#1KPMG Investment Guide Bangladesh February 2023#2Contents 01 Bangladesh - key facts 3 02 Modes of entry 17 Tax environment and 03 incentives 26 Foreign exchange 04 regulation 41 05 KPMG Bangladesh 44#3KPMG Bangladesh- key facts#41.1 Country Overview (1/2) One of the fastest growing economies in the world JANUARY 2023 INFLATION € 7.92% GDP GROWTH FOR 2021-22 March 2023 USD 1 $ = BDT 107.00 Source: Bangladesh Bank 2020-21 UNEMPLOYMENT RATE +7.25% Source: Bangladesh Bank Source: World Bank 5.23% Source: Bangladesh Bank 2021-22 EXPORT EARNINGS USD 60.97 bn Source: Export Promotion Bureau - Classified as a "Next Eleven" emerging market and one of the "Frontier Five" emerging economies in the world by Goldman Sachs and JP Morgan respectively. - Projected to become the 24th largest economy by 2033. - Although the country's economic growth has hampered due to Covid19 pandemic, it is expected the country will make a U-shaped recovery du to proactive economic policy reforms KPMG Credit ratings: Ba3 (Moody's) and BB- (Fitch) Foreign Direct Investment (FDI): USD 3.4 billion in 2021-22 Export destinations (2022): United States (20%), Germany (15%), United Kingdom (9%), Spain (6%), France (5%), Italy, Canada, Belgium, China, Japan and India. © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 4#51.1 Country Overview (2/2) Geography and climate • Location: Southern Asia, bordering the Bay of Bengal, between Myanmar and India Climate: Tropical; mild winter (October to March), hot, humid summer (March to June); humid, warm monsoon (June to October) • Regions: 8 divisions • Capital: Dhaka • Major cities: Dhaka, Chattogram and Sylhet Political system and demographics . • • . Type of government: Parliamentary democracy Population: 166.7 million people Official language: Bengali Prominent Young population: Approx. 67% below the age of 35 Financial sector • • Central bank: Bangladesh Bank • Local currency: Bangladeshi taka (BDT) Stock exchanges: Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE) Banks: 61 scheduled banks, 5 non-scheduled banks and 35 non-banking financial institutions KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 5#612 Economy and Infrastructure Key industry development Infrastructure Consumer friendly economy Sectors growing service and industry Payra Port Bangladesh is constructing its third sea port in addition to Mongla and Chattogram ports to expand its foreign trade All 26,700 Installed power capacity of 26,700 MW Source: Power Division generation Steady investment in digitisation Bangladesh Investment Development Authority (BIDA) Supports foreign investors Provides one-stop services Padma Bridge Padma bridge construction has been completed D 69+29 Dhaka Metro Rail Dhaka Metro Rail project, expressway project and expansion of highways will improve transportation facilities 69 Government-owned economic zones and 29 Private economic zones ― 2.4 GWe Ruppur Nuclear Power Plant, 1.3 GWe Rampal Power Plant, 1.2 GWe Matarbari Power Plant and more are being constructed Karnaphuli river tunnel construction project has been undertaken to increase connectivity KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh.#71.3 BIDA's one-stop services for investors Bangladesh Investment Development Authority is the primary regulator for foreign investors and it assists them with various services ranging from obtaining commercial licenses to operational registrations to commence their operations smoothly BIDA 1) Project Registration 2) Visa and Work Permit for expatriate employees 3) Office Permission 4) IRC Recommendation 5) Remittance Service 6) Utility connections Directorate of Environment 1) Site Clearance 2) Environment Clearance 3) Environmental Impact Assessment Approval 4) TOR Approval 5) Zero Discharge Approval Commercial licenses 1) Tax registration (eTIN) and VAT registration (eBIN) 2) Import Registration Certificate 3) Trade License Issuance Others 1) Land Use Clearance, Construction Permit, Special Project Approval 2) Name Clearance, Company Registration, BO/ LO 3) Security Clearance Issuance KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 7#81.5 Bangladesh's Ease of Doing Business Global rankings 131 Starting a Business Indicator Trade license within 2 days for companies, Risk based inspection for VAT registration within 3 days, etc. 135 Construction Permits Indicator Land use clearance issued from, RAJUK & CDA within 7 days, Occupancy certificate issued in 5 working days, etc. The Government has set an ambitious target to achieve a double-digit ranking by 2022. Government agencies have reformed many acts, rules, procedures, and regulatory regimes for making a favorable environment for private investment in Bangladesh. 176 Getting Electricity Indicator New electricity connection to warehouses in industrial zones in Dhaka and Chittagong is now given (up to 80 kW) within 7 working days through 2 procedures maximum 176 KPMG Trading Across Border Indicator The cost and time for border and documentary compliance for both imports and exports have recently been reduced. 72 Protecting Minority Investors Indicator The extent of shareholders rights, the extent of ownership and control, corporate transparency, disclosure has been increased, etc. 184 Registering Property Indicator Mutation for land transfer done within 7 days, company to company land transfer fee reduced to 1%, etc. 151 Paying Tax Indicator 119 Corporate Tax has been reduced to 30% from 35% Getting Credit Indicator 2 years of historical data on credit information of borrowers is now available from the credit information bureau report. © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 8#91.6 Public spending and GDP Public spending for FY2022-23 (planned) Shares of GDP (current prices) in FY2021-2022 12% 20% 13.02% 12% Public spending 6% BDT 6,780.64 Bn GDP BDT 39,717 bn 55.86% 6% 6% 31.13% 4% 5% 6% 5% 15% ■ Public Services ■Local government and rural development ■ Defence Services ■Public Order and Safety ■ Education & Technology ■ Health ■ Social Security & Welfare Housing ■ Recreation, culture, and religious affairs Energy and Power Agriculture Source: Bangladesh Ministry of Finance (2022). KPMG ■ Agriculture ■ Industry ■ Service Source: Bangladesh Bureau of Statistics (2022) © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 9#101.7 Digital Economy Over the months of COVID 19 pandemic and after, Bangladesh has seen a booming growth in digital economy. Online platforms have stepped into the space left vacant by traditional business structures during the persistent lockdowns and restrictions. From educational sectors going completely virtual to consulting health specialists on smartphones, technology utilisation has been at its peak. +5+ BUY SELL- Healthcare Praava Health Praava Health provides several types of medical services for all ages. It enabled an online platform for people to consult doctors using smartphones Mobile Financial Services (MFSS) bKash, Nagad, Upay These are online platforms/apps through which money can be sent or received E-commerce Chaldal, Bikroy, Daraz These are some of the most successful e-commerce platforms in Bangladesh which provide online facilities for buying and selling products & services Vehicle for hire Uber, Pathao, Shohoz One of the fastest growing tech startups in Bangladesh, Pathao provides ride sharing, food delivery, courier services, etc. through its online platform KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 2.5% Incentive on corporation tax if all income & receipts and expenses & investment above a certain limit are made through bank transfer#111.8 Recent investments in digital economy OO Automobiles o Nitol Motors (Suvare Electric cars) FMCG O Fair Technology Ltd (Hyundai Cars) О o PHP Automobiles (Proton Saga) o Bangladesh Auto Industries Ltd (Battery Electric Vehicles) KPMG E Recently there has been a huge injection of investment funds for manufacturing operations, both from local and foreign entities mainly due to widespread tax incentives and dynamic exemptions directed at industrial enterprises setting up in Bangladesh. • Coca Cola Procter & Gamble (in collaboration with Pran) Home and Consumer Electronics o Walton o Joint Venture of Whirlpool Corporation and Transcom Group o Meghna Corporation o Fair Electronics Ltd (Samsung AC) Mobile phone companies Samsung Electronics Nokia Walton Digitech Industries Benli Electronic Enterprise (Oppo) © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh.#121.9 Bangladesh amidst Covid-19 KPMG M Growth of export during the pandemic The country's export earnings from sale of goods in the financial year 2021-2022 grew by 34.38% from USD 38.75 billion to USD 52.08 billion This is due to the increase in earnings of RMG, jute and agricultural industries and a rebound from COVID19 downturn. In 2021-22, total export earnings grew by 34.40% to USD 60.97 billion. Growth of Investment despite economic slowdown Bangladesh received remarkable investment from both local and foreign investors during the pandemic. According to BEPZA data, Bangladesh received over USD 81 million from 8 companies in different export processing zones. Registration of new firms also increased by 24.32% which highlights the expansion of business. 00 High provision of Incentives for Imports and local production of Medical Supplies The Government of Bangladesh took various effective steps to combat the pandemic. The incentives include reduced import duties, selective exemption of VAT, relaxation of certain restrictions and subsidies for the healthcare sector as well as for the affected people. Sources: The Bangladesh Rating Agency Limited The National Board of Revenue © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 12#131.10 Why invest in Bangladesh 01 Promising and established country 02 Continuous rapid economic growth 03 Young and skilled workforce 04 Openness to foreign investment 05 Fiscal incentives 06 Bilateral and regional agreements 07 Competitive labor costs 08 Strategic location 09 Growing service and digital sector KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 13#141.11 Investment conditions (1/3) FDI is a potent resource for developing economy of Bangladesh and can play an important role in achieving the country's socio-economic objectives, including poverty reduction goals. Generally, foreign investors are free to make investments in Bangladesh except in a few restricted sectors. KPMG Arms and ammunition and other defense equipment and machinery Restricted Industries Forest plantation and mechanized extraction within the bounds of reserved forests Production of nuclear energy Security printing and mining © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 14#151.11 Investment conditions (2/3) Protected industries Furthermore, investment in certain industries also require prior approval of the relevant ministry/authority. KPMG Fishing in the deep sea Bank, insurance and other financial institution Generation, supply and distribution of power Exploration, extraction and supply of natural resources Large-scale infrastructure project Crude oil refinery (recycling/refining of lube oil used as fuel) Medium and large industry using natural mineral as raw materials Telecommunication service (mobile/cellular and land phone) Satellite channel Cargo/passenger aviation Sea-bound ship transport Sea-port/Deep sea-port VOIP/IP telephone Industries using heavy minerals accumulated from sea beach © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 15#161.11 Investment conditions (3/3) freight/cargo forwarding agents and airlines/railway GSA/PSA/cargo agent Foreign investment and 100% foreign ownership is permitted in general, with a limited number of business activities which require ownership from Bangladeshi companies or individuals. buying houses and indenting agents KPMG courier services agent Local investment shipping agent advertising agent for-profit/commercial education institution © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 16#17KPMG Mode of entry#182.1 Investment options Social development institutions and not-for- profit organisations working with foreign donations operate under specific regulations of NGO Affairs Bureau of Bangladesh. - Although not common, a general partnership may be formed with local individual or other registered entities under the Partnership Act, 1932. Its formation is easier than both office or a company. It has no legal entity and registration is not mandatory. There is only an agreemental relationship among the partners detailing the share of capital, profit and liability. The minimum number of partners is 2 and the maximum number is 20 in ordinary cases and 10 in case of banking business. Member's liability is unlimited for such formation. KPMG - Operate as a foreign company Open an office as a foreign company by registering with Bangladesh Investment Development Authority (BIDA). Office structures include Representative Office, Liaison Office and Branch Office. The office has to comply with the requirements mentioned in BIDA permission letter along with other Bangladeshi legislations. - Operations and locations of BO/ LO are limited to as stated in BIDA permission letter. For any new locations/customers and operations a new application will have to be submitted to BIDA. - Operating lives of these offices are limited to 2-3 years which is renewable upon expiry. Incorporate a subsidiary Investors can incorporate a fully-owned subsidiary subject to industry regulations or have a jointly owned company. Incorporated companies are governed by Registrar of Joint Stock Companies and Firms (RJSC). The most common types of company are Public Limited Company and Private Limited Company. Incorporated company can carry out any legally permissible business and expand their operations and location to any place in Bangladesh. Incorporated company has to comply with the regulations of the Companies Act 1994 and other legislations applicable in Bangladesh. © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 18#192.2 Registered offices KPMG Forms Representative Offices Liaison Offices Branch Offices Locations $ Limited to the places specified by the BIDA permission letter Only Branch Offices can generate revenue locally Scope of work and employment of foreign persons are limited Revenue Operation New locations, expansion of scope of work and employee base can be increased by obtaining approval from BIDA © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 19#202.3 Incorporated companies Public limited company Private limited company The number of members of a Public Limited Company is minimum 7 and the maximum number is limited according to share capital as described in Memorandum of Association. The liability of a member is limited by his/her share capital. - The special significance of a Public Limited Company is that such a company is permitted to offer shares and securities to the public. The shares of this company can be transferred without any restriction. ― Public Limited Companies are regulated by the Bangladesh Securities and Exchange Commission (BSEC). - - The number of members of a Private Limited Company is limited and this limit is minimum 2 and maximum 50. The liability of a member is limited by his/her share capital. - It cannot invite the general public to subscribe to its shares or debentures. - Private Limited Companies are not primarily regulated by the BSEC, but certain regulations of BSEC still apply. KPMG Company legislation also allows One Person Company to be formed by having one natural person as a shareholder. © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 20 20#212.4 Steps to set up a Registered office B Step 1: Apply to BIDA Step 2: Notify Bangladesh Bank after obtaining registration. [!!! 自 園 Step 4: If Bangladesh office wishes to generate and receive revenue locally, approval from BIDA is required along with VAT registration, if applicable. For export and import purposes, export or import registration certificates are also required. KPMG Step 3: Register with Income Tax Authority Register with RJSC 1!!! Step 5: Obtain Trade License You are operational! © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 21 24#222.5 Steps for Incorporating a company S Step 1: Apply for name clearance to RJSC - Step 2: Open temporary bank account for deposit of capital Step 3: Prepare Articles and Memorandum of Association and apply for incorporation with RSJC Step 4: Register with Income Tax Autho [!!! [!!! For export and import purposes, export or import registration are also required. Step 5: Register for Trade License KPMG !!!! Step 6: Obtain VAT registration You are operational! © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 22 22#232.6 Timeline SL Set-up process Timeline (weeks) 1 2 3 4 5 6 7 8 Office registration procedures 1 Apply for permission from BIDA 2 Letter to Bangladesh Bank under section 18B of Foreign Exchange Regulation Act 1947 3 Registration with Income Tax Authority 4 Registration with Registrar of Joint Stock Companies 5 Trade license 6 Clause 7 waiver from the permission letter of BIDA if the branch office raises invoice locally 7 Registration with VAT authority Company incorporation procedures 1 Obtaining name clearance 2 Opening temporary bank account for deposit of capital 3 Obtaining registration from RJSC 4 Registration with Income Tax Authority 5 Obtaining Trade license 6 Obtaining online VAT registration Import Registration Certificate (IRC) or Obtaining Export Registration Certificate (ERC) (If required) can be obtained within 2-3 weeks, however, chamber membership is required to be obtained beforehand which can take time depending on the relevant chamber. KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 23 23#242.6 Startup Sandbox (1/2) What is a startup? Startup means a company who works towards deployment or commercialisation of new products, process or service driven by innovation, development and technology or intellectual property. Conditions to be classified as a startup Ineligibility conditions 面 Annual turnover not exceeding Taka 100 crore in any financial year Incorporated under Companies Act, 1994 and registered with NBR Not a resulting company of a scheme of amalgamation or demerger Not a subsidiary of another company holding fifty percent or more of its shares ☑ Incorporated prior to first day of July 2017 Incorporated between first day of July 2017 and thirtieth X day of June 2022 and fails to get registration by the thirtieth day of June 2023; or X Incorporated on or after first day of July 2022 and fails to get registration under this section by thirtieth June of every year following the year of its incorporation KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 24 24#252.6 Startup Sandbox (2/2) Benefits This section will override all other provisions in ITO 1984 Sections 30 and 30B (treatment of disallowances) will not applicable for growth years for startups registered under this section. Loss incurred in growth years can be carried forward to 9 successive years. No reporting obligations other than submission of return if permanent access to books is provided to the tax authority. Minimum tax on gross receipts is reduced to 0.1% KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 25 25#26KPMG Tax environment and incentives :#273.1 Major tax legislations KPMG National Board of Revenue (NBR), the tax authority in Bangladesh. Direct Tax Indirect Tax Income Tax Ordinance 1984 %1 VAT and Supplementary Duty Act 2012 Customs Act 1969 Stamp Act 1899 SROS, Clarifications and Interpretations are issued to support the main legislations. © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 27 27#283.2 Corporate income tax structure 45% Tobacco product manufacturers* Non-listed mobile phone operators Listed mobile phone operators* Non-listed banks, insurance companies and financial institutions 37.5% Listed banks, Insurance companies and financial institutions Merchant banks Non-listed companies (general)** Association of persons Artificial Juridical Person One Person Company** 22.5% 15% Textile industries Co-operative societies Research institutes Private universities 10% KPMG Jute Industry and Exporter (other than individual) firm and HUF with LEED certification Listed companies (general)** 40% 27.5% 20% Exporters (other than individual) firm and HUF without LEED certification 12% *Additionally 2.5% surcharge is applicable **Specific conditions apply Tax holiday and tax exemptions industries. © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 88 28#293.3 Tax incentives (1/2) Power Plants Several tax incentives have been issued for industrial enterprises, physical infrastructures, thrust sector industries and specialised sectors. IT services, Professional and Training Institutes $ Drawback facilities and cash incentives for exporters KPMG Pharmaceuticals, biotech and chemical Public private partnership projects Import duty exemptions on capital machinery, specified raw materials etc. Dairy products, fisheries fruits and vegetable processing, agricultural equipment Rapid transit, auto-mobile and motorcycle manufacturing EPZ, EZ and High Tech Park investors and developers Home appliances, computer and light engineering items manufacturing © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 29 29#303.3 Tax incentives (2/2) KPMG ΚΑΛΛ $ Oil and gas sector Special tax provisions for exploration and extraction of mineral operations Simplified deemed income basis tax provisions for subcontractors in petroleum operations Power generation entities Industrial enterprises Physical infrastructure EZ and EPZ investors - Subject to commencement of operation up to 15 years income tax exemption if given. Royalty, technical fees, capital gains on transfer of shares are also exempted. Expatriates working in power plants also enjoy 3 year tax exemption 10 year regressive tax exemption is given for physical infrastructures Subject to location of establishment, 5 or 10 year regressive tax exemption is given to industrial enterprises Includes renewable energy, IT parks, highway, ports, rapid transit, expressway, pharmaceuticals, biotech, auto-mobile and motorcycle etc. Subject to location of establishment, 5 or 7 year regressive tax exemption is given for companies setup in Export Processing Zones. 10 year regressive tax exemption is given for companies setup in Economic Zones. © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 30 30#313.4 Personal income tax structure Resident/non-resident Bangladeshi Taxed on total income during the income year Residential status of Individual Total Income(BDT) Tax Rate First 300,000 (for women, senior citizens 65+ & persons 0% of Third Gender 350,000) Next 100,000 Next 300,000 Next 400,000 Next 500,000 On balance 5% 10% 15% 20% 25% KPMG Non-resident Taxed only on Bangladesh portion of income during the income year Taxed at a flat rate of 30% on total income during the income year Resident: (i) Presence in Bangladesh for 182 days or more in the related fiscal year or (ii) Presence for 90 days or more in the related fiscal year + 365 days or more in preceding 4 years. - Surcharge is applicable based on the amount of wealth of the individual Employers are required to deduct withholding tax at the time of payment to their employees. Return filing deadline is 30 November. For individual assesses submitting return for the first time, the date of submission is 30 June of the year. © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 31#323.5 Capital gain tax General CAPITAL GAINS TAX RATE % 15% Capital gains tax other than sale of shares of listed companies: - Company - 15% Others -15% or marginal tax rate based on the holding period of the asset Transfer of capital assets are subject to capital gains tax in Bangladesh Transfer of shares of a non-resident company might be subject to capital gain tax in Bangladesh under certain circumstances. CAPITAL GAIN TAX RATES FOR LISTED SECURITY TRANSFERS 15% Non-resident shareholders 10% 5% Resident firms, and Sponsor shareholders and companies shareholder directors of financial institutions 5% Shareholders with at least 10% shareholding excluding sponsor shareholders and shareholder directors 0% General individuals KPMG *Tax rates may vary due to specific conditions EXEMPTION FOR NON-RESIDENTS Non-resident shareholders are exempted from capital gain tax on their transfer of listed securities of Bangladesh companies if they enjoy similar tax exemption in their resident countries Recently, NBR published SRO No-. 156- ACT/Income Tax/2022, dated 1 June 2022, for the tax implications on offshore indirect transfer of shares which provides exemptions on certain transactions, given it fulfils certain outlined conditions. © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 32 32#333.6 Value added tax (VAT) (1/2) New VAT legislation has been implemented from 1 July 2019 with a view to modernising the VAT system, ease VAT compliance and reduce VAT complexities Standard VAT rate Nature of Activities - Businesses having turnover between BDT 5m to BDT 30m will be subject to turnover VAT Supply of goods Supply of any goods from inside to outside Bangladesh; Temporarily imported goods; Deemed export; - Supply of goods for repair, maintenance or modification and supply of stores or spare parts for ocean-going ship and aircraft engaged in international transport; Supply of services - Services given outside of Bangladesh; - Services given physically on goods situated outside Bangladesh at the time of supply of the service, - Services given relating to temporarily imported goods under the Customs Act; - Supply of telecommunication services by a telco supplier to a non-resident telco supplier. VAT Rate 15% 4% Zero rated Trade VAT Specifically for Manufacturers (on imports) Medicine Petroleum products Certain prescribed goods and services Business entities whose supplies are subject to Truncated VAT can choose to exercise the standard VAT rate of 15% and claim input VAT credit against their purchase. 5% 3% 2.4% 2% Lesser Rate (2-10%) KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 33#343.6 Value added tax (VAT) (2/2) Goods and services subject to lower VAT rates and trade VAT rates will not be eligible for input VAT credit. However, they can choose to exercise standard VAT rate of 15% and claim input VAT credit against their purchase. VAT on specific goods and services procurement can be taken as credit VAT cannot be taken as credit for the following cases: KPMG ☐ ☐ Rent and expenditures for construction and maintenance of building, Infrastructure, ■ Office equipment and fixtures, Immovable properties • • Entertainment expenses, Transportation services. © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 34#353.7 Import duties Import duties are paid by the importer as per the rates specified by regulations. Duty Type Customs Duty (CD) Following import duties are recoverable or adjustable: - VAT - Advance income tax (subject to minimum tax regulations and taxable profit) - Advance Tax Bangladesh has a well developed Cost and Freight (CnF) sector which provides comprehensive support to importers. KPMG Duty rate 0% to 25% 0% to 3% Regulatory Duty (RD) Supplementary Duty (SD) 0% to 500% Value Added Tax 0% to 15% Advance Income Tax 0% to 20% Advance Tax (VAT) 0% to 5% © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 35 55#363.8 Stamp duties Stamp duties are paid by the executors of legal documents Stamp duty is levied on legal documents, but the rates vary depending on the nature of documents. Major stamp duties include: - - For the transfer of shares of unlisted companies, stamp duty is imposed at the rate of 1.5% on the transfer price. The duty on transfer of immovable property is lower of 1.5% of the value of consideration or BDT. 20 million. Stamp duty for contracts and agreement is BDT 300. - Stamp duty for incorporation of a company is up to BDT 20,000. - For all other documents, the stamp duty varies. KPMG III © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 36#373.9 Double taxation avoidance treaty Sl. Country SI. Country 1 Bahrain 21 Oman (air traffic only) 2 Belgium 22 Pakistan 3 Bhutan 23 Philippines 4 Canada 24 Poland 5 China 25 Republic of Belarus 6 10 Czech Republic 26 Republic of Korea 7 Denmark 27 Romania 8 Germany 28 Saudi Arabia 9 France 29 Singapore 10 India 30 Sri Lanka 11 Indonesia 31 Sweden 12 Italy 32 Switzerland 13 Japan 33 Thailand 14 Kuwait 34 Turkey 15 Malaysia 35 United Arab Emirates 16 Mauritius 36 United Kingdom 17 Myanmar 37 United States of America 18 Nepal 38 Vietnam 19 Netherlands 39 Maldives 20 Norway 40 Morocco KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 37 32#383.10 Export processing zones (EPZ) EPZS have been established by the Bangladesh Export Processing Zones Authority (BEPZA) under the Bangladesh Export Processing Zones Act of 1980 in order to invigorate industrialization and boost employment through promotion of trade and investment. BEPZA is responsible for attracting foreign investment, facilitating fiscal and operational benefits and thus, providing a special customs bonded areas for investors to set up their infrastructure in Bangladesh in a congenial investment climate. - BEPZA provides various one stop services to expedite and ease setup and operational requirements, Dedicated branches of banks, courier, post office, shipping agent, customs office, police station etc. are setup in EPZ areas to provide access or essential services, Fiscal benefits Tax exemption up to 7 and 5 years depending upon location of EPZ, Import tariff exemptions and duty draw back-back facilities on import of raw materials, machinery, equipment and construction materials, 100% foreign investment is permissible, Medium/long term foreign borrowing facilities, Operation of foreign currency accounts, Bonded warehousing facilities. KPMG 8 EPZS are currently operational across Bangladesh © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 38#393.11 Economic zones (EZ) $ EZs have been established by the Bangladesh Economic Zones Authority (BEZA) under the Bangladesh Economic Zones Authority Act of 2010 in order to encourage rapid economic development through increase and diversification of industry, employment, production and export. BEZA provided multiple incentives, to the developers of the Economic Zones as well as to the manufacturing unit investors. Similar to EPZS, BEPZA also provide one-stop services and established dedicated branches of banks, courier, post office, shipping agent, customs office, police station etc. for the investors. Government owned EZs 69 29 Private EZs Fiscal benefits Tax exemption up to 10 years, Tax exemption on dividend during tax exemption period, Tax exemption on capital gains from transfer of shares for 10 years, Tax exemption on royalties, technical know-how and technical assistance fees, etc. for 10 years, Tax exemption on salary of expatriate employees for 3 years, Exemption of VAT on all utility services. Duty free import of goods to be used for the development of Zones 100% foreign investment is permissible, Medium/long term foreign borrowing facilities, Operation of foreign currency accounts, Bonded warehousing facilities. KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 39#403.12 High-tech Park Bangladesh Hi-Tech Park Authority (BHTPA) is the regulator for establishing Hi-Tech Park, Software Technology Park and IT Training & Incubation Centre throughout Bangladesh to incentivize local as well as foreign investors for the development of Hi-Tech/ Information Technology/Information Technology Enable Service industries. Similar to EPZS, BEPZA also provide one-stop services and established dedicated branches of banks, courier, post office, shipping agent, customs office, police station etc. for the investors 12 High Tech Parks declared across Bangladesh Fiscal benefits 12 years exemption of Income Tax for park developers. 10 years exemption of Income Tax for investors. Exemption of Duties on importing Capital Equipment and Construction Materials by the Investors and Goods/Materials to be used for the development of Hi-Tech Parks by the Park Developers; Exemption of Income Tax on Dividend, Share Transfer, Royalty, Technical Fees for investors; Exemptions of Income Tax for Foreign Employees; Exemption of Income Tax on declared Dividend by Park Developers; Exemption of VAT on goods produced by Investors; Exemption of stamp duty on the deed registration/ mortgage deed registration; Bonded Warehousing Station; KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 40 40#41KPMG Foreign exchange regulations $#424.1 Foreign exchange regulations (1/2) Bangladesh Bank is the central bank and regulator of the financial market Foreigners can invest in Bangladesh through equity contribution or loans. Equity funding by the foreign investors is always encouraged in Bangladesh for the following reasons: The Government shall accord fair and equitable treatment to foreign private investment which shall enjoy full protection and security in Bangladesh. · Government ensures foreign private investment shall not be expropriated, nationalised or be subject to any similar effect except for a public purpose against adequate compensation which shall be paid expeditiously and be freely transferable. Full repatriation of capital is ensured. Injection of equity does not require prior approval but certain formalities need to be maintained. Any foreign loan is subject to prior approval of BIDA and Bangladesh Bank. বাংলাদেশ ব্যাংক Bangladesh Bank KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 42 42#434.1 Foreign exchange regulations (2/2) Bangladesh is a highly regulated country with respect to foreign exchange controls Outward remittances are highly restricted. Few outward remittances can be made without prior approval of Bangladesh Bank, e.g. Dividend Import payments under L/C mechanism Training and consultancy fees Repayment of approved foreign loans For few outward remittances, specific guidance and conditions have been prescribed or practiced e.g. Specific foreign exchange regulations are present for shipping agents, freight forwarding agents, courier companies and airline companies For remittances which are not given specific guidance, special permission from Bangladesh Bank is required A recent circular from Bangladesh Investment Development Authority (BIDA) simplified the process of Royalty and Technical fees repatriation, wherein registered private entities can remit permissible amounts without additional approval from BIDA, subject to certain conditions. KPMG Transfer of shares and securities Royalty and technical fees © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 43 43#44KPMG KPMG Bangladesh#455.1 KPMG at a glance Our People Globally we are over 265,000 Our largest headcount 7 Partners & Directors In Bangladesh In Bangladesh we have around 410 people KPMG is a global network of professional service firms providing Audit, Tax and Advisory services. KPMG is one of the 'Big Four' accounting firms in the world today. KPMG firms collaborate across the globe, addressing the needs of clients, making bold decisions on investing together and serving the needs of KPMG professionals, wherever they work. Robust Training Skill-building programs, and international trainings ensure professional competency Our Presence Present in over 143 Countries and territories In Bangladesh we have » 2 offices: Dhaka & Chattogram Our Clients 400+ Clients across several industries both in Bangladesh and globally Industry Presence Our Achievements 1st KPMG Bangladesh has been a "Member Firm" of KPMG International (KPMG) since January 2006. It is the first Member Firm in Bangladesh of any of the 'Big Four'. KPMG Bangladesh celebrates over 60 years of service KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh.#465.2 About KPMG Bangladesh KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 143 countries and territories and have 265,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG Bangladesh operates through Rahman Rahman Huq, Chartered Accountants and KPMG Advisory Services Limited. Operating from offices in Dhaka and Chattogram, we are a team of around 450 people. KPMG Bangladesh's Advisory Services include IT Advisory, Deal Advisory and Risk & Management Consulting Services, which are manned by professionals with the qualification and experience necessary to meet the diverse needs of clients. Our ambition is to continue to recruit the best talent, train them in an environment of technical and ethical excellence to meet the highest expectations of clients in this age of continually evolving multi- dimensional challenges. KPMG Rahman Rahman Huq Inspire Confidence. Empower Change. KPMG KPMG Rahman Rahman Hug Chartered Accountants Member Fim of KPMG International 9 © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh.#475.3 KPMG Bangladesh Leadership Adeeb H Khan Senior Partner Tel:+880 2 2222 86450-2 [email protected] Ali Ashfaq Partner Tel:+880 2 2222 86450-2 [email protected] M Mehedi Hasan Partner Tel:+880 2 2222 86450-2 [email protected] Ashraf Zaman Ali Partner Tel:+880 2 2222 86450-2 [email protected] Md Tazul Islam Director V Sarker Nahidul Islam Director Md Fuad Uddin Khan Director Tel:+880 2 2222 86450-2 [email protected] Tel:+880 2 988 6450-2 [email protected] Tel:+880 2 2222 86450 [email protected] KPMG © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Printed in Bangladesh. 47#48KPMG kpmg.com/socialmedia in f G+ kpmg.com/app Download on the App Store The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2023 Rahman Rahman Huq and KPMG Advisory Services Limited are entities registered in Bangladesh, and member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Printed in Bangladesh. The KPMG name and logo are trademarks used under licence by the independent member firms of the KPMG global organisation.