Indenting commission, Private container port or dock yard service, Motor garage or workshop, Shipping agency commission Withholding Tax Rates on Based Amount Base Amount less than Tk. 25 Lakh Base Amount exceeding Tk. 25 Lakh 6% 8% 48

49 Changes in TDS Sections (12) Section 52AA: Transport service, car rental Withholding Tax Rates on Based Amount Base Amount less than Tk. 25 Lakh Base Amount exceeding Tk. 25 Lakh 3% 4% 49

50 Changes in TDS Sections (13) Section 52AA: Catering service, cleaning service, collection and recovery agency, event management, supply of manpower, and private security service provider- Withholding Tax Rate on Based Amount Up to Tk. 25 Lakh Exceeding Tk. 25 Lakh (a) On commission 10% 12% (b) On gross receipts 1.5% 2% 50

51 Changes in TDS Sections (14) Section 52AA: Where both commission/fee and gross bill amount mentioned Withholding Tax shall be higher of Tax on commission or fee applying relevant rate Gross bill 3.5% for Media buying agency and 10% for Others Rate of tax on commission or fee 51

52 Tax liability for shipping business of nonresident: Sec 102 Fiscal year 2016/17 Fiscal year 2017/18 8% on income on account of carriage of passengers, livestock, mail or goods 8% on existing scope Demurrage charge or handling charge or any other amount of similar nature Supplementary return shall be submitted for demurrage income within 30 days from the end of month in which the income accrued. 52

53 Value Added Tax 53

54 New VAT Act 2012 The New VAT Act 2012 implementation has been delayed It is now expected to be enforced from 1 July

55 VAT Alerts Truncated VAT, tariff VAT, package VAT are present Price Declaration is present Current Account needs to be maintained Current Account needs to be maintained Advance trade VAT will remain at 4% Full deduction of withholding VAT 55

56 VAT Registration Businesses who are centrally registered under VAT Act 1991 will need to obtain 9 digit e-bin online All VAT obligations under the VAT Act 1991 will be performed with this 9 digit e-bin All unit VAT registration will also need to be converted to 9 digit e-bin separately online All VAT obligations performed currently with the respective VAT circles will continue to be performed with the same VAT circles VAT return is required to be filed with the respective regional commissioner by the Unit VAT Registered person mentioning the 9 digit e BIN 9 digit e-bin should be obtained by 31 Dec In the transition time 11 digit VAT registration will be effective 56

57 VAT Registration All 9 digit e BIN central registration taken after 31 March 2017 by businesses which previously had unit registrations will be invalid as long as VAT Act 1991 is effective Business will need to obtain unit registration for each unit of operation If they wish to obtain central registration, then they will have to apply for central registration under the VAT Act

58 Extension of VAT exemption facility To promote the growth of domestic heavy industry Local manufacturers of Extension time limit Refrigerator and freezer Air conditioner 30 June 2019 Palm oil & soya bean oil 58

59 Customs Duty 59

60 Import Duties Customs Duty Regulatory Duty Supplementary Duty 60

61 Export Duty H.S.Code included products on which Export Duty has been imposed Sl. No. H.S. Code Description Proposed Rate (%) Cigars, cheroots and cigarillos, containing tobacco Cigarettes containing tobacco Other Cigars, cheroots, of tobacco substitutes Water pipe tobacco Other Smoking tobacco "Homogenised" or "reconstituted" Tobacco Other tobacco extracts 25 61

62 Excise Duty 62

63 Excise Duty Service Code Description of Services E Services Rendered by Bank or Financial Institute- (a) In cases where the balance, whether credit or debit, does not exceed BDT 100,000 at any time during a year (b) In cases where the balance, whether credit or debit, exceeds BDT 100,000 but does not exceed BDT 500,000, at any time during a year. (c) In cases where the balance, whether credit or debit, exceeds BDT 500,000 but does not exceed BDT 1,000,000, at any time during a year. (d) In cases where the balance, whether credit or debit, exceeds BDT 1,000,000 but does not exceed BDT 10,000,000, at any time during a year. (e) In cases where the balance, whether credit or debit, exceeds BDT 10,000,000 but does not exceed BDT 50,000,000, at any time during a year. (f) In cases where the balance, whether credit or debit, exceeds BDT 50,000,000, at any time during a year. Rate of Duty Nil BDT 150/account BDT 500/account BDT 2,000/account BDT 12,000/account BDT 25,000/account 63

64 Excise Duties Service Code Description of Services E Services Rendered by Bank or Financial Institute- (a) In cases where the balance, whether credit or debit, does not exceed BDT 100,000 at any time during a year (b) In cases where the balance, whether credit or debit, exceeds BDT 100,000 but does not exceed BDT 500,000, at any time during a year. E Services Rendered by Airline - (a) Services rendered by airline through issuing a domestic "Airline Ticket per seat" for single journey, which may involve one or more stops over on its way to ultimate airport of destination. b) Services rendered by airline through issuing an international "Airline Ticket per seat" for single journey, which may involve a connecting flight from a domestic airport. (c) Foreign national of Diplomatic class, showing his/her diplomatic passport at the Airline Ticket counter and check-in counter. Nil Rate of Duty BDT 150/account BDT (i) For SAARC countries BDT (ii) For other countries of Asia BDT 2, (iii) For Europe, USA and rest of the World BDT 3, Nil 64

65 Thank you 65