Monthly Newsletter - June 2024

1. Mandatorily VAT Deducted at Source:

VAT Deduction at Source (VDS)

As a withholding entity, the service receiver must deduct VAT before paying to suppliers and have to deposit deducted VAT to the Government Treasury on behalf of the supplier within the prescribed timeline

Which are the Withholding entities?

The following entities are being considered as withholding or deducting entities whose has power to deduct Vat at source before paying to suppliers:

 01. Government Organizations;

 02. Non-Government Organizations approved by NGO Affairs Bureau & Social Welfare Authority;

 03. Any Bank, insurance Companies and similar Organizations;

 04. Any Intermediates and upper-level Educational Institutions;

 05. Any Limited Company.

List of services where VAT deduction at source is mandatory If tax is deducted or collected more than the actual amount in that case such excess deduction will not be treated for the purpose of minimum tax under section 163.

2. Health and Hygiene in Establishment/Organization

Cleanliness:

Cleanliness is very important in human life. Because it effects in health and mind. So in work place, we have to be more careful about cleanliness and every moment, we have to keep clean our surrounding place. In any organization or establishment, it is mandatory to maintain follow the rules of cleanliness.

Regarding cleanliness, In Bangladesh labor Act. 2006, here mentioned that every establishment shall be kept clean and free from effluvia arising from any drain, privy or other nuisance, and    in     particular-

01. Accumulation of dirt and refuge shall be removed daily by sweeping effective suitable manner from the floors, work-rooms, staircases and passages of the establishment;

02. The floor of every work-room shall be cleaned/washed at least once in every week by washing, using disinfectant where necessary

03. Where any floor is liable to become wet in the course of any manufacturing process to such extent that drainage is require thereof, effective means of drainage shall be provided and maintained.

Regular work of establishment (Inside walls, partitions and ceilings):

Firstly,  If they are painted or varnished, it shall be re-varnished at least once in every 3 (Three)

years,

Secondly, if they are painted and varnished, and smooth imperious surfaces, be cleaned at least once in every 14 (Fourteen) month in a year.

And in other case be white washed or color washed at least once in every 14(Fourteen) months and the date of completing works above shall be entering in the registered prescribed by rules.

Washing the Work Room/place:

As a continuity of above, each working should be washed for making free from the germs with chemicals, solution depending on the situation.

And depending on the situation it has to be wipe out with wet cloth and to use the germicides where necessary.

3. About Foreign-Owned Company

Introduction:

Knowing the definition of a foreign-owned company in Bangladesh according to Bangladesh Bank guidelines is important for several reasons, particularly because it impacts regulatory requirements, investment strategies, and operational permissions.

Definition of a foreign-owned company:

As per clause 4(A), Chapter-16 of Guidelines for Foreign Exchange Transactions (GFET), 2018 Vol 1, Foreign-owned/controlled companies A company is deemed to be controlled directly or indirectly by persons resident outside Bangladesh-

• If it is a branch office of a company incorporated outside Bangladesh;

• In the case of partnership,

    • If  50 (fifty) percent or more of the capital of the partnership is owned by foreign nationals or,

    • The majority of the partners are foreign nationals; and

• In the case of companies incorporated in Bangladesh,

    • If 50(fifty) percent of the shares or more are owned by foreign nationals or,

    • 50 (fifty) percent or more of the directors in the Board of company are foreign nationals. In the case of equal shareholding or equal representation on the Board of Directors, a company is deemed to be foreign-controlled if its Chairman is a foreign national.

Here are some key reasons why this understanding is crucial:

Regulatory Compliance: In Bangladesh, foreign-owned companies are subject to specific regulatory frameworks that differ from those applicable to domestically-owned companies. Understanding whether a company qualifies as foreign-owned according to the Bangladesh Bank helps ensure compliance with foreign exchange regulations, reporting requirements, and other statutory obligations. Non-compliance can lead to legal consequences, including fines and restrictions on operations.

Access to Incentives: The Bangladeshi government often provides various incentives to foreign investors, such as tax exemptions, reduced tariff rates, and other financial benefits aimed at encouraging foreign direct investment. Companies identified as foreign-owned under Bangladesh Bank guidelines might be eligible for these incentives, which can significantly affect the feasibility and profitability of their investments.

Investment Regulations: Foreign investment in Bangladesh is subject to certain conditions and restrictions, which can vary depending on the sector and the nature of the investment. Knowing the definition of a foreign-owned company helps determine the applicable investment ceiling, sectoral restrictions, and the necessary approvals required from the Bangladesh Investment Development Authority (BIDA) and other regulatory bodies.

Reference:

1. SRO No: 240-AIN/2021/163-Musuk
2. Guidelines for Foreign Exchange Transactions (GFET), 2018 Vol 1