CMSF set to manage dividends, streamline tax waiver process

The securities regulator has decided to engage the Capital Market Stabilisation Fund (CMSF) in distributing cash dividends to investors on behalf of listed companies, to ease the tax collection process and help investors secure tax waivers on dividend income.
The CMSF, established in 2021 to settle claims of undistributed dividends, will launch a TDS (tax deduction at source) system to take on the new responsibility.
The single platform will be used to deduct tax on the aggregate amount of dividends investors receive from one or more organisations. Investors will get a digital TDS certificate, and tax benefits-such as waivers on dividend income-will be adjusted automatically during the submission of tax returns.
As part of the regulatory move, the Stabilisation Fund has already developed an online module, which will go live to provide relevant information to investors once it receives consent from the finance ministry.
The cash dividend distribution system will come into effect through a gazette notification after the completion of necessary formalities.

On August 18, the Bangladesh Securities and Exchange Commission (BSEC) submitted a set of proposals, including the introduction of the dividend distribution hub, to overhaul the CMSF.
"In a recent meeting, the finance adviser already gave his verbal consent in favour of distributing dividends through the Stabilisation Fund," said a senior BSEC official, wishing not to be named as he does not have the authority to speak to the media.
The CMSF will have to sign a memorandum of understanding (MoU) with the National Board of Revenue (NBR) before activating the system.
Currently, investors have to navigate a cumbersome process to avail of the tax waiver on dividend income up to Tk 50,000 annually.
Listed companies issue tax certificates separately after deducting 15 per cent tax from dividend income of shareholders who are registered taxpayers with a TIN (tax identification number). The tax rate is 20 per cent for those without a TIN.
Investors have to collect as many tax certificates as the number of companies they are invested in, which is often discouraging. Shareholders must then submit those tax certificates along with tax returns to the revenue board to enjoy the tax benefits.
Golam Rabbani Hamidi, chief executive officer of Modern Securities, said it is very difficult for investors to collect tax certificates from multiple companies.

"A significant number of investors do not feel encouraged to acquire tax certifications, going from company to company," Mr Hamidi said.
A handful of brokers, such as IDLC Securities, however, provide tax statements that are accepted by the National Board of Revenue with tax returns.
An official of IDLC Securities said they provide each client with a tax statement citing cash dividends earned from different companies and tax deducted in each case.
The common trend is that even when companies transfer cash dividends to investors' bank accounts, deducting tax, shareholders fail to avail of tax benefits because of the unavailability of tax certificates.
CMSF officials say tax certificates collected by investors sometimes do not match the online submission of tax returns.
On the other hand, a pile of tax certificates increases the workload of revenue board officials. Considering all these issues, the CMSF has developed the online module to provide a one-stop service to investors.
Wasi Azam, head of operations at the CMSF, said their proposed system, if enforced, would allow companies to transfer cash dividends to the bank account of the Stabilisation Fund.
As the Fund will have data sharing with the Central Depository Bangladesh Ltd. (CDBL), the CMSF's software will easily sort out investors' dividends. On receipt of an investor's cash dividends from multiple listed companies, they will be issued a single challan on the total dividend income.
Investors with TIN will receive the challan by email, as they provide their email ID when opening BO (beneficiary owner's) accounts. They will also be able to download challans from the CMSF domain.
Challans for investors without TIN will be distributed manually.
The previous commission introduced the Stabilisation Fund by formulating rules that came into effect in June 2021, to help revitalise the market through liquidity support along with settling investors' claims of undistributed or unsettled dividends.
Since the fall of the previous government, however, the fate of the CMSF has been hanging in the balance as its role has come under question.
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