NBR nod must for banks to offer double taxation avoidance benefit

National Board of Revenue has asked all banks not to allow double taxation avoidance benefits to any non-resident taxpayers without NBR certificate.

International taxation wing of the revenue board has also requested Bangladesh Bank for taking necessary measures so that banks follow the directives.

International tax wing of NBR on July 5 wrote two letters to the central bank governor and the managing directors of all scheduled banks.

In a letter to the central bank, NBR said that Bangladesh had bilateral agreements on avoidance of double taxation with 33 countries.

Taxpayers from the both countries would get some income tax benefits including waiver and reduced tax rate under a bilateral agreement, it said.

Generally, any person or organisation responsible for making any payment to a non-resident has to deduct income tax at specified rates, mostly 20 per cent and 30 per cent, on total payment.

But the rate varies for taxpayers residing in countries having double taxation agreements with Bangladesh.

NBR officials said that all non-resident taxpayers, mainly foreign companies, organisations and individuals of a country having DTA agreement must obtain certificate from NBR on applicability of the benefit.

But they claimed the benefits by showing the copy of the agreement to the banks while remitting money to their home country.

Banks usually deduct tax at source at a reduced rate and allow sending money to non-resident’s home country relying on the documents provided by the foreign entities or individuals even the documents do not include NBR certificate on applicability of the tax benefits.

In the letter, NBR member (international taxation) Kalipada Halder said that there was a requirement of taking specific approval of NBR on applicability of the benefit or on the applicable tax rate for the foreign organisation or individual taxpayers under such agreement.

Banks did not have the authority to allow waiver or deduct tax at a reduced rate and remit the money without the certificate, he said.

‘NBR has the sole authority to allow the benefit or give legal opinion after details scrutiny of the existing double taxation avoidance agreement,’ he said.

The government has also made the issue clear in the Finance Act-2018 through bringing amendment in the provision 56 of the Income Tax Ordinance-1984, he said.

According to the amendment, NBR may issue a certificate to the effect that the payment shall be made without any deduction or, in applicable cases, with a deduction at the reduced rate as mentioned in the certificate if it is satisfied that the non-resident is not be liable to pay any tax or is liable to pay tax at a reduced rate in Bangladesh due to the tax treaty or any other reason.

In this context, providing double-taxation avoidance benefit to any non-resident by banks for sending remittance back to their country without certificate of NBR should bring under intensive monitoring for the sake of revenue interest, the letter stated.

Banks should receive the certificate from the taxpayers before remitting the money, it said.

NBR requested the central bank to ensure the compliance of the provision of the income tax law by the banks.

It also asked the managing directors of banks to comply with the provision.

Bangladesh has DTAs agreements with Belarus, Belgium, Canada, China, Denmark, France, Germany, India, Indonesia, Italy, Japan, the Kingdom of Saudi Arabia, Malaysia, Mauritius, Myanmar, the Netherlands, Norway, Pakistan, Philippines, Poland, Romania, Singapore, South Korea, Sri Lanka, Sweden, Switzerland, Thailand, Turkey, the United Arab Emirates, the United Kingdom, the USA and Vietnam.