The National Board of Revenue (NBR) has asked the export-oriented sector to obtain fresh tax-exemption certificates to benefit from tax breaks at the latest rates.
In a clarification, the tax authority said tax exemption certificates issued before March 4, 2024, are no longer valid from that date.
Exporters must obtain new certificates from the income tax exemption wing of the revenue board. These certificates should be submitted to banks for the deduction of source taxes.
The clarification, signed by Bapon Chandra Das, second secretary of the income tax wing, was prompted by confusion surrounding the validity of existing tax exemption certificates.
The NBR sent the clarification to the Bangladesh Bank, managing directors of all banks and financial institutions, tax commissioner zone-4 and other relevant parties.
On March 4, 2023, the income-tax wing of the NBR addressed a legal gap by issuing a statutory regulatory order (SRO) to restrict apparel, textile and other exporters from availing a reduced rate of source tax unless it is proportional to their payable corporate tax.
Previously, some exporters obtained tax exemption certificates to pay a lower source tax rate of 0.83 per cent instead of the standard rate of 1.0 per cent, proportionate to their corporate tax. This practice could have resulted in huge losses of state revenue.
As of March 4, 2024, exporters who pay corporate tax below 12 per cent can benefit from a lower source tax rate. Other exporters must pay the 1.0 per cent source tax.
Only USGC LEED-certified apparel exporters, and those in the jute and other designated sectors, can enjoy the reduced source tax benefit.
A senior income tax official said exporters need to obtain a tax exemption certificate on a case-by-case basis to avail of this fiscal concession.
The SRO for the apparel sector remains valid until June 30, 2028. The NBR has repealed the previous SRO issued on June 26, 2023.
The corporate tax rate for export-oriented RMG factories is 12 per cent. But, for green factories, the rate is lower at 10 per cent.
In general, the corporate tax rate is 27.5 per cent for such industries.
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