The government has scrapped the multi-layer taxation on dividend income in the proposed national budget for the fiscal year of 2018-19.
According to the proposed financial bill, companies are waived to pay tax on the taxed dividend income after its distribution to the shareholding resident companies.
The government made the decision in the wake of strong demand for abolishing the system from the country’s leading trade bodies and corporate taxpayers.
Currently, dividend income up to Tk 25,000 is tax free. A company has to deduct withholding tax at the rate of 20 per cent on the dividend income while paying the income to other subsidiaries or shareholding companies.
The withholding tax rate is 10 per cent if the dividend is given to a resident individual and 30 per cent for non-resident foreigner.
Earlier, Federation of Bangladesh Chambers of Commerce and Industry, Metropolitan Chamber of Commerce and Industry, Dhaka Chamber of Commerce and Industry and some other trade bodies appealed the government to remove the multi-layer taxation on dividend income.
The dividend income is being taxed several times before it reaches the parent company and other shareholders while it should be taxed only once at a time when it is distributed to individual shareholders, the trade bodies said.
They said foreign investors were also reluctant to invest more in the country due to double taxation.
Therefore, the government’s move would increase the flow of capital for investment as well as enable a healthy growth in
the capital market. The Foreign Investors’ Chamber of Commerce and Industry said on Friday that the withdrawal of the multi-tier dividend taxation would benefit many existing companies and encourage local investment. The chamber requested extension of the facility to Bangladeshi companies having subsidiaries abroad that would encourage repatriation of inward dividend.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Miscellany