Corporate tax

Corporate tax.

Introduction
Every company is required to obtain an e-TIN and register with the VAT
authorities to receive distinctive numbers. Companies have to file their tax
returns within Tax Day*. The filing date may be extended up to two months
and further extension up to another two months by the tax authorities
upon application. The return has to be accompanied by an audited statement of
accounts, computation of total income along with supporting schedules, for
example, depreciation schedule as per tax law, statement of profit/loss on sale
of fixed assets, excess perquisite calculation statements, etc. An assessing
officer verifies the filed return and may ask for information, explanation, and
evidence of claims made where required. Based on this, the officer may re-
compute the total income and tax payable, pass an order of assessment, and
communicate the order to the assessee.

Company means a company incorporated under the Companies Act in
Bangladesh and includes:
– A body corporate established or constituted by or under any law in force
– Any nationalized bank or industrial or commercial organization
– Any association or combination of persons, if any of such persons are
registered as a company
– An association or body incorporated by or under any laws of a country
outside Bangladesh
– Any foreign association or body which the NBR declares to be a company.
9.18 Artificiality of Corporation
A company is created through the veil of incorporation which gives it a separate
identity in the form of an artificial judicial person. Therefore, the taxation of a
company is different and distinct from its owners (i.e. shareholders). Section
2(20) of ITO 1984 defines a company as:
 a company as per the Companies Act 1913 or 1994;
 a body corporate established or constituted by or under any law in force in
Bangladesh;
 any association or body incorporated by or under the laws of a country
outside Bangladesh; and
 any foreign association or body, not incorporated by or under any law which
NBR may declare itself as a company.
Therefore, a company defined under the ITO 1984 may be different than a
company defined in the Companies Act 1994. Since the rate of income tax
would be different for a company as compared to all other classes of person
whether a person shall be treated as a company or not is very important.
9.19 Residency
Residency is a very important factor, because if a person is a resident all income
from whatever source derived is received, accrues, or arises in Bangladesh as
well as outside Bangladesh shall be considered as total income for Bangladesh
taxation purpose. However, if a person is a non-resident only income which is
received, accrued, or arises in Bangladesh shall be considered as total income.

9.20 Bangladeshi resident company
Section 2(11) defined Bangladeshi companies as those companies formed and
registered under the Companies Act 1913 or 1994 as well as established or
constituted by or under any Bangladeshi law and having its registered office in
Bangladesh. As per Section 2(55(c) of ITO 1984 all such Bangladeshi
the company as well as any other company the ‘control and management of
whose affairs are situated wholly in Bangladesh in that year shall be treated as
Bangladesh resident.

Corporate tax

9.21 Control and management
Control of a business not necessarily means from where the actual trading or
physical business activities are conducted. Normally, where directors who
manage and control the company hold their meetings and take decisions not
merely where they reside. A fundamental case on this matter is De Beers
Consolidated Mines Ltd v Howe where a South African incorporated mineral
company is determined as having a resident of London, UK. This matter is also
elaborated further in various avoidance of double taxation treaties prepared
under OECD guidelines.
9.22 Bangladesh connection
Section 18 of ITO 1984 explains the situation when any income shall be
deemed to accrue or arise in Bangladesh.
9.23 Residence- Section 2(55):
Tax Residence is quite different from Legal/Immigration Residence.
Company:
In general, a company that is incorporated in Bangladesh will be treated as a
resident for tax purposes. Any company whose control and management are
situated wholly in Bangladesh will also be treated as a resident for tax
purposes.
A Bangladeshi company; or any other company in the Control and Management
of whose affairs is situated wholly in Bangladesh in that year (directors
meeting, physical undertaking and subjects of trade, etc.). It can happen that

residents of one country but the trading is undertaken in another country. In
India the term used is " place of effective management" which means a place
where key management and commercial decisions that are necessary for the
conduct of the business of an entity as a whole are, in substance made.
Residency:
Residency is a very important factor because if a person is a resident all income
from whatever source derived is received, accrues, or arises in Bangladesh as
well as outside Bangladesh shall be considered as total income for Bangladesh
taxation purposes. However, if a person is a non-resident only income that is
received, accrues, or arises in Bangladesh shall be considered as total income.
Resident companies are subject to income tax on their worldwide income, and
as such foreign income is also taxable in their country of tax residence. Normally,
a company can be a tax resident of only one country. Non-residents are assessed
only on income received or accrued in Bangladesh, including capital gains.

tax

9.24 Permanent establishment
A detailed definition of “Permanent Establishment” (PE) has been inserted in the
the definition section of tax law.
PE in relation to income from business or profession means a place or activity
through which the business or profession of a person is wholly or partly carried
on, and includes:
(i) a place of management; (ii) a branch; (iii) an agency; (iv) an office; (v) a
warehouse; (vi) a factory; (vii) a workshop; (viii) a mine, oil or gas well,
quarry or any other place of exploration, exploitation, or extraction of natural
resources (ix) a farm or plantation; (x) a building site, a construction, assembly
or installation project or supervisory activities in connection therewith; (xi) the
furnishing of services, including consultancy services, by a person through
employees or other personnel engaged by the person for such purpose, if
activities of that nature continue (for the same or a connected project) in
Bangladesh; and (ii) any associated entity or person (hereinafter referred
to as “Person A”) that is
Commercially dependent on a non-resident person where the associated entity
or Person A carries out any activity in Bangladesh in connection with any sale
made in Bangladesh by a non-resident person”.
However, the earlier definition of PE in the Transfer Pricing section of tax law has
been deleted.