Individuals, firms to pay tax at source

Individuals and companies both have to pay tax at source at the time of opening local letters of credit (L/C) for purchasing or procuring products from the domestic sources, the revenue board said to clear a mist.
The National Board of Revenue (NBR) clarified the tax law on local L/C Sunday following confusions in the field-level tax offices on deduction of the tax from buys by individuals or proprietors.
The income tax policy wing has instructed all of the tax offices across the country to deduct the tax as per rules incorporated into the budget for fiscal year (FY) 2014-15.
Talking to the FE, a senior tax official said there is confusion on deduction of tax at source in the field-level tax offices in case of purchase of goods through local L/C by private or joint-venture firms or through similar types of financial agreement.
"The NBR has made the matter clear in the instruction that all types of taxpayers will have to pay the tax at source at the time of opening L/C or through similar types of financial agreements for procuring goods," he said.
The official said the issue came into focus after few members of Bangladesh Computer Samity purchased equipment through local L/C.
Commercial banks deduct tax at source against local L/Cs. In 2012, the NBR imposed tax at source on the opening of local L/Cs by companies. In the budget for the current FY, the NBR extended its net by imposing the tax on individuals or proprietors.
However, local L/Cs on procuring essential products are exempted from such tax.
The NBR has incorporated a new section, 52U, on deduction of taxes from local L/C or similar types of financial agreements in the current FY through the Finance Act-2014 by scrapping previous rules, the NBR order said.
"According to the section, local LC-issuer banks have to deduct 3.0 per cent tax at source at the time of payment against L/Cs, if its value exceeds Tk 0.5 million, to the sellers or buyers. The new rules came into effect from July 1, 2014," the order says.
The tax at source would be considered advance income tax instead of finally-paid tax for the companies or individuals, it said.

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