Foreign contractors and suppliers will have to pay income tax, customs duties and value-added tax on their total receipts and supply of goods for execution of the foreign-funded development projects, a senior official of the National Board of Revenue told New Age on Wednesday.
The international taxes wing of the revenue board took the decision on January 14 in line with an inter-ministerial meeting held in September last year, he said.
Representatives from finance ministry, foreign ministry, planning ministry, science and technology ministry, Planning Commission, Implementation Monitoring and Evaluation Division and NBR attended the meeting to remove confusions over imposition of taxes and duties in the area.
There are confusions among different stakeholders whether execution of the foreign-funded projects and supply of goods are taxable or not as in many cases contractors and suppliers are exempted from taxes.
According to the decision, foreign contractors and suppliers must have to pay taxes and duties if payable under the agreement on foreign finance.
The government’s project implementing agencies will deduct taxes while making payment to the foreign firms.
The agencies will have to pay the taxes from its own fund if taxes are not covered under the foreign financing agreement, it said.
Every year, the government implements many large development projects in electricity, gas, oil and other physical infrastructure sectors with its own fund or foreign loans and grants.
In most cases, the government have to hire foreign contractors and suppliers for execution of project either as conditions of foreign loans and grants or it has no skill to carry out the projects.
Though the local contractors and suppliers pay taxes and duties for the same job, the government agencies do not deduct or pay the taxes for the foreign contractors and suppliers disobeying the NBR directives showing various excuses.
The government agencies show excuse that the projects are executed with foreign loans and grants or they (foreign contractors and suppliers) are exempted from paying tax under the conditions of contracts.
NBR officials said that the income tax wing of the NBR had been giving directives to various government ministries and divisions for deducting tax at source at the rate of 5 per cent on total receipts of foreign contractors, contracting firms and suppliers before making payment to them.
In recent months, the income tax wing instructed different project implementing agencies including Bangladesh Power Development Board and utility transmission and distribution companies to deduct income tax while making payment to any foreign contractors and suppliers for executing foreign-funded projects.
‘We have asked many agencies to deduct income tax on payment of foreign contractors,’ an income tax official said.
‘The tax amount would be several thousands crore taka in more than 50 projects,’ he said adding that the BPDB alone was asked to pay around Tk 500 crore in tax at source which was supposed to be deducted during payment to an international contractor.
NBR officials said that contracting firms would have to pay tax on income of consultants and employees engaged in the firms.
Tax will also be applicable on the payment to sub-contractors if the principal contractor hires any sub-contractor for execution of the project, they said.
In most cases, the government’s implementing agencies pay duties on import of machinery and other equipments sent by the contractors for execution of the projects.
Contractors usually execute the projects on turn-key basis and the government pays the contract money for execution of the project.
The international taxes wing of the revenue board took the decision on January 14 in line with an inter-ministerial meeting held in September last year, he said.
Representatives from finance ministry, foreign ministry, planning ministry, science and technology ministry, Planning Commission, Implementation Monitoring and Evaluation Division and NBR attended the meeting to remove confusions over imposition of taxes and duties in the area.
There are confusions among different stakeholders whether execution of the foreign-funded projects and supply of goods are taxable or not as in many cases contractors and suppliers are exempted from taxes.
According to the decision, foreign contractors and suppliers must have to pay taxes and duties if payable under the agreement on foreign finance.
The government’s project implementing agencies will deduct taxes while making payment to the foreign firms.
The agencies will have to pay the taxes from its own fund if taxes are not covered under the foreign financing agreement, it said.
Every year, the government implements many large development projects in electricity, gas, oil and other physical infrastructure sectors with its own fund or foreign loans and grants.
In most cases, the government have to hire foreign contractors and suppliers for execution of project either as conditions of foreign loans and grants or it has no skill to carry out the projects.
Though the local contractors and suppliers pay taxes and duties for the same job, the government agencies do not deduct or pay the taxes for the foreign contractors and suppliers disobeying the NBR directives showing various excuses.
The government agencies show excuse that the projects are executed with foreign loans and grants or they (foreign contractors and suppliers) are exempted from paying tax under the conditions of contracts.
NBR officials said that the income tax wing of the NBR had been giving directives to various government ministries and divisions for deducting tax at source at the rate of 5 per cent on total receipts of foreign contractors, contracting firms and suppliers before making payment to them.
In recent months, the income tax wing instructed different project implementing agencies including Bangladesh Power Development Board and utility transmission and distribution companies to deduct income tax while making payment to any foreign contractors and suppliers for executing foreign-funded projects.
‘We have asked many agencies to deduct income tax on payment of foreign contractors,’ an income tax official said.
‘The tax amount would be several thousands crore taka in more than 50 projects,’ he said adding that the BPDB alone was asked to pay around Tk 500 crore in tax at source which was supposed to be deducted during payment to an international contractor.
NBR officials said that contracting firms would have to pay tax on income of consultants and employees engaged in the firms.
Tax will also be applicable on the payment to sub-contractors if the principal contractor hires any sub-contractor for execution of the project, they said.
In most cases, the government’s implementing agencies pay duties on import of machinery and other equipments sent by the contractors for execution of the projects.
Contractors usually execute the projects on turn-key basis and the government pays the contract money for execution of the project.
Source: New Age
