The Minister for Finance and Planning (MoFP) on 8 June 2017, issued to the National Assembly the estimates of government revenue and expenditure for 2017. The government plans to organise and spend TZS 31,712.0 billion in the 2017/18 budget.
The Budget reflects priorities to speed up economic growth to achieve middle income status, keep back revenue leakage and resource wastage, develop infrastructure, and reform government bureaucracy to boost service delivery. The Budget Bill 2017 has been published, pending tabling before the National Assembly for debate and approval. It is assumed that this Bill will be enacted into law later in the year. It will be effective from 1st of July 2017 as specified in the Bill. The overview of tax proposals contained in Budget 2017 are given below:
- A 5% withholding tax (WHT) on payment made for specified minerals (minerals that a licenced dealer is authorized to deal with) or minerals supplied by a resident person.
- A reduction of the corporate income tax rate (from 30 per cent to 10 per cent) applicable for new plants to assemble vehicles, tractors and fishing boats or outboard engines for those who have a performance agreement with the Government for the first five years from commencement of operations.
- The bill provides for a rise in the threshold from TZS 15 million to TZS 30 million to apply for tax relief on non-commercial motor vehicles.
- A zero VAT rate is proposed for ancillary transport services in relation to goods in transit in Tanzania. This will reduce costs of transporting goods through Tanzania and will ultimately make Tanzanian ports more competitive.
- An extension of time to submit VAT returns to the first working day following a weekend or public holiday when the due date falls on a Saturday, Sunday or a public holiday.
- Tax exemption is proposed on machinery and plant used in textile, edible oil, leather and pharmaceutical (including veterinary) industries. It is geared towards promoting investments in small and medium scale industries.
- The Bill also includes some amendments to the Excise (Management and Tariff) Act. A 5% excise duty increase is proposed on specific non-petroleum products, including alcohol, soft drinks and tobacco (except locally produced water, fruit juices and spirits).
- A decrease of excise duty is proposed on locally produced fruit juices and wines.
- An increase in excise duty on petrol, diesel and kerosene by TZS 40 per litre.
- The Minister has proposed an increase of TZS 40 per litre in the excise duty on fuel.
- An increase of 5% or 3,481 per litre in excise duty is proposed for imported spirits.
The Malaysian government is going ahead with its tourism tax to be imposed from July 1, 2017. Under the new tax, hotel guests will be charged between RM2.50 and RM20 for every night’s stay, depending on the classification of the hotel.
According to Malaysian Tourism and Culture Minister Mohamed Nazri Abdul Aziz the money collected would be used to promote Malaysia overseas and refurbish tourism facilities. The Tourism Tax Bill 2017 was passed in the last Parliament sitting with a majority vote.
On 15 June 2017, the Hong Kong Inland Revenue Department (IRD) issued a notice on the property tax obligations of property owners. Property tax is charged on property owners by reference to the actual rent receivable (including lease premium) in the relevant year of assessment. Owners in receipt of rental income must inform the tax department in writing if they are liable to tax and supply the particulars of the property not later than 4 months after the end of the basis period for the year of assessment (e.g. on or before 31 July 2017 for the year of assessment 2016/17), unless they have already received the appropriate tax returns.
A return issued by the IRD should be completed and furnished to the IRD within the stipulated time limit for official record updating purposes even if no rental was received in respect of the property concerned. Owners chargeable to property tax must keep sufficient rent records, such as lease agreements and duplicates of rental receipts for at least 7 years. They must inform the Department of any change of address in writing within one month.
Where a corporation has been exempted from property tax and there is a change in the ownership or use of the property, or in any other circumstances which may affect such exemption, the corporation must notify the Department in writing of the change within 30 days after the event. Heavy penalties may be incurred for failure to comply with the requirements of the Inland Revenue Ordinance.
On 12 June 2017, Irish Revenue has published the amended Capital Acquisitions Tax manual that dealing with business relief Part 12 to incorporate material from Tax Briefing No. 33 (September 1998) in relation to the treatment of debts attributable to assets that are not used for the purposes of the business concerned.
The Finance Ministry of the United Arab Emirates (UAE) on 10th of May 2017 arranged a briefing session in respect of the new Excise Tax Law. Implementation of the UAE Excise Tax Law follows the Gulf Cooperation Council (GCC) Ministers of Finance approval in principle, of a unified agreement, in June 2016. In accordance with agreement, excise duty will be introduced in the UAE by the fourth quarter of 2017. The other GCC Member States also have a plan to implement the excise tax by the end of 2017. The 5 per cent excise tax is to be implemented across the GCC countries by 2018. The UAE government has proposed a 50 per cent excise tax on carbonated drinks, and a 100 per cent tax on energy drinks, tobacco and tobacco products. The importer will need to pay the accurate amount of excise tax to the tax authority before discharging the goods from the designated storage area. The final excise tax law is expected to be published before the end of June.
On 8 June 2017, Irish Revenue published the Tax and Duty Manual Part 13-02-05 which deals with the close company surcharge under section 440 TCA 1997, has been updated.
The Manual explains that capital allowances are not deductible against estate and investment income for the purposes of the close company surcharge. For the avoidance of doubt on the matter, it has been updated to clarify that this does not affect the availability of a deduction for capital allowances, which are by virtue of section 307 TCA 1997 treated as a trading expense of the trade, when computing income for the purposes of section 434 TCA 1997.
On 1 June 2017, the Finance Minister Mr. Abul Maal Abdul Muhith presented the annual national budget of an outlay of TK 4 trillion for the fiscal year 2017-18. In the proposed budget, the finance minister has targeted a GDP growth rate of 7.4 per cent.
“GDP growth rate will be 7.4 percent in FY 2017-18 and inflation will come down to 5.5 percent by the end of the fiscal year,” Muhith told the parliament.
The government’s move to keep tax-free income threshold and the tax rates on individuals and firms unchanged in the next fiscal year is likely to affect many low and middle income people who would be new to income taxes.
Personal Income Tax
Minimum tax for Dhaka and Chittagong City Corporation is TK 5000; other City Corporation is 4000 and other areas TK 3000. Tax free income limit for women and more than 65 years citizen is TK 300,000, challenged persons TK 400,000 and wounded freedom fighters TK 425,000.
|Up to TK 250,000||No Tax|
|TK 250,001-TK 650,000||10%|
|TK 650,001- TK 1,150,000||15%|
|TK 1,150,001- TK 1,750,000||20%|
|TK 1,750,001- TK 4,750,000||25%|
|TK 4,750,001- Above||30%|
Readymade Garments: Readymade garments sector is playing a vital role in the economic development and employment generation in Bangladesh. Considering the contribution of this sector in the economic growth and employment generation government has been providing various incentives and tax benefits as withholding tax rate on readymade garments export is currently 0.70 percent and enjoying reduced corporate tax rate of 20%. According to current proposal this sector may enjoy further reduced corporate tax rate to 15% from 20%.
Tax benefit for green factory: In line with environment issues, government proposed to reduce the tax rate of a readymade garments company to 14 percent if the factory of such company has an internationally recognized green building certification.
Core Infrastructure: In order to attract investment in infrastructure, government proposed conditional tax exemption for infrastructure sector such as tolled national highways, expressways, flyovers, elevated and at-grade expressways, subway constructed under public-private partnership (PPP).
Other proposals: For facilitating growth and business and for ease of doing business government proposed to allow a branch office, liaison office or a subsidiary office (including a subsidiary thereof) of a foreign parent company to maintain an income year uniform to its parent company; grant tax exemption to alternative investment fund; and expand the tax exemption list of information and communication technology sector.
Surcharge: Government proposed to maintain minimum surcharge of Taka 3000 if the net wealth exceeds Taka 2 crore and 25 lakh and also proposed to impose a surcharge of 2.5 percent on the income from the business of producing cigarette, bidi, zarda, gul and other tobacco items.
The proposed tax rate for company taxpayers has been presented in the following table:
|Non listed Companies||35%|
|Listed Banks, Insurance and NBFIs||40%|
|Non listed Banks, Insurance and NBFIs||42.5%|
|Listed Mobile phone operators||40%|
|Non listed Mobile phone operators||45%|
Value Added Tax (VAT)
Effective Implementation of VAT Act: The revenue department is fully prepared to implement the Value Added Tax and Supplementary Duty Act, 2012 from 1st of July, 2017. Previously the implementation of this new Act was deferred twice for providing adequate time to the business community to prepare and acquaint themselves with the accounting and record keeping procedures under this new VAT Act.
VAT rate: Finance minister turned down business people’s demand for dropping the Value Added Tax (VAT) rate and declared in his budget speech keeping a single and uniform 15% VAT rate for the next 3 years.
Turnover Tax Exemption Threshold: Government proposed to raise the VAT free annual turnover ceiling from Tk 30 Lakh to Tk 36 Lakh. The firms with this annual turnover will be completely out of the scope of tax. This kind of benefit was not there in the 1991 VAT Act.
In addition, Government proposed to raise threshold for registration under VAT from Tk 80 Lakh to 1 crore 50 Lakh. In other words, businesses having a total yearly turnover up to Tk 1 crore 50 Lakh will be able to avail the opportunity to pay only 4% tax on their turnover.
VAT Exemption: Government proposed to provide VAT exemptions on 536 primary food items such as rice, lentils, fish, meat, vegetables, sugar, honey, puffed rice, maize, wheat, liquid milk, barley, salt etc. same as before. In addition, VAT exemptions are available to 93 items of life saving drugs. Public transport services, public health and medical services, education and training services will also enjoy VAT exemption. Government also proposed VAT exemption for 404 items of the agriculture; livestock and fisheries sector same as before. Furthermore, non commercial activities of charitable and cultural organizations will also enjoy VAT exemption facility.
Other Indirect Tax
Excise duty on Airline Tickets: Revision of existing excise duty on airline tickets as follows except for domestic travels and travel to the SAARC countries which is proposed to keep the same as present:
- Taka 2,000 Excise Duty on airline tickets instead of existing Taka 1,000 for travel to any Asian countries except the SAARC countries;
- Taka 3,000 Excise duty on airline tickets instead of existing Taka 1,500 for travel to Europe, USA and other countries of the world;
- In order to avoid any inconvenience of travelers, this Excise Duty will be collected at the time of purchasing air tickets.
Excise Duty on Bank Account: Government proposed to impose Taka 800 Excise Duty instead of existing Taka 500 in cases where the balance, whether debit or credit exceeds Taka 1 Lakh but does not exceed the limit of Taka 10 Lakh at any point of time during a year. Similarly, Taka 2,500 will be imposed instead of existing Taka 1,500 in cases where the balance exceeds Taka 10 Lakh but does not exceed the limit of Taka 1 crore; Taka 12,000 will be imposed instead of existing Taka 7,500 in cases where the balance exceeds Taka 1 crore but does not exceed the limit of Taka 5 crore and Taka 25,000 will be imposed instead of existing Taka 15,000 in cases where the balance exceeds Taka 5 crore.
Duty and Tax on Cigarette and Bidi: Considering the present scenario, Government proposed to fix the price of the low segment for every 10 sticks of local brand cigarette at Tk. 27 from existing Tk. 23 and increase the Supplementary Duty rate to 52% from existing 50%. At the same time, fix the price of the low segment for every 10 sticks of international brand cigarette at Tk. 35 and the Supplementary Duty rate at 55%.
The existing Supplementary Duty rate for non-filter bidi and filter bidi will remain unchanged at 30% and 35% respectively. These rates will be effective from 1 June 2017.
Currently there is only 10 percent duty applicable on e-cigarette and on its refill pack. For this reason, Government proposed to introduce two separate H.S. Codes for these two items and impose 25% customs duty for both the items along with impose 100% Supplementary Duty on these two items.
Supplementary Duty on fast food: The Government had committed to impose additional taxes on fast food also known as “junk food” considering the health risk. For this reason, Government proposed to impose 10% Supplementary Duty at local supply stage on fast food in addition to applicable 15% VAT.