Facilities for foreign investors [As of 01 July 2017 (Updated)]:
Government of Bangladesh provides a lot of incentives for foreign investors. These are, in brief, as follows:
01. Protection of foreign investment and its repatriation
As per the Foreign Private Investment (Promotion and Protection) Act, 1980, protection of foreign investment from expropriation by the state is fully ensured. Moreover, full repatriation of capital invested from foreign sources is allowed. Similarly, post-tax profits and dividend accruing to foreign investors are allowed to be transferred in full. Remittance of approved post-tax royalties, technical know-how and technical assistance fees is also allowed upon permission from Bangladesh Investment Development Authority (BIDA). Foreigners employed in Bangladesh are permitted to make monthly remittance to the country of their domicile out of their current savings up to 75% of their net income. Besides, they are entitled to remit their entire retirement benefits.
02. Fiscal incentives
(a) Tax treaty: Avoidance of double taxation on the basis of bilateral tax treaties. So far Bangladesh has tax treaties with 34 countries.
(b) Research and development: Expenditure on scientific research expenditure is deductible from business/Professional income.
(c) Tax rebate for manufacturing companies: Qualifying manufacturing companies located in places other than city corporation areas may enjoy tax rebate up to 20% for a period up to 10 years.
(d) Tax rebate for initial public offering: A 10% total tax rebate is available to non-publicly traded companies that transfer 20% or more shares of its paid-up capital through Initial Public Offering (IPO). This rebate is available in the year of transfer.
(e) Reduced tax rate on capital gains arising from transfer of shares: 10% tax rate on capital gains of firms and companies from transfer of shares of public companies listed with stock exchanges. For sponsor shareholders and directors of banks, financial institutions, insurance companies, merchant banks, leasing companies, portfolio management companies, stock dealers or stock brokers the rate is 5%. For other individuals such gains have been exempted from tax. Any capital gain from the transfer of stocks or shares of a publicly listed company made by a non-resident assessee is exempt from tax if such assessee is entitled to similar exemption in the country in which he is resident
(f) Tax Holiday: Tax Holiday for 5/10 years is available to defined sectors of industry set up by a company incorporated in Bangladesh in defined regions and for 10 years to defined physical infrastructure facilities at prescribed rates on fulfillment of certain conditions.
(g) Concessionary rate of import duty for import of capital machinery: Concessionary import duty (1% in general) and exemption from VAT and Supplementary Duty are available in case of import of capital machinery subject to certain conditions. to certain conditions.
(h) Incentives to Private Sector Power Generation companies: Power Generation Companies (other than coal-based electric generation companies) that commence its commercial production on 01 January 2015 and thereafter and follow Private Sector Power Generation Policy of Bangladesh, will enjoy tax holiday for 10 years-@100% for the first 5 years, @50% for the next 3 years and @25% for the remaining 2 years. These companies would have to maintain regular books of accounts and file income tax return under section 75 of the Income Tax Ordinance 1984 on due time. Coal-based Private Power Generation companies that would enter into contract by 30 June 2020 for setting up electric plants and start commercial production by 30 June 2023 would enjoy tax holiday for 15 years. Tax exemption of income the expatriates engaged in power generation companies for three years from their date of arrival. Interest from foreign borrowings, royalties, technical know-how and technical assistance fees, as well as capital gain will be exempted from tax.
(i) Public Private Partnership (PPP): Business income of PPP company shall be exempted from tax for ten years. Company formed as per section 22 of the Public Private Partnership Act 2015 shall get exemption from tax on capital gain from transfer of share, royalty, technical know how, technical assistance fee from PPP project for ten years. 50% salary income of expatriate technician of PPP projects shall be exempted from tax for three years if the employee is appointed within five years of the commencement of commercial production of the company.
(j) Special incentives to Oil and Gas sectors: In compliance with Production sharing contract (PSC) with the Government, Government holds and keeps the contractors of oil & gas exploration harmless from all present and future Bangladesh taxes except where specifically provided to the contrary.
(k) Liquefied Natural Gas (LNG): Excelerate Energy Bangladesh Limited (EEBL) was exempted from tax on its income from FRSU for 15 years. Expatriate employee’s salary is exempted from tax for 3 years. Royalties, technical know how fee, technical assistance fee, interest on foreign loan and capital gain from transfer of shares is exempted from tax. The Government has allowed Excelerate Energy Bangladesh Limited (EEBL) exemption on Value Added Tax (VAT), Supplementary Duty (SD) and Advance Trade VAT (ATV) on goods and services for implementation of Floating Storage Regasification Unit (FSRU) and services rendered by FSRU. The company also enjoy tax holiday for 15 years and would enjoy exemption of income tax of the expatriates for three years from their date of arrival, interest from foreign borrowings, royalties, technical know-how and technical assistance fees, as well as capital gain from transfer of share.
(l) Hi-tech park: Company operating in Hi-Tech Park for providing goods or services shall get exemption from tax on income from the said business at varying rates for 10 years. Company appointed as developer by Section 20 of Bangladesh High-Tech Park Authority Act, 2010 shall get exemption from tax on business income of developers of High- Tech Park for 10 years @ 100%, for 11th year @ 70% and 12th year @ 30%.
(m) Rooppur Nuclear Power Plant Project: Income of Atomstroyexport, a Russian company and contractor of the project, from contractor’s bill of the project and income of foreign employees and consultants shall enjoy exemption of tax on its income. Sub-contractor bill of the project shall be exempted form tax. Import of goods, machinery, services and documents for the project are also exempted from tax.
(n) Real Estate: Tax collected at source under section 53FF of the Income Tax Ordinance 1984 from company engaged in real state business shall be final unless regular tax on income from the business exceeds the same.
(o) Facilities for export-oriented industries: Import of capital machineries and parts thereof is allowed on nominal duty of 1% besides the facilities of Bonded Warehouse, Back to Back Letter of Credit and Duty Draw Back in case of export-oriented industries.
(p) Additional facilities in the Export Processing Zones: There are several additional benefits for industries set up in the Export Processing Zones. If these are set up in Dhaka and Chittagong divisions (other than the three Hill Track districts) on or after 01 January 2012, these would enjoy tax holiday for 5 years, 1st two years @ 100%, and next two years @ 50% and the last year @ 25%. However, if these are set up in other divisions and the three Hill Tract districts, these would enjoy tax holiday for 7 years; 1st 3 years @ 100%, next 3 years @ years 50% and the last year @ 25%. Further facilities include duty-free import of machinery, equipment and raw materials, off-shore banking facilities, freedom from customs formalities, provision of electricity, water, gas and telecommunication connections.
(q) Special Export Processing Zones (SEPZ): Company operating in Special Export Processing Zones (SEPZ) and company developing economic zone shall also get exemption from income tax at different rates for 10 years