The government moves to launch four new investment bonds with tax-free facility on stake for expatriate Bangladeshis to encourage them to invest their remittances in various sectors in the country.
Officials said the Internal Resources Division (IRD) under the Ministry of Finance has sought the tax authority’s opinion on draft rules for launching the bonds in terms of two foreign currencies–Pound sterling and Euro.
The savings directorate has framed four rules to prepare modalities for the investment bonds. The rules are the Euro Investment Bond Rules, the Euro Premium Bond Rules, the Pound Sterling Investment Bond Rules and the Pound Sterling Premium Bond Rules 2014.
Tax officials said investors in the four new bonds are set to enjoy tax exemption on invested amount and interest income from the bonds.
A senior savings directorate official said the wing was yet to finalize the date of launching the bonds.
He said the draft rules had been sent for vetting and now needed NBR’s clearance.
With those four new bonds, investors of the existing Wage-Earners Development Bond (WEDB), US Dollar Investment Bond and US Dollar Premium Bonds are likely to get the similar tax-free facility.
In 1981, the government offered tax exemption to WEDB when it was introduced first. But, through the Finance Act-2011, the government imposed 5.0 per cent tax at source on interest income or gain receipt from the bond.
Currently, investors in the WEDB are subject to payment of 5.0 per cent tax at source on its interest income.
Tax officials said the government received only Tk 10 million in fiscal year 2013-14 as tax at source from the wage earner’s bond.
They said tax exemption on interest income of the bond would not cause any significant amount of government revenue loss while expatriates would get encouraged to invest their remittances in bonds. US dollar premium bond and US dollar investment bond are not exempt from tax at source on interest income as per NBR’s rules or circular although those are enjoying tax exemption as of WEDB.
A senior tax official said the matter of imposing tax at source on the US dollar bonds is quite unclear as those are enjoying tax exemption under its own rules.
“Some of the government entities prepare their own rules by keeping provision of tax exemption. Such rules should be approved by the tax authority to avoid further complexities,” he said.
Recently, the IRD sought NBR’s opinion on two clauses of the draft rules on those investment bonds regarding tax exemption for the invested money on purchase of bond and gain or interest income from the funds.
The special features of the bond include ‘the money invested in the purchase of bond(s) shall be exempt from tax payable under the income Tax act, 1922 (XI of 1922)’ and ‘the interest accrued/earned on the investment in the bond(s) shall be free from income tax and it shall not be added to the total foreign income’.
Officials said the new bonds would create avenues for investment of foreign income and remittance that would contribute to the economic growth of the country.
Bangladesh received $14 billion as remittance in 2013, retaining its position among the top ten remittance-recipient countries, according to the World Bank (WB) latest issue of the Migration and Development Brief.
The inflow of remittance marked 14.70 per cent rise in November 2014 with the country receiving $1168.85 million compared to $1019.03 million in October 2014. The monthly inward remittance also registered more than 10.0 per cent rise over November 2013.