Branding Bangladesh
A K Chowdhury | Tuesday, 29 July 2008
BEING a country of 150 million people with close proximity to big markets like China and India, economies like Bhutan and Nepal and a resourceful neighbour like Myanmar, Bangladesh has all the potentials to be chosen as the next investment destination in South Asia for manufacturing, processing, assembling. It may also emerge as a place to source foreign intellectual property (IP) like Dubai.
Its two sea ports, three international airports, 65 per cent literacy rate and life expectancy of 61 years speak well for the country's economic potential. Its GDP growth rate of six per cent and 45 million employed civilian labour force are indicative of the state of its economy.
Enterprises having 100 per cent foreign ownership are allowed to operate in Bangladesh. There is no discrimination between a foreign-owned enterprise and a Bangladeshi company.
For foreign investment, repatriation of capital, dividend, profit, royalty, technical know-how fee or professional, including management technical assistance/services fees or interest on foreign loans are well prompted and protected under "Foreign Private Investment (Promotion & Protection) Act 1980".
For new manufacturing undertakings, local incorporated or registered setup in any export processing zones in Bangladesh, tax is expected for ten years from the day of commercial operation.
After this tax exemption is over, tax at 50 per cent applies on exports earning.
Dividends payable to foreign shareholders, out of distributable tax exempt EPZ enterprise profit, are also tax exempted during the enterprises' tax exemption period. Even after the exemption period, if the dividends are re-invested in the EPZ, no tax is payable.
Besides, enterprises in EPZs are entitled to carry out their day-to-day imports or exports free of any duty, VAT, taxes or levies.
Additionally, new specified industries owned by a locally incorporated entity having paid up capital of at least taka one million, are entitled to enjoy tax holiday for five or seven years, depending on the area of set-up in Bangladesh.
Alternatively, such new industries are entitled to claim accelerated depreciation on plant, machinery or equipment -- allowable at 50 per cent in the first year, 30 per cent in the second year and 20 per cent in the third year.
Further, any income derived in Bangladesh from the business of software development and Information Technology Enabled Services (ITES) is tax exempt from July 1, 2008 to June 30, 2011.
Royalty or technical know how fee or professional managerial or technical assistance or services fees, subject to prior registration or clearance of the Board of Investment (BoI) and the central bank (Bangladesh Bank) up to a maximum of 6.0 per cent of turnover are repatriable subject to tax deduction at source (TDS/AIT) at the rate of 10 per cent only with having local auditors' certification. TDS on royalty or technical know how fee is treatable as "final discharge" of local tax obligation annually.
But for local paying-enterprises' local taxation purpose, the foregoing charges taken together annually is restricted to 5.0 per cent of profit before such charges.
However, in case of foreign branch or paying-enterprise (PE): 10 per cent of branch's or PE's profit, before tax, is normally allowable for tax purpose as head office charge -- to be certified by the auditors for the purpose.
Dividend or branch or PE profit repatriation attracts TDS at the rate of 20 per cent (tax-treaty 15 per cent or 10 per cent).
The cost of doing business in Bangladesh is affordable considering the comparative lower labour cost, coupled with indigenous cheaper materials.
Bangladesh is blessed with abundant natural gas and coals.
The cost of developed land or building in EPZ, on rental or ownership basis, or elsewhere in Bangladesh, on leasing or buyout basis, are, indeed, quite competitive as compared to those in Sanghai in China or Mumbai in India.
Bangladesh has bilateral tax-treaties with 26 countries, allowing a number of regulatory or fiscal protections and facilities.
There is no transfer pricing (TP) regulations, as yet, in Bangladesh but the local regulators look for "arms length" basis of business transactions and usually prefer or refer to the Organisation for Economic Cooperation and Development (OECD) guidelines for the purpose.
There is yet no organised derivatives or bond markets in Bangladesh.
The Bangladesh Bank (BB), mainly regulates monetary, banking/financial institutions, money laundering and foreign exchange matters following updated financial and economic regulations.
The Board of Investment (BoI) registers and monitors foreign investment and technology and foreign expatriates and foreign liaison or representative office issues.
The Bangladesh Exports Processing Zones Authority (BEPZA) mainly facilitates and registers and monitors enterprises in EPZs.
The office of the Registrar of Joint Stock Companies (RJSC) facilitates, registers and monitors corporate enterprises including branches or PE's of foreign companies.
The National Board of Revenue (NBR) regulates revenue matters.
The Chief Controller of Imports and Exports (CCI&E) facilitates registration and monitors all imports or exports.
The Security and Exchange Commission (SEC) and two stock exchanges at Dhaka and Chittagong facilitate registration as well as trading of listed securities or debentures.
An independent judiciary, Anti-Corruption Commission (ACC) and Election Commission (EC), in full operation and with support from civil society forums, are in operation to help ensure good governance.
The writer is founder President IIA, co-founder of Chittagong Stock Exchange Bangladesh and Y2K President - ICAB and managing and fiscal partner Hoda Vasi Chowdhury & Co Independent Correspondent Firm to Deloitte Touche Tohmatsu Chartered Accountants. He can be reached at e-mail: akchowdhury@hodavasi.com
Its two sea ports, three international airports, 65 per cent literacy rate and life expectancy of 61 years speak well for the country's economic potential. Its GDP growth rate of six per cent and 45 million employed civilian labour force are indicative of the state of its economy.
Enterprises having 100 per cent foreign ownership are allowed to operate in Bangladesh. There is no discrimination between a foreign-owned enterprise and a Bangladeshi company.
For foreign investment, repatriation of capital, dividend, profit, royalty, technical know-how fee or professional, including management technical assistance/services fees or interest on foreign loans are well prompted and protected under "Foreign Private Investment (Promotion & Protection) Act 1980".
For new manufacturing undertakings, local incorporated or registered setup in any export processing zones in Bangladesh, tax is expected for ten years from the day of commercial operation.
After this tax exemption is over, tax at 50 per cent applies on exports earning.
Dividends payable to foreign shareholders, out of distributable tax exempt EPZ enterprise profit, are also tax exempted during the enterprises' tax exemption period. Even after the exemption period, if the dividends are re-invested in the EPZ, no tax is payable.
Besides, enterprises in EPZs are entitled to carry out their day-to-day imports or exports free of any duty, VAT, taxes or levies.
Additionally, new specified industries owned by a locally incorporated entity having paid up capital of at least taka one million, are entitled to enjoy tax holiday for five or seven years, depending on the area of set-up in Bangladesh.
Alternatively, such new industries are entitled to claim accelerated depreciation on plant, machinery or equipment -- allowable at 50 per cent in the first year, 30 per cent in the second year and 20 per cent in the third year.
Further, any income derived in Bangladesh from the business of software development and Information Technology Enabled Services (ITES) is tax exempt from July 1, 2008 to June 30, 2011.
Royalty or technical know how fee or professional managerial or technical assistance or services fees, subject to prior registration or clearance of the Board of Investment (BoI) and the central bank (Bangladesh Bank) up to a maximum of 6.0 per cent of turnover are repatriable subject to tax deduction at source (TDS/AIT) at the rate of 10 per cent only with having local auditors' certification. TDS on royalty or technical know how fee is treatable as "final discharge" of local tax obligation annually.
But for local paying-enterprises' local taxation purpose, the foregoing charges taken together annually is restricted to 5.0 per cent of profit before such charges.
However, in case of foreign branch or paying-enterprise (PE): 10 per cent of branch's or PE's profit, before tax, is normally allowable for tax purpose as head office charge -- to be certified by the auditors for the purpose.
Dividend or branch or PE profit repatriation attracts TDS at the rate of 20 per cent (tax-treaty 15 per cent or 10 per cent).
The cost of doing business in Bangladesh is affordable considering the comparative lower labour cost, coupled with indigenous cheaper materials.
Bangladesh is blessed with abundant natural gas and coals.
The cost of developed land or building in EPZ, on rental or ownership basis, or elsewhere in Bangladesh, on leasing or buyout basis, are, indeed, quite competitive as compared to those in Sanghai in China or Mumbai in India.
Bangladesh has bilateral tax-treaties with 26 countries, allowing a number of regulatory or fiscal protections and facilities.
There is no transfer pricing (TP) regulations, as yet, in Bangladesh but the local regulators look for "arms length" basis of business transactions and usually prefer or refer to the Organisation for Economic Cooperation and Development (OECD) guidelines for the purpose.
There is yet no organised derivatives or bond markets in Bangladesh.
The Bangladesh Bank (BB), mainly regulates monetary, banking/financial institutions, money laundering and foreign exchange matters following updated financial and economic regulations.
The Board of Investment (BoI) registers and monitors foreign investment and technology and foreign expatriates and foreign liaison or representative office issues.
The Bangladesh Exports Processing Zones Authority (BEPZA) mainly facilitates and registers and monitors enterprises in EPZs.
The office of the Registrar of Joint Stock Companies (RJSC) facilitates, registers and monitors corporate enterprises including branches or PE's of foreign companies.
The National Board of Revenue (NBR) regulates revenue matters.
The Chief Controller of Imports and Exports (CCI&E) facilitates registration and monitors all imports or exports.
The Security and Exchange Commission (SEC) and two stock exchanges at Dhaka and Chittagong facilitate registration as well as trading of listed securities or debentures.
An independent judiciary, Anti-Corruption Commission (ACC) and Election Commission (EC), in full operation and with support from civil society forums, are in operation to help ensure good governance.
The writer is founder President IIA, co-founder of Chittagong Stock Exchange Bangladesh and Y2K President - ICAB and managing and fiscal partner Hoda Vasi Chowdhury & Co Independent Correspondent Firm to Deloitte Touche Tohmatsu Chartered Accountants. He can be reached at e-mail: akchowdhury@hodavasi.com