University of Dhaka, Bangladesh

Reducing Tax Burden: Investment in Capital Market

By Shafiqul Alam and Mushfiqur Rahman, Ahmed Zaker & Co. Chartered Accountants

Investing in the capital market (i.e., share market) has some inherent risks. However, what if such investments helped reduce one’s tax burden in addition to creating gains from stock trading? The Bangladeshi Government has set its taxation policies in such a way that everyone is encouraged to invest in shares and maybe achieve just that.

According to the Income Tax Ordinance, 1984, an individual can get investment tax credit through investing in listed securities.

The amount of investment tax credit is 15% and is calculated on the lower of 25% of total taxable income, or actual investment, or BDT 15 million. Cash dividend income is also exempted up to BDT 50,000 for individuals and, for a company, the divided income is taxed only at 20%, whereas the regular tax rates for listed and non-listed companies are 25% and 35%, respectively. Bonus shares distributed to shareholders are also exempted from tax.

Resident individuals are exempted from capital gains tax on the sale of listed companies’ shares and non-residents are also eligible for this exemption provided they enjoy the same benefit in their home countries. Alternatively, companies and firms are only taxed at 10%.

The law also encourages listed companies to pay dividends to their shareholders when earning profits as they have to distribute at least 30% of their net income after tax as cash dividends annually to avoid tax penalties.

It is certain that in a well-functioning economy, the capital market plays a major role and facilitates economic growth by reducing the saving-investment gap.

In this regard, the Bangladeshi Government has taken steps for the long-term development of the capital market by introducing various provisions benefitting both general and institutional investors. In the long run, this will create a virtuous cycle of economic growth and development.


Shafiqul Alam

Shafiqul Alam

GGI member firm
Ahmed Zaker & Co. Chartered Accountants
Advisory, Auditing and Accounting, Corporate Finance, Tax
Dhaka, Chittagong, Bangladesh
T: +880 8300 5048
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.ahmed-zaker.com

Ahmed Zaker & Co. is a leading firm of chartered accountants in Bangladesh providing audit, tax, and advisory services to businesses, both locally and overseas, across a wide range of sectors, since 1979.

Shafiqul Alam is an Audit, Tax and Consulting Partner at Ahmed Zaker & Co. He is an expert in investment management, capital markets, corporate affairs, Companies Act, Income Tax Ordinance, BSEC, DSE, and CSE rules and regulations, etc., and works with a diverse client portfolio encompassing organisations from a wide variety of sectors. He is a fellow member of both the Institute of Chartered Accountants of Bangladesh and the Institute of Chartered Secretaries of Bangladesh.
Mushfiqur Rahman

Mushfiqur Rahman

GGI member firm
Ahmed Zaker & Co. Chartered Accountants
Advisory, Auditing and Accounting, Corporate Finance, Tax
Dhaka, Chittagong, Bangladesh
T: +880 8300 5048
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.ahmed-zaker.com

Mushfiqur Rahman is an Assistant Manager within Ahmed Zaker & Co.’s Audit and Tax Departments with experience of working with a portfolio of clients across a wide range of industries. He is also a registered income tax practitioner.


Published: International Taxation Newsletter, No. 12, Spring 2020 l Photo: Matyas Rehak - stock.adobe.com

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