The tax authority has moved to offer an investment rebate facility to the individual investors of Shariah-based Islamic bond-like instrument Sukuk.
Once the tax rebate is allowed, individual taxpayers will be able to lessen their tax burden through investment in Sukuk.
They have to show the investment in Sukuk claiming tax rebate, similar to saving certificate and Treasury bond investment, in their annual tax return submitted to the income tax authorities.
Tax officials said after a two-phase income tax benefit on investment in Sukuk, the fresh tax incentives are under process in the income tax wing.
On September 7, 2021, Value Added Tax (VAT) wing of the National Board of Revenue (NBR) also waived taxes on sale and purchase of assets between originator and special purpose vehicle (SPV) of Sukuk. VAT applicable against rent of assets or leasing of assets between them also waived.
Recently, the income tax policy wing prepared a proposal to send it to the government high-ups to implement the decision of a high-powered committee of the Ministry of Finance.
The decision was taken in the 48th meeting of cash and debt management committee (CDMC) of the finance ministry.
The CDMC recommended that the NBR consider individual investment in Sukuk like Treasury bond.
The finance ministry last month sent a letter to the NBR chairman to take necessary steps to implement the CDMC decision.
In the letter, the ministry said some individuals had invested in the government issued Sukuk in the fiscal year of 2020-21.
Currently, individual investors of Treasury bond and saving tools are entitled for the tax rebate facility.
Following the decision, the NBR started working on it recently.
The decision came after some individual investors invested in Sukuk in the last fiscal year.
Investment in other government securities including Treasury bond is entitled for the tax rebate, Deputy Secretary of the finance ministry Md Abul Bashar wrote.
"It should be considered to incorporate a provision for the Sukuk like Treasury bond," said the letter.
Income Tax Ordinance, 1984, sixth schedule, part B, paragraph 10 (2) © offers the tax rebate facility on investment in government securities.
A senior Bangladesh Bank official said investment by individuals on Sukuk was increasing gradually and the tax incentives would encourage more people.
According to income tax ordinance, individual taxpayers having annual income less than Tk1.5 million can enjoy the tax exemption rate 15 per cent of the investment amount.
In case of exceeding income above Tk 1.5 million, the rate of tax rebate will be 10 per cent of the investment.
The NBR offers tax rebates for investment in some selective sectors up to 25 per cent of total annual income.
Last April, Beximco as a maiden Bangladeshi company decided to issue the first-ever private-sector Sukuk 'Al Istisna' for Tk 30 billion.
It is the largest-ever issuance of securities in the private sector of Bangladesh.
In December 2020, the government issued the first-ever Tk 80-billion Sukuk for a safe water supply project.
Sovereign Sukuk is the main contributor of the global sukuk market.
Earlier, the income tax wing waived Tax Deducted at source (TDS) on transaction of Sukuk between Originator and SPV.
In the budget for the current fiscal year, the income tax wing waived gain tax at a rate of 4.0 per cent on transfer of asset to the SPV of Sukuk.
Sukuk is a real asset-backed security and its issuing company will get back the asset after expiry of the leasing time or end of the term.
