To receive the incentive all types of investment and expenditure that cross an annual upper limit of Tk 3.6 million must be conducted through a bank
Published : 06 Jun 2024, 06:07 PM
Finance Minister Abul Hassan Mahmood Ali has proposed to lower the corporate tax rate on the condition that companies use bank transactions for all types of income, and a certain level of expenditure and investment.
He has proposed to lower the tax rate by 2.50 percent in different sectors in the 2024-25 budget tabled on Thursday.
The finance minister’s condition states that companies must use bank transfers for all types of income and receipts, all single transactions over Tk 500,000, and all types of investment and expenditure that cross an annual upper limit of Tk 3.6 million.
“Currently, different tax rates exist for the corporate taxpayers in different sectors. For those companies not defined as publicly traded according to the Income Tax Act, I propose to set the rate at 25 percent instead of 27.50 percent on certain conditions,” the finance minister said.
Previously, though the tax rate was set at 27.50 percent, it would rise to 30 percent if companies failed to meet the necessary conditions.
“To make the economy more formal and promote sole proprietor companies, I propose to change the sole proprietor company tax rate from 22.50 percent to 20 percent on conditions, just like that of non-listed companies,” he said.
The tax rate was previously 22.50 percent, but it would rise to 25 percent if companies failed to meet the conditions.
The minister also proposed that if more than 10 percent of paid-up capital shares were sold through IPO, a listed company would get to pay a tax rate of 20 percent instead of the existing 22.50 percent under the same conditions.
However, he proposed to lower the tax rate from 25 percent to 22.50 percent for publicly traded companies with 10 percent or less of paid capital shares on the market through IPOs.
The proposed budget kept the existing corporate tax rate of 37.50 percent for publicly traded banks, insurance, financial institutions and also for merchant banks.
Mahmood Ali proposed that banks, insurance companies and financial institutions that are not publicly traded, will pay the company tax at the rate of 40 percent as before.
Although the upcoming budget proposed tax rebates for different companies, the finance minister proposed to increase the tax rate for cooperative societies by 5 percent.
The tax rate for cooperative societies was hiked from 15 percent to 20 percent in a bid to increase the tax-to-GDP ratio, he said in his budget speech.
As before, companies making cigarettes and any type of tobacco products will have to pay a 45 percent tax, but the finance minister also proposed adding a 2.5 percent surcharge.
Mahmood Ali also proposed that if more than 10 percent of paid capital shares of a publicly traded mobile phone operator were available through IPO, the tax rate would remain at 40 percent as before. But in that case, the company’s pre-IPO placement cannot be more than 5 percent.
Those mobile phone operator companies not publicly traded will still have to pay the 45 percent tax rate, the minister said.