The National Board of Revenue (NBR) has exempted companies and firms from paying the environmental surcharge for owning more than one car.

Only individual taxpayers will be required to pay the surcharge for having second, third, or more cars, particularly sedans, jeeps and microbuses, the NBR said in a circular issued this week.

The tax administration imposed the environmental surcharge on additional vehicles for the first time in fiscal year 2023-24 to discourage their ownership and enable Bangladesh to contain air pollution and meet its commitment to reducing carbon emissions.

In the first year, the NBR imposed a surcharge on all taxpayers, including companies and firms, on ownership of more than one car. The tax authority said the surcharge would be applicable for ownership of each car in excess of one.

If the engine capacity of the second vehicle was up to 1,500cc or 75 kilowatts, the NBR collected Tk 25,000 as a surcharge.

The surcharge goes up as the engine capacity of the vehicles increases.

For example, it slapped Tk 50,000 as a surcharge on the ownership of a second car with higher engine capacity -- between 1,500cc and 2,000cc or 75 kilowatts and 100 kilowatts.

The surcharge is Tk 3.50 lakh if the engine capacity of the vehicle is 3,500cc or 175 kilowatts, according to the NBR notification.

The tax administration has kept the rate of surcharge against the engine capacity of cars unchanged for FY25 but said it would only be applicable for individual taxpayers.

A senior official of the NBR said it exempted companies and firms from payment of the surcharge since the Bangladesh Road Transport Authority (BRTA) is yet to prepare a proper database of ownership of vehicles by companies.

Officials cannot properly track the ownership of cars by firms and companies during the renewal of registration or issuance of fitness certificates, the official said.

 "They can do this for individual taxpayers. So, we have kept the surcharge payments for individual taxpayers," he said.

As per the NBR's circular, taxpayers must pay the surcharge during the renewal of fitness certificates.

The NBR also imposed conditions for the renewal of fitness certificates in the circular.

It imposes higher taxes if owners of vehicles, including those operated commercially, fail to show proof of submission of income tax returns for the current fiscal year, according to the circular.

As of June this year, Bangladesh had 61 lakh registered vehicles. Of those, the number of private passenger cars, microbuses, and jeeps stood at 6.3 lakh, according to BRTA data.

The NBR collected Tk 1,575 crore in taxes from the issuance of fitness certificates and renewal of registration in FY21, which was 48 percent higher compared to the previous year.