No tax benefit for firms shifting to economic zones | The Daily Star
12:00 AM, March 26, 2019 / LAST MODIFIED: 12:18 AM, March 26, 2019

No tax benefit for firms shifting to economic zones

The tax authority has tightened rules on tax benefits handed to companies establishing factories in the economic zones, in a move to attract fresh investment and curb the scope for misusing incentives.

In a notification this week, the National Board of Revenue (NBR) said firms would not get tax exemption if they relocate industrial units to the economic zones from their existing locations.

“New industrial units have to be established to enjoy the tax privilege,” said a senior official of the NBR, on condition of anonymity.

The NBR also said the machinery which was used earlier to produce goods and services in the country could not be installed to set up plants in the EZs.

The move comes at a time when a rising number of entrepreneurs are queuing to establish EZs, tempted by the tax breaks and a host of other benefits offered by the government.

Bangladesh Economic Zones Authority (Beza) has received 46 applications from investors keen to set up the EZs. Until now, the authority has approved 29 applications in principle.

Of them, 10 applicants have received the final nod to set up the private EZs, said an official of the Beza yesterday.

The NBR, in July 2015, offered a 10-year tax benefit for companies that would set up factories inside the enclave to produces goods and services for both domestic and foreign markets.

Large business groups such as Meghna, City and Abdul Monem Ltd have already set up EZs.

In the initial order, the NBR had said firms would have to have tax registration, maintain accounts and submit tax returns regularly to avail the privilege, which provides full tax exemption on the income from proceeds of goods and services in the first three years of operations.

The NBR has kept unchanged the same benefit in the latest notification. It says companies will get 80 percent tax waiver on the income from the sales of goods in the fourth year, 70 percent in the fifth year and 60 percent in the sixth year.  The benefit will gradually come down to 20 percent in the 10th year before phasing out in the subsequent year.

The latest notification also asked companies to maintain separate books of accounts and bank accounts for the plants inside and outside of the EZs.

“If industrial units inside and outside of the EZs carry out intra-unit transaction, companies will have to submit a detailed statement of transaction along with income tax returns,” the order said.

Beza Executive Chairman Paban Chowdhury said the measure would bring about good result.

“We think this is an appropriate measure. It will encourage fresh investment and curb the scope for enjoying tax incentive by way of relocating factories to EZs,” he said.

The measure will be applicable to all economic zones, added Chowdhury.

 

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