Minimum Tax in Bangladesh 2023-24

What is minimum tax in Bangladesh ?

Minimum Tax in Bangladesh – The minimum tax represents the obligatory tax amount that an assessee must pay in a given scenario. Regardless of allowable tax deductions, losses, or tax adjustments, an assessee cannot evade the obligation of minimum tax payment.

As the name suggests, minimum tax is structured to establish a baseline for the tax liability of an assessee. It can manifest as a fixed payment or utilize a simplified set of rules, often streamlining the complexities of the regular tax system.

This concept ensures that there is a minimum threshold for the tax liability of an individual or business entity. Regardless of the number of deductions or credits claimed, or whether the business entity experienced losses during the fiscal year, minimum tax sets a bottom limit on the percentage of taxes that the filer must pay to the government.

Types of minimum tax in Bangladesh

a) Minimum tax based on location

This specific category of minimum tax is relevant solely to individual assesses and is contingent upon the assessee’s geographical location. It becomes applicable only when the taxable income of the assessee exceeds the tax-free limit. Here is the rate of minimum tax based on the location, as per Finance Act 2023:

Location of the assessee	Taka
Assessee residing in Dhaka (both North & South) and Chattogram City Corporation area	5,000
Assessees residing in any other City Corporation area	4,000
Assessees residing in any area other than City Corporation area	3,000

Example 1

Consider the below information of Mr. Anower Hossain for the income year 2022-23:

Source of Income	Amount
Salary Income:
Basic Salary	240,000
Festival bonus	60,000
House rent allowance	144,000
Medical allowance	28,800
Conveyance allowance	25,000
Total	497,800

Solution 1

Here, no minimum tax is applicable since the total taxable income falls below the tax-free threshold of Tk. 350,000, considering a male assessee.

Example 2

Consider the below information of Mr. Anower Hossain, residing in Mirpur area, for the income year 2022-23:

Source of Income	Amount
Salary Income:
Basic Salary	340,000
Festival bonus	56,667
House rent allowance	204,000
Medical allowance	40,800
Conveyance allowance	25,000
Total	666,467

Solution 2

Here, the assessee has to pay minimum tax of Tk. 5,000 as the total taxable income exceeds the tax-free income of Tk. 350,000.

Example 3

Consider the below information of Mr. Anower Hossain, residing in Mirpur area, for the income year 2022-23:

Source of Income	Amount
Salary Income:
Basic Salary	490,000
Festival bonus	81,667
House rent allowance	245,000
Medical allowance	58,800
Conveyance allowance	30,000
Contribution to RPF	49,000
Total	954,467

Moreover, please also consider the below information of him regarding investment

Investment details:	Amount
He also contributed the same amount to RPF	49,000
Purchase of Bangladesh Sanchayapatra	100,000
Share purchase (listed companies)	115,000

Solution 3

In this scenario, the taxpayer Mr. Anower Hossain is required to pay minimum tax of Tk. 5000, given that the total taxable income exceeds the tax-free threshold of Tk. 350,000. However, in his case, minimum tax has come into effect after the deduction of tax rebate, where final tax liability is reduced to an amount below Tk. 5000.

b) Minimum tax based on gross receipts

In the taxation system of Bangladesh, another form of minimum tax is the Minimum Tax based on gross receipts. According to Section 163(5) of the Income Tax Act 2003, the following assesses are obligated to pay this particular type of minimum tax:

Every company;
Partnership firms having gross receipts of more than Tk. 50 lac; and
Individual assessee having gross receipts of more than Tk. 3 core.

As specified in Section 163(5) of the Income Tax Act 2023, assesses are required to pay an additional financial obligation referred to as the alternative minimum tax, which is computed based on their gross receipts. For the fiscal year 2023-24, the applicable rates for gross receipts are as follows:

Sl No.	Classes of assessee	Rate of minimum tax
1	Manufacturer of cigarette, bidi, chewing tobacco, smokeless tobacco or any other tobacco products	3% of the gross receipts
2	Carbonated Beverage	3% of the gross receipts
3	Mobile phone operator	2% of the gross receipts
4	Any other cases	0.60% of the gross receipts

Notes:

Minimum tax shall be 0.10% for an industrial undertaking engaged in manufacturing of goods for the first three income years since commencement of its commercial operation.
Rate of minimum tax for carbonated beverage has been reduced to 3% from 5% by SRO No. 259-Law/Income Tax-08/2023, dated 29 August 2023.

Example 4

Ms. Sonia Kabir is involved in a trading business. In the income year 2022-23, she imported finished goods with a value of Tk. 2.3 crore and subsequently sold these goods for Tk. 3.10 crore. During the import, Customs collected a tax of Tk. 55,000 from her under section 120 of the Income Tax Act 2023. For the year ended 30 June 2023, Ms. Kabir reported a net profit of Tk. 9.50 lakh from her trading business, with no other sources of income. Her business is located in Mirpur, Dhaka.

Determine the Tax payable of Ms. Sonia Kabir.

Solution 4

Example 5

ABC Limited is a pharmaceutical company. During the year ended 30 June 2023, gross receipts related information of ABC Limited are as follows:

Particulars	Amount
Sales	55,000,000
Opening accounts receivable	4,583,333
Closing accounts receivable	5,591,667
Opening balance of Customer advance	1,815,000
Closing balance of Customer advance	1,265,000
Sale proceed of fixed assets	475,000
Bank interest	225,000
FDR interest	550,000
Total	69,505,000

Solution 5

c) Minimum tax in Bangladesh based on TDS or TCS

Another form of minimum tax within the Bangladesh Taxation System is the Minimum Tax based on TDS (Tax Deducted at Source) or TCS (Tax Collected at Source). According to Section 163(2) of the Income Tax Act 2023, a total of 54 Sections related to TDS and TCS are designated as minimum tax. This categorization implies that any tax amount collected or deducted under these specified sections will be treated as minimum tax during the calculation of corporate income tax liability.

Example 6

PQR Limited sells office furniture to various corporate offices of Bangladesh. During the year ended 30 June 2023, financial information of his business is as follows:

Total turnover was Tk. 30 core.
As per the audited Financial Statements, the reported profit before tax (PBT) is Tk. 30 lac
As per income tax computation taxable profit stands Tk. 3,525,320
Moreover, during the year customer deducted Tk. 1,327,000 when making payment to PQR Limited

Determine the tax payable of PQR Limited.

Solution 6

List of TDS or TCS Sections that fall under minimum tax in Bangladesh

Here is the comprehensive list of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) sections, categorized under Minimum tax tagging. We trust this will assist in understanding the components that fall under Minimum tax.

Serial No	Name of Source	Section	Person responsible for deduction or collection	Rate	Minimum Tax?
1	Income from Employment	86	Person responsible for making the payment of salary	Average rate	No
1	Income from Employment from Govt or any other authority	86(3)	Drawing and Disbursing Officer (DDO)	Average rate	No
2	Remuneration to members of Parliament	87	Person responsible for making the payment	Average rate	Yes
3	Payment to Workers’ Participation Fund & Benevolent Fund	88	Person responsible for making the payment	10%	Yes
4	Payment to contractors, suppliers etc.	89	Person responsible for making the payment	Refer to Rule 3 of TDS Rules 2023	Yes
5	Payment in case of services	90	Person responsible for making the payment	Refer to Rule 4 of TDS Rules 2023	Yes
6	Payment for Intangible assets	91	Person responsible for making the payment	10%; and 12% (if base value exceeds Tk. 25 lacs)	Yes
7	Advertising income of Media Broadcasting	92	Specific person	5%	Yes
8	Payment to actors, actresses, producers, etc.	93	Person responsible for making the payment	10%	No
9	Commission, discount, fees etc.	94	Person responsible for making the payment	1.5%, 3%, 5%, 10%	Yes
10	Travel agent	95	Person responsible for making the payment	0.30%	Yes
11	Amount received as commission on account of letter or credit	96	Person responsible for opening letter of credit	5%	No
12	Amount received as commission on account of local Letter of Credit (LC)	97	Lender, bank or financial institution	3%, 2%, 1%	No
13	Payments by cellular Mobile Phone operators	98	Chief Executive Officer (CEO) of company	10%	No
14	Payment in excess of premium paid on Life Insurance Policy	99	Person responsible for making the payment	5%	No
15	Amount of Insurance commission	100	Person responsible for making the payment	5%	Yes
16	Fees, etc. of surveys of general insurance company	101	Person responsible for making the payment	15%	Yes
17	Interest on saving deposit and fixed deposit etc.	102	Person responsible for making the payment of interest or profit	20%, 10%, 5%	Yes
18	On Interest on deposit of post office savings bank account	103	Person responsible for collection of income tax	10%	No
19	Interest income of resident	104	Specific person	10%	No
20	Profit of saving instruments	105	Person responsible for paying profit	10%	Yes
21	Interest on securities	106	Person responsible for issuing Securities	5%	Yes
22	Discount on the real value of Bangladesh Bank bills	107	Person responsible for making payment on account of discount or deduction	Maximum rate	No
23	Receipts in respect of international phone cell	108	Person responsible for making the payment	1.5%, 7.5%	Yes
24	From rent	109	Tenant (Person responsible for making the payment)	5%	No
25	For rendering of services from convention hall, conference centre, etc.	110	Tenant (Person responsible for making the payment)	5%	Yes
26	Compensation against acquisition of property	111	Person responsible for giving compension	6%, 3%	Yes
27	Export cash subsidy	112	Any person responsible for making the payment	10%	Yes
28	Freight Forward Agency commission	113	Any person responsible for making the payment	15%	Yes
29	Purchase of power	114	Bangladesh Power Development Board or any person engaged in the distribution of eletricity	6%	Yes
30	Income received by the land owner from Real Estate Developer	115	Person engaged in Real estate or Land Development business	15%	Yes
31	Commission or remuneration paid to agent of foreign buyer	116	Bank	10%	Yes
32	Dividend	117	Company incorporated in Bangladesh or Principal Officer (Chief Executive) of any Company	10%, 15%	Yes
33	Income from lottery, etc.	118	Person responsible for making the payment	20%	Yes
34	Income of non-residents	119	Payee	Refer to Rule 5 of TDS Rules 2023	Minimum tax as per Section 119(3)
35	From importers	120	Commissioner, Customs or any other officer empowered for the purpose	Refer to Rule 7 of TDS Rules 2023	Yes
36	Export manpower	121	Director General of Bureau of Manpower, Employment and Training	10%	Yes
37	Clearing and Forwarding Agents	122	Commissioner, Customs	10%	Yes
38	Export income	123	Exporter	1%	Yes
39	Income remitted from aboard in connection with any service, revenue, sharing etc.	124	Person responsible for payment or deposit to the person’s account	10%, 7.5%	Yes
40	In case of Land transfer	125	Registration Officer responsible for the registration of deed documents	Refer to Rule 6 of TDS Rules 2023	Yes
41	Real Estate or Land Developer in case of Buildings or Apartments constructed for residential purposes	126	Person responsible for registering any deed documents for the transfer of Land or Building or Apartment	Refer to Rule 6a of TDS Rules 2023	Yes
42	Commission on Govt. stamp, court fees and cartridge paper	127	Person responsible for the payment	10%	Yes
43	Lease of property	128	Responsible for registration under the Registration Act, 1908 (Act No. XVI of 1908)	4%	Yes
44	Cigarette manufacturers	129	Person responsible for the sale of bandrolls	10%	Yes
45	Brick manufacturers	130	Any person responsible for the renewal of permit	45,000 70,000 90,000 150,000	No
46	Issuance or Renewal of Trade License	131	Person responsible for Renewal	500 1,000 2,000	No
47	Shipping business of a Resident	132	Authorized Commissioner of Customs or any other authority	3% 5%	Yes
48	Sales by public auction	133	Any person responsible for the transfer of title to goods or property or permission to exercise any right	10% 1%	Yes
49	Transfer of share	134	Person responsible for registering the transfer of shares in the company	15%	Yes
50	Transfer of securities including placement share	135	Shareholder or any director or any holding company sponsor or stock sponsor or under permission to transfer units of mutual fund listed on stock exchange or sponsor or holder of any mutual fund	5%	Yes
51	Transfer of share of shareholder of stock exchanges	136	Chief Executive Officer of Stock Exchange	15%	Yes
52	Member of stock exchanges	137	Chief Executive Officer of Stock Exchange	0.05%	Yes
53	Motor vehicles plying commercially	138	Person or Authority responsible for registration or renewal of fitness of motor vehicles	Refer to Section 138	Yes
54	Operations of marine vessels	139	Person responsible under the Inland Shipping Ordinance, 1976 (Ordinance No. LXXII of 1976)	Refer to Section 139	Yes

Conclusion - Minimum Tax in Bangladesh

We have endeavored to incorporate the implications of minimum tax in Bangladesh across various scenarios. We trust that this detailed explanation has clarified how the provisions of minimum tax have influenced the calculation of income tax liability. In case of any confusion or for more clarity please reach out us in the comment section.