FOREIGN COS OPERATING IN BANGLADESH

Govt to impose income tax on share transfer abroad

Staff Correspondent | Published: 22:01, Jun 23,2018

 
 

A file photo shows headquarters of Banglalink, a subsidiary of Netherlands-based Veon, at Gulshan in Dhaka. The proposed national budget for the upcoming 2018-2019 financial year has created an opportunity for the National Board of Revenue to impose income tax on transfer of shares of foreign companies having subsidiary in Bangladesh. — New Age photo

The proposed national budget for the upcoming 2018-2019 financial year has created an opportunity for the National Board of Revenue to impose income tax on transfer of shares of foreign companies having subsidiary in Bangladesh.
Officials said that the proposed provision would establish taxing rights of the NBR over various forms of share transfer of a foreign company if it has a subsidiary or operations in any form in Bangladesh.
The NBR will now be able to claim income tax proportionately on gains derived through share transfer of the parent company taking place abroad, officials said.
Finance minister AMA Muhith in the Finance Bill 2018 placed before the parliament on June 7 proposed inclusion of a provision in the Income Tax Ordinance 1984 in this connection.
The proposed provision says, ‘The transfer of any share in a company that is not a resident of Bangladesh shall be deemed to be the transfer of an asset situated in Bangladesh to the extent that the value of the share transferred is directly or indirectly attributable to the value of any assets in Bangladesh.’
Income through such transfers will be considered to have accrued or arisen in Bangladesh, NBR officials said.
They said that such a provision was an important taxing tool in international taxation, which was adopted by many developed and developing countries.
They said that they now would also be able to claim income tax proportionately at various layers of share transfer, in any forms like merger and acquisition, if it has involvement directly or indirectly with Bangladesh operations.
A senior official of the NBR said that the revenue board would claim tax if the value of the share of the foreign company rose during transfer due to better performance of its Bangladesh subsidiary or operations ‘no matter whether the transfer has involvement of the share of Bangladesh subsidiary or not’.
The NBR will be able to claim tax in share transfer of both the Bangladesh operations and the parent company, he said.
Earlier, the NBR could not bring under tax net the share transfer of Bangladesh operations of Warid to Airtel in absence of legal coverage.
The share transfer took place abroad between Indian telecom giant Bharti Airtel and Abu Dhabi Group, parent company of Warid Bangladesh.
The NBR faced a similar problem when in May this year Chinese e-commerce giant Alibaba acquired e-commerce company Daraz Group, a subsidiary of Germany-based Rocket Internet, which also operates in Bangladesh along with other South Asian countries.
Regarding the procedures of taxation in such cases, another income tax official on Thursday told New Age that the NBR would ask the Bangladesh subsidiary to furnish detailed report to the tax authority whenever such a transfer or any types of change in ownership of the parent company took place.
The income tax wing of the NBR will finalise the procedures if the provision is approved in the parliament with the budget, officials said.

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