Venture capital firms demand corporate tax exemption
Companies providing venture capital and private equity, an emerging concept of financing in Bangladesh, will be able to invest $500 million in next two years.
The Venture Capital and Private Equity Association of Bangladesh demanded they be exempted from paying corporate tax so they can make the investment easily.
The platform came up with the demand at a press conference at Krishibid Institution Bangladesh in the capital yesterday. “Venture capital financing is a risky sector and companies are still generating funds for the purpose of investment,” said Shameem Ahsan, president of the VCPEAB. As the sector is at a nascent stage of development, the government should provide them with tax exemption, he said.
Venture capital firms have to pay 35 percent as corporate tax.
The association was formed with 10 companies, and half of them are in the process of obtaining licences from Bangladesh Securities and Exchange Commission (BSEC).
Some of the companies have made a combined investment of $300 million in the last two years in different companies, mostly in the ICT sector, according to Ahsan.
The entrepreneur thanked the government for keeping the alternative investment fund tax-free in the proposed budget for 2017-18.
He said venture capital companies provide funds to entrepreneurs who do not have access to banks or non-bank financial institutions due to a lack of collateral.
“The new investment concept promotes innovative business ideas and creates an alternative financing platform for banks.”
Venture capital firms make equity investment in a company for a maximum of 15 years and exit from the company after the company gets listed with the stockmarket.
In June 2015, the BSEC introduced regulations for venture capital financing in Bangladesh.
The rules cover private equity and venture capital funds which will be operated by a fund manager through a registered trust. The fund manager and the trustee must be registered with the BSEC.
The fund managers will raise capital from eligible investors such as institutions, high-net-worth individuals and foreign fund managers.
Funds cannot be raised through initial public offering and can be collected only through private placement. Funds cannot be listed or traded on stock exchanges like mutual funds.