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Major Reforms in 2017

Reform Implementations of  BUILD for FY 2017-18

BUILD proposed to rationalize the corporate Income Tax at 10% from the announced rate of 14% on “Green Industry” in the budget for FY2017-18. The government has decided to reduce the CIT for Green Industrial establishment to 10%, which is aligned to SDG 12(Sustainable Consumption and Production). Incentivization of green factory would reduce industrial footprint to climate change and help to step ahead towards the global agenda 2030by United Nation.

 

BUILD suggested to include Foreign workers in a tax network of Bangladesh, It has been announced in the finance Act 2017 that each and every foreign national has to pay 30% income tax against their annual income. As a result of that around 5 lac foreign national would be in the income tax network in the upcoming fiscal year and $150 million revenue would be added to the revenue volume.

Guidelines for  Audit

BUILD prepared and presented a study on “simplification of Audit policy (Income Tax)” in the 2nd TWC meeting on 3rd February 2016 at NBR. In that meeting, BUILD proposed for a detailed Guideline with all related information for the Tax Payers so that they are prepared fully not to face Audit which is creating hassles for running their businesses. In responses,  NBR informed there is a guide line for audit which is used by allied department of NBR but for the tax payers as such there is no public guide lines.

On 19th February 2017 audit intelligence investigation unit of NBR has prepared a guide line as per ITO 1984, section 82BB (1) and in case of return submission 82BB (3) for the FY 2016-17. This Guideline will be helpful for the Tax payers, BUILD also requested for publishing the Tax audit guideline through  website of NBR.

Risk Based Auditing

Similarly in case of  desk based auditing a circular was made on 1st December, 2016 for the commissioners to handle the desk based  process as per ITO 1984, 82BB(2) for the FY 2016-17. BUILD  recommended for Risk based audit system:

a.        Risk based audit approach has to be implemented so that Tax payers are not harassed for paying taxes.

It was decided that Risk based audit system could be introduced with some criteria which is in the process after full automation of the taxation system by July, 2017 with the announcement  of National Budget.

ERQ increased up to USD25000 in 2017

A bunch of proposals  for  simplification of Foreign Exchange Policies for the pharmaceutical sector in Bangladesh was presented at the 3rd Financial Sector Development Working Committee meeting in 2014. Bangladesh Bank agreed to implement some of the recommendations placed in the meeting.

Recently, by announcing a circular (FE Circular No. 05, date 05 February, 2017) Bangladesh Bank has decided to enhance the limit of advance payment from Export Retention Quota (ERQ)  up to USD 25000 or its equivalent  from USD 10000.This is a remarkable step implemented by  the Bangladesh Bank, which will help this sector grow quicker.    

It is also noteworthy that, on 27 May, 2015 Bangladesh Bank had also announced a circular (FE Circular No. 05) in which, ERQ for exports of high domestic value added merchandise has been increased to 60 percent from existing 50 percent, while the ERQ for merchandise exports of high import contents (like apparels using woven fabric) has been raised to 15 percent from earlier 10 percent.  

Separate Economic Zone for Women Entrepreneurs

 

There are a lot of women entrepreneurs in the country who want to expand their business but due to lack of land they cannot expand their business. For that reason a proposal on “Requirements for Separate Economic Zone (EZ) for Women Entrepreneurs (WE)” was presented in the 8th PSDPCC meeting at PMO held on January 13, 2016. For the implementation of the decision of 8th PSDPCC meeting, recently BEZA decided to allocate 100 acre lands for women entrepreneurs at Mirsorai Economic Zone, Chittagong. In that respect, BEZA will make agreement with relevant organizations. 

 

Major Reforms in 2016

Trade License Feereduced

The trade license collection fee and registration feehave been increased on March 2, 2015, as per SRO no 44/Act/2015 for doingbusiness in city corporation areas. Trade license fees were increasedexorbitantly, e.g., the rise of fees for any confectionary or any fast-foodshop in Dhaka city increased to BDT 2000 and BDT 4000 from BDT 300 of 2002 (SRONo 295/Act/2002/Powro-1/2M-04/2002). The business stopped to renew licensesbecause of the increase of fees. On 31st January at last local governmentministry took a decision to reduce the trade license fees and accordinglyissued an SRO (No 13 Act 2016) revising the fees. The businesses can now havelicenses or renew licenses at the reduced rate. Worth mentioning, this issuewas raised in the 7th PSDPCC Meeting at PMO and BUILD initiateda study. Now it has been implemented.

Minimum Tax Reduced

As per Income tax Ordinance 1984(16 CCC) imposition ofminimum tax is allowed based on company classification of firms. Irrespectiveof profit and loss minimum tax at the rate of 0.03% is to be paid by thosecompanies earning more than BDT 50 lacs. In the year of 2015-16, a newprovision has been included to reduce the tax rate further to 0.10% for thosewho are engaged in manufacturing industries for at least three years. BUILDconducted a study on "Charge of Minimum Tax (Turnover Tax) according tothe ITO, 1984" in 2013 and proposed for some reforms.

Simplification ofFinancing Policies for Women Entrepreneurs

A proposal on “Simplification of Financing Policies forWomen Entrepreneurs” was presented in the 4th SME DevelopmentWorking Committee Meeting and 8th PSDPCC meeting at PMO.Ministry of Industries and Bangladesh Bank has agreed all the recommendationsplaced in the meeting. A definition of Women Entrepreneurs was included in theIndustrial Policy 2016 and Bangladesh Bank issued a fresh circular allowingcollateral free loan to the amount of BDT 25 lac for women entrepreneurs onJanuary 07, 2016.

High Priorities Sectors in the National Industrial Policy2016

Based on impact of trade, jobs, demand, the country’sendowments and investment outlook, BUILD initiated the study to identify highpriority sectors from the list of the 32 thrust sector included in the NationalIndustrial Policy 2010 so that those sectors with the highest potential receiveproper policy attention. The reform paper was presented in the 2ndPSDPCCmeeting held on 26 July 2012. The SME cell of Ministry of Industries (referenceletter of January 27, 2013) informed that these sectors are to be included inthe NIP 2016. In the NIP 2016, these sectors have been included as highpriority sectors and some policy incentives have also been arranged to developthese sectors.

Importance of International Commercial Terms (Incoterms)

A proposal on Import Policy Regime: Business toBangladesh was presented in the 4th Trade and InvestmentWorking Committee and 6th PSDPCC meeting at PMO. Ministry ofCommerce has agreed all the recommendations placed in the meeting. One ofproposals was the maintenance of the INCOTERMS by the Importers and ADs to bemandated through policy as it is important for complying with the TradeFacilitation Agreement at the 9th WTO Ministerial Meeting inBali.

The Government has included ‘import through INCOTERMS’ inthe Import Policy 2015-18 (Chapter 2, Clause 5).

ADR resolving time reduced

In a recent time ADR is getting popular and a number ofcases are being resolved through ADR process. A study on Alternative DisputeResolution-Implementation and Policies’ was presented at the 2nd TaxationWorking Committee Meeting of BUILD. BUILD proposed for reducing time frame ofresolving ADR cases, the Finance Act 2016 has reduced the Time from 60 to 50days now. This policy will help business entrepreneurs to get more and quickservices from ADR.

Taxpayer’s time to respond to the notice increased

In the present policy under clause 41(Uum((3), which mentioned tax payer need to apply for ADR within 10 working days if anysort of judgment, show cause requirement related notice and price fixation asper clause-5 is not in his favor, the time has been now increased to 20 days,which will help applicant to be ready to get a final decision. BUILD proposedfor these change through its study on Alternative DisputeResolution-Implementation and Policies and presented at NBR.

Reform Implementation of Tax Policies

BUILD prepared a study on Simplification of Tax Policy forElectrical and Electronics sector and presented in its Taxation WorkingCommittee meeting for rationalizing tax policy and addressing hassles forimporting raw materials and maintaining standard and quality issues for someselected electrical and electronic products. NBR accepted a significant numberof proposals of this study.

As per proposals of BUILD to support domestic 10-120 MVAtransformer manufacturers (HS code 8504.23.90) import duty has been increasedfrom earlier 5% to 10%. This will help domestic manufacturers to beself-sufficient in supplying transformer at the domestic level and increaseexport.

There are about 5-6 domestic UPS manufacturers operatingin the country but a significant amount of raw material is required to be imported from overseas of which motherboard is a significant one for UPS.NBR has agreed to reduce the duty on the motherboard accessories imported undera single HS Code from the present level of 25% to 10%.

Optical Fiber Cable is one of the sectors growing faster.Bangladesh is almost self-sufficient in producing this product. But a number ofraw materials used for this sector are imported such as Polyester Tape (HS code3919.10.00), Jelly Compound (HS code 3824.90.90). NBR is considering dutyreduction of these raw materials which are not produced in the country tosupport this sector.

Reform Implementation of ADR

A study on Alternative Dispute Resolution-Implementationand Policies’ was presented at the 2nd Taxation Working Committee Meeting ofBUILD. BUILD proposed for reducing time frame of resolving ADR cases. ADRresolving time line has been reduced to 0 days from 60 days (SRO no.53-AIN/2012/632/VAT). For applying against any notice, the time duration forapplicant is 20 working days now instead of 10 working days (SRO no.53-AIN/2012/632/VAT). BUILD proposed for enhancement of time for gettingapplicant ready to reply the notice.

Reform Implementation of Tax Policies

BUILD placed few issues regarding overhead costs ofestablishing branch offices for Banks through its 4th Financial SectorDevelopment Working Committee (FSDWC) Meeting held on December 29, 2014 and inresponse, Bangladesh Bank revised the issues and brought following changes;

·         Maximumspace criterion has been extended to 6000sqft from 5000sqft for the urbanbranches vide BRPD Circular Letter No-09, dated -26 July 2016.

·         Maximumspace criterion has been extended to 3000sqft from 2000sqft for the ruralbranches vide BRPD Circular Letter No-09, dated- 26 July 2016.

·         Maximumexpenses other than IT for branch set up was at BDT 1500/sqft, for movingexisting branch, the amount was set at BD 1000/sqft vide BRPD Circular LetterNo-01, dated- 16 January 2014. Analyzing the market data, BB still thinks thecurrent limit should remain unchanged. BB will continue to keep eye on thisissue and modify the limits as and when they felt necessary.

Tax on Vehicle Registration

BUILD placed an issue regarding a specific law to collecttax on vehicle registration in Income tax Ordinance (ITO) 1984 (presently it isdone by issuing an SRO every year) through its Budget Proposals by TaxationWorking Committee (TWC). In response, NBR approved the issues and by theFinance Act 2016 they inserted a new section 68 B in the ITO 1984 regardingadvanced tax for the owner of the private motor car

Trademark Registration for SMEs in Bangladesh

A proposal for Trademark Registration for SMEs in Bangladeshwas presented in the 4th SME Development Working Committee. Ministry ofIndustries agreed to implement the recommendations placed in the meeting. Somemajor recommendations were inclusion of service mark rules in the new TrademarkRules 2015 and journal publication through DPDT website. The government hasalready incorporated service mark, in new Trademark Rules 2015 and journalpublication through DPDT website.

Major Reforms in 2015

ERQ Quota Enhanced

Following the proposal of BUILD placed at the 5th PrivateSector Development Policy Coordination  Committee at PMO, the ForeignExchange Policy Department of Bangladesh Bank has enhanced Exporter's RetentionQuota(ERQ) on 27th May 2015. BB revised its section IV, chapter13 of the Guidelines for Foreign Exchange Transactions-2009(GFET) which permitsexporters to retain specified parts of their export earnings inforeignexchange.

Exportersuse ERQ for business expenses, includingmaintenance of offices abroad, fairparticipation andpromotional activities. The RMG and pharmaceutical companies are thegenuine beneficiaries of the ERQ to increase their exports.

Corporate Income Tax Reduced

BUILD set out a proposal to reduce CIT to NBR. Followingthe proposal, the government in the budget agreed that CIT difference betweenpublicly and non-publicly traded companies would be 10%, in the last fiscalyear non publicly traded company’s rate has been reduced to 2.5%, in order tomaintain 10% difference publicly traded company should be  allowed to pay25%.

Environmental Clearance Certificate for Cold Storage

BUILD set out a recommendation at the 5th PSDPCCmeeting to review the guideline and industry category for environmental riskand include Cold storages in “Green and Orange A” category instead ofexisting“Orange B”. Department of Environment under the Ministry of Environmenthas already reviewed and accepted the proposal. Now Cold Storages Industrybelongs to "Komola Ka"/Orange A” instead of “Komola Kha/ Orange B” inthe classification made for obtaining an Environmental ClearanceCertificate.However, the private sector believes cold storages should be in‘Green’category and the 7th PSDPCC requested examinationof the possibility for re-classification of this sector to Green category.

GSP Automation System  Expanded to Non-RMG

A study presented in the 4thTrade and theInvestment Working Committee and placed in the 6th PSDPCCmeeting,requested to extend the benefits of automated GSP certificate for bothRMG and non-RMG sector and to Non-EU country as well. As a result, the ExportPromotion Bureau (EPB) extends their GSP automation services beyond Dhaka sothat more exporters can enjoy these benefits. Automated software for GSPsupported by EU is in practice since January 2015 with a view to make businessmore accountable and transparent along with enabling to facilitate theexporters to enjoy speedy access to the automated GSP System.

List of Registered Factory names now on DIFE Website

BUILD conducted a research to simplify Factory PlanApproval procedure for the Department  of Inspection for Factories andEstablishments (DIFE) and presented in the 3rd Private SectorDevelopment Policy Coordination Committee(PSDPCC). BUILD proposed for the expansionof this Department, graduation to a Directorate and the virtualplatform establishment to accomplish tasks in a convenient way. DIFE hasbeen graduated to a Directorate and it has recently established awebsite(http://www.dife.gov.bd) to provide stakeholders with importantinformation on acts,rules,inspection procedure, sectoral information ofindustries, contact informationand current activities.

VAT exempted limit extended

BUILD submitted budget proposals on VAT, Income Tax andCustoms to NBR.  Among the given proposals Turnover TAX, Localprocurement and simplification of drawback system are very importantconsidering the economic impact. Proposals made by BUILD for the turnovertax module can ensure that Eligible SMEs and Cottage Industries are able toavail Turnover Tax benefits.   FBCCI submitted some proposals toNBR which is validated by their standing committee.  One of the proposalsis that VAT exempted limit should be increased 24 lacs to 36 lacs which BUILDendorsed and included in its Budget proposals for the year 2015-16.Government accepted the proposals which  was announced in the Budget.

Major Reforms in 2014

No Permission Required  of Central Bank for ATM Booth

 Banks need not Bangladesh Bank’s prior permissionfor setting up ATM booths. In response to the circular(No 18 issued on 19thNovember2012) of Bangladesh Regulation and Policy Department (BRPD),  BangladeshBank issued acircular (Letter No2)  on 13th January 2015.The circular said all scheduled banks will require their respective board’sapproval meetingthe expenses of rent and booth installation cost. This proposalwas placed by BUILD through its Financial Sector Development WorkingCommittee. 

Several reform updates were received at the 6th PrivateSector Development Policy Coordination Committee(PSDPCC) Meeting held on 9thDecember 2014 at PMO. Bangladesh Bank, DIFE(Department of Inspection FinancialEstablishment) of MOLE (Ministry of Labour and Employment)and NBR senttheir updates in writingin response to thereform proposals suggested by BUILDat the 4th and 5th PSDPCC meeting. The updates are as follows:

o  Bangladesh Bank will  issue a new EDFMaster Circular shortly to address the changes made so far, so that theexporters canacquire all the updated information for availing Export DevelopmentFund(EDF).

o The next amendment of Guidelines for ForeignExchangeTransaction(GFET) will include all the necessary information,detailingvalue addition, eligibility criteria and maximum limits, etc. Bangladesh Bankwill inform BUILD after the inclusion in the next amendment.

o  Bangladesh Bank will inform thestakeholders whenever the threshold of Export Retention Quota(ERQ) forpayment of foreign exchange transaction will be revised from the present levelof USD 10,000.

o  As per request of 5th Meeting of the PSDPCC, theDepartment of Inspection of Factories and Establishments(DIFE) have implementeda number of reforms, one of which is updating the website of the organizationto post all related information of established companies.

Obtaining an Ad-HOC IRC from BOI just got easier

BUILD’s Trade and Investment Working Committee (TIWC)proposed recommendations to make the process of getting an Ad-HOC IRC easierand faster. So, Board of Investment(BOI) has implemented BUILD’srecommendations through work orders based on the decisions of BOI’s executivecommittee meeting. As a result of this, significant improvements came intopractice in the process of Ad-HOC IRC issuance. The overall issuance time hasbeen reduced to just 10 days from 34-63.This includes a seven days reduction ininspection time and a furtherfive day reduction in internal proceedings.

Now applicants are also provided with a checklist withtheir application form to prepare themselves for inspections. Furthermore,English version of the application formis now available in BOI website. Inaddition to this, the regional entrepreneur will now have the information theyneed to apply for Ad-HOC IRC through regional BOI offices on the BOI website.BOI expects that by the end of hisyear, the process will be fully automatedservice and delivery becomes more efficient.

Separate Section in the upcoming Export Policy for Deemed Export

With a view to achieve optimum national growth throughthe increase and diversification of Export, BUILD conducted a study on DeemedExport in 2013. BUILD found that policy interventions can be made through smallrevisions in the Export Policy. In order to ensure the legal entity of thedeemed exporters, BUILD suggested that there should be a separate section inthe Export Policy for deemed exports, which can also include the guidelines fordeemed exporters backed with government gazette notification.

Ministry of Commerce has approved this reform proposal byBUILD and they have decided to include a separate chapter for deemed export inthe upcoming Export policy. BUILD is now advocating for the other reformsproposed on the issues which includes-increasing the Export Retention Quota toat least 15 percent from the existing quota of 10 percent for export of goodshaving high import content and extending the timeline to 90 days from theexisting clause of 30 days, for the compulsory encashment of export proceedsother than back to backL/C.  

CCI & E simplified the procedures for Export cumImport

Office of the Chief controller of Imports &Exports (CCI&E) simplified documentation requirements for Export cumImport. Earlier,eleven documents were required for export cum import which hasbeen reduced to only five now. This will reduce hassle and cost of doingbusiness.

Some upcoming process simplification through FEG

·        BangladeshBank will issue a new Master Circular shortly to address the changes in thecirculars issued for EDF. So far, so that exporters can acquire all theupdated information for availing EDF.

·        The nextamendment of FEG will include all the necessary information, detailing valueaddition, eligibility criterion and maximum limits.

·        Bangladesh Bankwill also issue a circular whenever they will allow the payment of Renewal feefrom the exporters Local Currency Account.

·        Bangladesh Bankhas in principle agreed to  extend ERQ Account amount from the presentlevel of USD 10000.

 2013

Credit Report Thresholds Go Up

Foreign Exchange Policy Department of Bangladesh Bank hasrecently raised the thresholds for confidential reports (supplier’s creditreport in light of a BUILD study presented during its Financial SectorDevelopment Working Committeeon 11 April  2013). Collection ofconfidential reports on the exporter(foreignsupplier),costs between USD75-150as per latest Dun & Bradstreet(D&B)fees schedule. To reduce the costburden on the local  importers, it has been decided that Ads should obtainconfidential reports ofthe exporters in all cases where the LC/Contract exceedsUSD 10,000(earlier itwas BDT 5 lac) incases

New Thresholds

Previously BDT 5 lac now US$10K(If pro-forma invoices areissued directly by foreign suppliers)

Previously BDT 10 lac now US$ 20K (If indents are issuedby local agents of foreign suppliers) where pro-forma invoices areissued directly by foreign suppliers and USD 20,000(earlier it was  BDT 10lac) in cases where indents are issued by local agents of foreign suppliers.