The National Board of Revenue (NBR) has offered a tax benefit for the asset management companies (AMCs) for the next five years to stimulate the country's capital market.
The AMCs will enjoy a reduced tax rate of 15 per cent, instead of the existing 37.5 per cent, until 2018, on income from management of mutual funds (MFs) in the stock market.
The NBR issued a statutory regulatory order (SRO), dated December 5, in this regard. The reduced tax rate will be effective from the issued date and onwards.
Tax officials said the companies will get the tax benefit on their income in the current fiscal year, 2013-14. However, the previous tax rate (37.5 per cent) will be imposed on their income from July 1 to December 4, 2013.
A senior tax official said the NBR completed its processing regarding the tax benefit two months ago. However, the issuance of the SRO needed approval of the finance ministry and vetting of the law ministry, he said.
The tax benefit has been offered following proposal of the Bangladesh Securities and Exchange Commission (BSEC) and the Investment Corporation of Bangladesh (ICB).
Actual tax incidence of the AMCs' income stands at 20 per cent, as the companies are enjoying different tax exemptions on their income.
Officials said the AMCs will enjoy the reduced tax rate only on their income from mutual fund management in the stock market. Tax will be charged at the regular rate of 37.5 per cent on other incomes of the companies, including fixed deposit receipt (FDR) and dividend income.
Tax officials said the facility has been offered to attract investment, so that the companies can play a more effective role in minimising the investors' risk.
A total of 17 AMCs are operating in the country and managing 43 MFs in the capital market.
Yawer Sayeed, managing director of AIMS Bangladesh Ltd, the country's first private asset management company, however, expressed his doubt over outcome of the 'short-term' benefit.
Mr Sayeed said income from mutual fund management should be totally exempted from payment of income tax.
"The five-year tax benefit will not bring any significant outcome for the AMCs, as these companies are severely affected by the volatility in the capital market."
The government will not lose any significant amount of income tax following the tax waiver, as the AMCs' earnings are not so high, Mr Sayeed added.
ICB sought the benefit, while other AMCs are not in favour of such short-term tax benefit. The companies need the government's support to grow and concentrate more on mutual fund management, he added.
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