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The Bangladesh Budget Speech for 2019-2020 was delivered by Finance Minister Abul Maal Abdul Muhith on 13 June 2019. Some of the main points of the budget are as follows:

Income tax measures, including:

  • An increase in the minimum tax rate for mobile companies from 0.75% to 2.0% of turnover;
  • An extension of the existing tax holiday incentives for 21 industrial sectors and 19 physical infrastructure development sectors by five years and the inclusion of additional sectors, including manufacturing of agricultural machinery, furniture, home appliances, mobile handsets, toys, leather goods, LED televisions and plastic recycling (the tax holiday includes an exemption starting at 90%, which is reduced each year, and is currently set to expire on 30 June 2019);
  • A reduction of the maximum tax deduction rate at source on the bill of contractors and suppliers from 7% to 5% (proposed rates range from 2% to 5%);
  • An increase in the latest assessed income threshold for advance tax payments from BDT 400,000 to BDT 600,000;
  • An increase in the annual turnover threshold for the SME tax exemption from BDT 3.6 million to BDT 5 million;
  • An extension of the tax exemption on income from export of handicrafts for an additional five years (currently set to expire 30 June 2019);
  • An extension of the reduced tax rates for readymade garments (12%; 10% with green building certification) and textile sectors (15%) for an additional five years (currently set to expire 30 June 2019);
  • The introduction of a 5% rebate on total tax for employers if at least 10% of total employees includes persons with physical disabilities;
  • The introduction of a 15% tax on stock dividends distributed by any listed company in order to promote the distribution of cash dividends;
  • The introduction of an additional 15% tax on retained earnings and reserves exceeding 50% of the paid-up capital of a company; and
  • The introduction of the explicit requirement for the submission of income tax returns by non-residents with a permanent establishment in Bangladesh.

Value Added Tax (VAT) measures, including:

  • The introduction of new online services for VAT registration, payment, return filing, etc.
  • The abolition of the existing price declaration system before the supply of goods, with VAT to be paid on the basis of the fair market price;
  • The abolition of the requirement to maintain a sufficient balance in the Account Current Register while supplying goods, with businesses allowed to pay tax at the end of the month through VAT returns;
  • The introduction of the provision that wherever 15% VAT is applicable, the input tax credit can be obtained through the VAT return, and that a VAT return will be treated as the application of refund;
  • An increase in the VAT registration threshold from BDT 8 million to BDT 30 million;
  • The introduction of a 4% turnover tax for SMEs with annual turnover between BDT 5 million and BDT 30 million;
  • The introduction of a VAT exemption for small and marginal traders with an annual turnover of up to BDT 5 million;
  • The introduction of reduced VAT rates of 5.0%, 7.5% and 10.0% for specific goods and services;
  • The introduction of a fixed VAT rate of 5% for local traders;
  • The introduction of VAT rates of 2.4% and 2.0% for pharmaceutical and petroleum products, respectively, at the trading stage;
  • The extension of the existing VAT exemption facility for government priority and fast track projects, such as the Bangladesh Economic Zone (BEZA) and the Public-Private Partnership (PPP) projects;
  • The extension of the existing VAT and supplementary duty exemptions given to heavy industries such as automobiles, refrigerators, freezers, air conditioners, motorcycles, mobile industries, etc. for the growth and development of heavy domestic industry and export sector; and
  • Several changes with respect to the VAT exemption schedules.

Click the following links for the Budget Speech 2019-2020 and the Finance Bill 2019-2020. Subject to approval, the measures will generally apply from 1 July 2019.