The government has proposed a cut in the corporate tax rate by 2.5 per cent for listed companies with a condition that all financial transactions will be conducted through banks.
The government has offered the tax benefit in an effort to lure more companies to go public with more free-float shares.
In his budget speech for the fiscal year (FY) 2022-23, Finance Minister A H M Mustafa Kamal on Thursday proposed a 20 per cent corporate tax rate for listed companies that issues shares worth more than 10 per cent of paid-up capital through IPO (initial public offering).
"For the sake of development of the stock market and attracting investments, I propose a tax rate of 20 per cent in place of existing 22.5 per cent for listed companies that issue shares worth more than 10 per cent of its paid-up capital through IPO," the finance minister said in his budget speech.
This facility will not be applicable to the companies that fail to conduct transactions through banks on account of receipts, income, expenses and investment of more than Tk 1.2 million, even though they offload shares worth more than 10 per cent of paid-up capital. They will be charged the corporate tax at the rate of 22.5 per cent.
As per the existing provision, the 22.5 per cent corporate tax rate is applicable to companies, other than banks, insurers, financial institutions and mobile operators.
The existing corporate tax rate of 22.50 per cent has been kept unchanged for the listed companies that issue shares worth 10 per cent or less than 10 per cent of paid-up capital.
But the companies that issue 10 per cent shares or less will have to pay the corporate tax at the rate of 25 per cent if they fail to conduct transactions through banks in the event of receipts, income, expenses and investment worth over Tk 1.2 million.
In his instant reaction, the former chairman of the securities regulator Faruq Ahmad Siddiqi has said it's good that the government is reducing the corporate tax rate day by day.
"The corporate sector may benefit from this. But the budget proposals leave very little impact on the capital market as no company goes public to reap the tax benefit," Mr. Siddiqi added.
He, however, said no benefit of the budget proposals would be visible in the capital market or elsewhere unless full implementation of the measures is ensured by the revenue board.
In the proposed budget for the FY 2022-23, the government has proposed a cut in the corporate tax rate by 2.50 per cent to 27.50 per cent for non-publicly-traded companies.
The non-publicly-traded companies will not be allowed to reap the 2.50 per cent tax rebate, if they fail to conduct transactions through banks. They will have to pay the tax at the existing rate of 30 per cent.
In case of one-person company, the proposed corporate tax rate is 22.5 per cent instead 25 per cent. Such companies will have to pay tax at existing rate of 25 per cent if they fail to conduct transactions through bank transfer.
In the proposed budget for the FY 2022-23, the existing corporate tax rate has kept unchanged for publicly and non-publicly traded banks, insurers, financial institutions and merchant banks.
The existing corporate tax rate for publicly-traded banks, insurers and financial institutions is 37.5 per cent, while the tax rate is 40 per cent for non-publicly traded companies.
The existing 37.5 per cent tax rate has been kept unchanged for merchant banks also.
The 40 per cent and 45 per cent corporate tax rates have been kept unchanged for listed and non-listed mobile phone operator companies respectively.
The existing 45 per cent corporate tax rate and the 2.5 per cent surcharge have remained unchanged in the proposed budget for the FY 2022-23.
The government has proposed another reduction in the tax rate by 2.5 per cent to 27.50 per cent for both association of persons and artificial juridical person and other taxable entities.
But they will have to pay tax at the existing rate of 30 per cent, if they fail to conduct transactions through banks.
The existing 15 per cent tax rate has been kept unchanged for private universities, private medical colleges, private dental colleges, private engineering colleges or private colleges solely dedicated to imparting education on ICT.
In the budget proposal, the government has increased the tax at source to 20 per cent from the existing 10 per cent charged on the corporate entities' bank interest income.
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