Filing corporate tax returns in Bangladesh is crucial for all types of Businesses. It’s how they align with the law and observe due duties. Any negligence and failure in paying the imposed tax on time and through the actual process puts a red mark on a business’s professionalism. Statistically, it is the most common trigger for facing a Government audit. 

The stake can get as high as a massive amount of fines and years of imprisonment. It’s a concern that often stirs confusion and fear among businesses. To help, here is an in-depth guide on how to file corporate tax in Bangladesh and how to mitigate the risk.

Detailed Explanation of Corporate Tax Returns in Bangladesh

Companies registered in Bangladesh under the Company Act 1913 or 1994 are subject to paying annual income tax to the government. This is officially referred to as corporate tax. To fall into the category of a valid company, a business should be able to be defined as

• A corporate body with a legally defined structure
• A financial institution obliged to the national jurisdiction
• A group of individuals operating under a business name
• An association legally authorized by any foreign country
• A foreign body with no legal approval, operating under a special ordinance

The proportion of the annual tax return for companies in Bangladesh or the payable tax amounts is set by the National Board of Revenue (NBR). The same body is also responsible for bringing any changes to that amount and declaring them in the annual budget presentation. According to the current corporate tax format, how much a business needs to pay depends on its type, total income amount, and rebate considerations. Let’s discuss them one by one.

Corporate Tax Rate in Bangladesh

This table describes common business types and their respective income taxes:

Rebate Rates and Parameters for Companies

A rebate is the amount approved by the government that a business can exclude from its total income when calculating tax outstanding. It includes any expense that can be categorized or recognized as an investment intended for business growth.

To determine the rebate amount for a specific fiscal year, businesses show evidence of all the expenditures and earnings. Any amount that doesn’t exceed BDT 1,50,00,000 or 30% of the gross income can be applied as investment. Eventually, the NBR grants 15% of the investment for a rebate.

Types of Corporate Tax

When a company gets registered, it becomes liable to contribute to the national revenue by paying taxes. These taxes vary based on whether they are imposed on income, transactions, a certain stage of the selling funnel, or the type of products. 

Corporate Income Tax

It is the primary form of tax that companies, regardless of type, size, and profit margin, are obligated to pay based on their total annual income.

Turnover Tax

Companies that sell services and goods and make BDT 5 million to BDT 30 million as turnover are mandated to pay this tax. It’s 4% of the total turnover amount and becomes payable after the company obtains an enlisted certificate.

Capital Gain Tax

A capital gain is the profit amount that a company makes after selling an asset, like a share or real estate. The general country’s determined amount is 15% of the profit.

Withholding Tax

It is, by nature, passive and collected in advance. Companies, when paying staff or third-party services in the form of salaries, fees, commissions, interest, or dividends, cut a certain percentage of the payment amount and send it to the government. It is counted as a part of the paid individual’s or business’s income tax. 

Advance Income Tax (AIT)

AIT is paid when a company comes to an agreement with the NBR and decides to pay taxes in advance, yet in small installments.

Value Added Tax (VAT)

Whenever a business entity sells a good or service, it collects a tax from the buyer on the added value. The government receives it from the companies on a monthly basis.

Supplementary Duty (SD)

Supplementary charges are imposed on the goods that are either injurious, deleterious to health, or luxury products. This is, in fact, to discourage the consumption of these products and an attempt to grow national capital. 

Prerequisites for Filing Corporate Tax Returns

Obligations for a corporate tax filing are classified into two types: Company tax return deadline in Bangladesh and paperwork. 

Deadlines

The NBR collects corporate revenues, estimating them in the span of a fiscal year. The end of a fiscal year isn’t necessarily the same for every business. Like, for financial institutions, banks and insurers, a fiscal year ends with December. Whereas, for most businesses, June is the end month. The deadline for filing taxes is within 6 months after the end of a fiscal year. 

Documents

The NBR assesses every tax filing request before approving. So, they require applicants to provide the relevant documents. An acceptable submission includes:

• Company validation certificates: TIN, BIN, trade, incorporation, MoM, and AoA
• Audited financial statements for balance, profit, loss, and cash flow
• Audit reports from a certified public accountant
• Challans for subsidiary taxes and bank payment receipts
• Documents supporting Withholding Tax return clearance
• Supporting documents for rebates and capital gains
• Other relevant documents specified in the requirement

Step-by-Step Process to File Corporate Tax Returns in Bangladesh

Once all the documents are prepared, follow these steps to file business tax in Bangladesh. 

Step 1: Calculating Total Tax Liability

The method for calculating the total tax amount is simple. Add up all sorts of imposed taxes and subtract the amount you have paid in advance and rebates from the sum.

Here is the general formula:

Total Tax Amount = (Annual Taxable Income X Tax Rate) + Other Applicable Taxes + Fines – Rebates and Tax Credits – Paid Advance Tax – Withholding Duties

Step 2: Filling Tax Return Forms

You can collect them directly by visiting the NBR office or virtually on the official NBR portal. During filling up, it’s crucial to put just the information that each field and form specifies. Tax filling mistakes and wrong information can cause rejections and penalties.

Step 3: Attaching Prepared Documents

At this step, you have to go through all the essential documents and check whether one is missing. For direct submission, attach them with the filled-up forms or follow directions on the websites for a virtual submission.

Step 4: Assessment

After a successful submission, a general waiting notice for internal assessment will follow. For a delayed notice of approval or acceptance, regular follow-ups with the authority will keep you updated on its current status.

Step 5: Collecting Tax Clearance Certificate

Approval of the tax filing application will be notified via your provided credentials, like email or phone number. The clearance certificate will be available in the NBR office for collection.

Corporate Tax Penalties

Failure to abide by NBR corporate tax return regulations or coming short of the requisite documents will invoke punishments. Imprisonment, fines, interests, resubmissions, and delays are the most occurring penalty types. Factors that lead to unwanted consequences are:

Not Filing: If a company misses a deadline or deliberately chooses not to file a tax return, it has to pay a penalty amount equivalent to ten percent of its last estimated income. 

Delayed Filing: For each day after a missed deadline, the penalized company has to pay BDT 50 in addition to other charges.

Missing Document: All taxpaying bodies must provide authentic or attested documents essential for the tax assessment: certificates, account details, transaction histories, and so on. For any missing documents, an immediate submission with a fine of BDT 500 will be advised. If the company can’t provide it within the deadline, a further fine of BDT 250 will be added for each month of delay.

False Documents: Submitting counterfeit copies of certificates and statements, like TIN, invoices, and audit reports, is a serious infringement of the law. To discourage such acts, the Income Tax Act 2023 has imposed a fine of up to 100,000 or imprisonment of up to 3 months on the malpractitioner.

Not Filing Advance Tax: Failing to file an advance tax or partial filing will result in a fine of the same amount of the evaded tax.

Missed Notice: Companies repetitively ignoring tax returns may get notices from the NBR for quick clearance of the outstanding. Ignoring these notices without showing may cause a charge.

TAX Evasion: Any effort to conceal income will be punished as tax evasion and can lead to imprisonment of the shareholders for up to 5 years.

Corporate Tax Compliance & Best Practices

While precautions will help you always be audit-ready and prepared for the filing, you will need in-depth insight into the procedural details to save the day. Best practices are the mixed result of actions and knowledge.

Hiring a Legal Adviser: Having a legal professional to see through business transactions, layout, operation, expansion strategy, and documents will keep things simple during all types of tax return filing services. 

Updating on Changes: The economic, political, and business landscape will never stand still. The consequent force will drive constant changes in laws and regulations. Rationally, to comply, you must be aligned with the latest updates.

Maintaining Records: A missing paper can wreak havoc on you. If it’s a requisite submittable, losing it means fines. Without it, audits will report mismanagement, and assessments won’t conclude.

Using Authorised Software: Integrating software into your business operation will let you automate calculations, manage transaction data, and assess accounts daily. Just make sure to use an application authorized by the NBR.

Timely Filing: Always get required papers and certificates ready and update to submit within deadlines.

Regular Auditing: Hiring a professional at least once a month to check whether all is just in place reduces any obstacles for a successful filing.. 

Special Cases – Foreign Companies & Joint Ventures

Ventures, whether public company, private company, proprietary, branch, liaison, or joint, that have foreign shareholders are regulated by special tax return obligations. While the steps and requirements for these companies are similar, there are a few exceptions. 

Tax Rate

There is a slight disruption between the imposed tax rated on local and foreign companies. A few categories, like foreign tobacco and mobile operators, share the same rate as the national corporations. But in other domains, it varies. Here is a brief detail assorted on a table:

Repatriation Tax: Foreign branch and liaison offices carry out a specially ascribed 20% tax on the portion of their annual profit that they send to the mother or head office located in another country.

Documents

Companies and joint ventures regarded as foreign bodies have to provide a few extra papers during tax filing:

• Transfer pricing documents for internationally transacted goods and assets
• Master file denoting business structure, overview, financial setup and statement, and pricing policy
• Local file denoting lists of associated bodies, cross-border transactions, analysis, and methods.

Permanent Establishment

If a foreign body is approved by the NBR as a permanent establishment, the country allows it to operate and pay taxes under the same regulations as a local business.

How Bangladesh Consultant Can Help Filing Corporate Tax Returns

The return procedure for corporate taxes can feel overly complicated for businesses with a large transaction list and many branches. In all cases, relying on a corporate tax advisory service in Bangladesh can save time, hassle, money, and reputation. Bangladesh Consultant, a professional team of seasoned legal tax advisers in Bangladesh, offers:

• Expert consultation on NBR tax filing system
• Suggestions for building a compliant transaction funnel
• Help in preparing and attesting documents
• Assistance in filling up forms and submissions
• Assurance of timely and acceptable return filing

Conclusion

The tax filing process for companies in Bangladesh is a winding road. From setting up a strategic operative model, maintaining essential documents, meeting deadlines, preparing proper documents, and arranging audits, to filling up forms with impeccable information, there is a lot to deal with. Only with the expert assistance of TAX consultants in Bangladesh, like Bangladesh Consultant, can such predicaments be avoided.

FAQs

When is tohe corporate tax return due in Bangladesh?

Just after the 6 months till the end of a fiscal year.

What happens if I miss the filing deadline?

Failing to meet corporate tax compliance in Bangladesh causes delays, fines, and imprisonment.

Can I file tax returns for multiple years at once?

In special events, like failing to file a tax return repeatedly in the past consecutive years, you can clear all your due at once.

How do I avoid tax audit risks?

Your best option is to partner with a legal professional, like Bangladesh Consultant, to take care of all associated responsibilities.