The Income Tax Bill-2023 is likely to be passed by Parliament today with major changes including a relief for the bank depositors having current or savings accounts.
Under the law, if enacted, bank depositors having only fixed deposit above Tk 1.0 million will need to submit tax returns and furnish the proof of return submission to continue with the bank accounts.
Under the new law, all educational institutions, having English medium curriculum and English version, would also be considered as company and they would be required to pay corporate tax.
However, those having Bangla curriculum and those under the Monthly Payment Order (MPO) would remain excluded from the list.
Tax officials said the new law was drafted in Bangla also in a bid to widen the tax net and raise the country's tax-GDP ratio.
If passed, the new law might be implemented from July 1, 2023.
However, some of the Statutory Regulatory Orders (SROs) under the existing Income Tax Ordinance-1984 would remain valid until new SROs issued by the National Board of Revenue (NBR).
Under the new law, educational institutions, Samity, trade and commerce associations, foundations, and non-government organisations would be treated as companies. Apart from individuals, all other entities would be considered as company irrespective of their registration under Companies or Societies or Partnership Act.
"Treating those as companies will have a vast impact as they will have to pay minimum tax at 0.6 per cent despite incurring loss and they will have to submit audited financial statement with verification through the Document Verification System (DVS) of the Institute of Chartered Accountants of Bangladesh (ICAB)," said a tax expert.
However, there are differences of opinion among the tax officials regarding a provision in the law on treating any entity or business under any fund, trust, local authority, etc. as company.
Tax officials cleared confusions on treating many of the businesses, educational institutions, and business entities under any fund as company under the new law. They said the changes were made in a clarification issued on October 19, 2022, not under the Income Tax Bill-2023
However, the new law clarifies the definition of 'person' while translating the provision into Bangla and included English medium and English version educational institution, a tax expert said.
Firms, Association of Person, joint Hindu family, Trust, businesses under any Fund, local authority, company, entity, etc. have been brought under the purview of company in the clarification issued on October 19, 2022.
However, a senior tax official questioned whether a clarification could define a law.
He said the changes in the definition of 'companies' would impact the small businesses as their cost of operation would go up significantly.
A vast range of entities that are currently paying tax as individuals would have to pay corporate tax.
Officials said changes in companies' definition brought in a previous clarification in 2022 were made clear in Bangla version of the new law.
They said following huge informal financial transactions and poor record keeping, the taxmen widened the areas of corporate tax return submission.
An entity having formal financial transaction should not avoid transparency in its accounts, they added.
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