Income may come under direct taxation

The earnings of international technology companies having no permanent establishment (PE) in Bangladesh would come under the purview of direct tax in the next fiscal year, officials say.
Also, the revenue board might define freewheeling 'e-commerce' in the income-tax law, specifically in the Finance Bill 2022-23, due to the sector's booming business.
As part of its budget preparation, the income-tax wing of the National Board of Revenue (NBR) is working on the possible taxable-income areas to collect tax revenue from the digital economy and widen the direct-tax net.
Currently, the NBR does not receive any income tax, other than VAT, from Google, Facebook, Youtube, Amazon, Netflix and other social media reigning in the emerging metaverse.
As per the income-tax ordinance, banks are supposed to deduct 20-per cent tax at source from non-resident companies having the PE when they repatriate profits to their home country.
Income-tax officials say the scheduled banks at present cannot deduct the tax at source on the income by companies not having setup here.
In the upcoming financial year (2022-23), the tax at source might be imposed, subject to approval by government high-ups, on the companies irrespective of having PE or not, officials hinted.
They say the footholds of the tech giants such as Google, Facebook, Amazon and Netflix in Bangladesh have prompted the tax authorities to rethink the direct-tax measures.
The companies are earning hefty profits worldwide. Google's net income grew 32 per cent to $75 billion in the final quarter of 2021, ending the year with a total of $76 billion in profit.
Those companies will have to pay taxes on amounts they will earn in Bangladesh, says a senior tax official.
"It would not be possible to make obtaining Taxpayer Identification Number (TIN) mandatory for the non-resident companies as they would not be able to submit tax returns without the PE," he adds.
The tax authorities are exploring some different fiscal measures for the companies not having the PE in Bangladesh, he says.
Initially, the taxmen would have to accept the declaration of income by the non-resident companies as the NBR is not well-equipped to detect misdeclaration of their virtual transactions, he adds.
However, there is a concern among the foreign investors over violation of some clauses of double-taxation avoidance agreement (DTAA) through deduction of taxes in such a way at the time of sending income to their native countries.
Responding to a query over the issue, another tax official, who deals with the matter, says the DTAA does not cover the areas where the NBR currently collects taxes from.
Earlier, the High Court in the full text of a verdict had observed that the global companies are bound to submit their income-tax returns to the NBR according to the Income Tax Ordinance 1984.

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