Bangladesh government is all set to curtail corporate income tax by 2.5 percentage points in a bid to encourage compliance with a condition of promoting cashless transactions.
Finance Minister Abul Hassan Mahmood Ali on Thursday proposed the 25% corporate tax to replace the existing 27.5% for non-listed companies, subject to a condition.
He made the proposal while placing the proposed budget for FY25 at the parliament on Thursday.
The condition is that all types of income, receipts, single transactions of over Tk5 lakh and all annual expenses and investments exceeding Tk36 lakh be done through bank transfers.
Similarly, the minister proposed that listed companies which offloaded at least 10% of shares in the stock market and abided by the bank transfer condition be able to avail an income tax reduction from 22.5% to 20%.
If the share offloading is less than 10%, the company has to pay income tax at a rate of 25%.
However, if this company abides by the bank transfer condition, the income tax rate will be 22.5%.
"To further formalize the economy and encourage the establishment of one-person companies, I propose to make the one-person company tax rate from 22.5% to 20%, subject to compliance with the same conditions as non-listed companies," added the finance minister.
“In this case, all types of income and receipts and all types of expenses and investments above Tk5 lakh in each single transaction and above Tk36 lakh in total annually must be done through bank transfer.”
“It is proposed to conditionally make the tax rate from 22.5% to 20% for listed companies if shares exceeding a certain amount of paid-up capital are transferred through IPO (Initial Public Offering).”
“Currently, as part of the effort to achieve the country's tax-GDP rate growth target every year, I propose to increase the tax rate for cooperative societies from 15% to 20% keeping other tax rates fixed as per last financial year,” he included.
However, the reduced disparity between listed and non-listed companies could negatively impact the capital market, reducing the willingness to become listed and ensuring compliance, said sector insiders, adding that the government should raise the tax disparity to collect more revenue.
Although the corporate tax rate for listed companies remains unchanged, hidden aspects may hurt listed companies, insiders noted.