EAST DELTA UNIVERSITY

SCHOOL OF BUSINESS ADMINISTRATION

MBA PROGRAM
Summer-2020
Course Code: ACT 631
Course Title: Corporate Tax Management
 COURSE INSTRUCTOR

■ DR. MOHAMMAD MORSHEDUR RAHMAN

■ ASSOCIATE PROFESSOR
■ DEPARTMENT OF ACCOUNTING
■ UNIVERSITY OF CHITTAGONG
■ MOBILE: 01712274563
■ E-MAIL:mmrais@cu.ac.bd; morshedur.r@adjunct.eastdelta.edu.bd
Brief Introduction about me------
■ From Banskhali, Chattogram
■ SSC in 1994 and HSC in 1996 from Banskhali
■ BBA in 2001 (Held in 2004) and MBA in 2002 (Held in 2005) from Department of Accounting, CU
– CGPA 3.73 in BBA and GPA 3.84 in MBA
■ In 2005, started to study CMA and completed 1100 marks out of 2000
■ In 2006, Started career as a banker in Standard Bank, National Bank and NCC Bank
■ In 2007, left the bank, started career as a faculty in a private university (Southeast University).
■ In 2009 got the scholarship from Sweden and Germany but left the option to start the career in a public university.
■ At 09.04.2011, started career as a lecturer in the Department of Accounting, CU.
■ At 10.04.2012, got promotion to Assistant Professor
■ In 2013, I left Bangladesh to pursue my PhD from Huazhong University of Science and Technology under
Chinese Government Scholarship.
■ In 2016, came back to the country and joined the department.
■ In 2016, got the promotion to Associate Professor.
■ Hobby: reading, travelling and doing research
■ Number of publication = 26
 ■ Course Code: ACT 631
■ Course Title: Corporate Tax Management
■ Class Time: 6:30 pm -9:30 pm (Saturday)
Course Objectives

■ The course is intended to give an idea on Corporate Tax Management and Tax Planning.
■ The course includes various aspects of corporate income tax.
■ Tax planning holds an important role for all types of assessees in respect of their
income.
■ The course is designed in such a way that after successful completion of the course the
students would be able to work in corporate sector relating to procedure and
management of corporate sector in the field of taxation.
■ Various process and methods of tax planning as per Income Tax Ordinance 1984 will be
discussed in the said course
Syllabus

■ Chapter-1: Introduction
■ Basics, concepts, objectives, factors, methods, corporation, tax planning, Corporate   Tax 
 Planning, Tax Avoidance, Tax Evasion, Corporate Planning, Different types of Company.
■ Chapter-2: Taxation of Companies (residential status, tax liability)
■ Introduction, determining residential status of corporation and company, assessment of
corporation and company, rate of tax and rebate, procedure of assessment.
■ Chapter-3: Set off and carry forward of losses
■ Introduction, set off losses, carry forward of losses and depreciation, conditions and
limitations of carrying forward of losses.
■ Chapter-4: Appeal and Revision and alternative dispute resolution
■ Appeal: basic premise and grounds, appeal to the appellate joint commissioner of taxes, appeal to the commissioner
of taxes, appeal to the appellate tribunal, reference to the high court division of the supreme court, appeal to the
appellate division of the supreme court, revision, tax settlement commission, alternate dispute resolution.
■ Chapter-5: VAT Management
■ Introduction, reasons for introducing VAT in Bangladesh, definition of VAT, arguments for and against VAT,
procedure of assessment and computation of VAT, features of VAT, tax base of VAT, goods and services subject to
VAT, goods and services exempted from VAT, deduction of VAT at source, submission of VAT return, duties and
penalties under VAT.
■ Chapter-6: Tax Planning
■ Introduction, definition of Tax Planning, principles of tax planning, benefits and limitations of tax planning,
general strategies and policies of tax planning, techniques or methods of tax planning.
■ Chapter-7: Assessment of non-resident, double taxation relief, protection of
information and transfer pricing.
■ Assessment of non-resident, double taxation relief, protection of information of assesse
and confidentiality, transfer pricing.
■ Chapter-8: Tax Holiday
 Basic Text:

■ Course materials prepared by instructor

■ CA Manual_Taxation II published by ICAB
■ Taxation in Bangladesh: Theory and Practice by Dr.
Monjur Morshed Mahmud and Others.
■ Bangladesh Income Tax- Theory and Practice by Nikhil
Chandra Shil, Mohammad Zakaria Masud and
Mohammad Faridul Alam
 CHAPTER-01
INTRODUCTION
 BACKGROUND
■ Every person in Bangladesh is affected by our tax system in some ways,
often on a daily basis and without even realizing it.
■ We pay tax on the money we earn and on the things we buy and this tax is
of course used by the government to pay for our development purpose such
as schools, hospitals, roads and so on.
■ As government and business practices change, the tax system changes.
■ In Bangladesh we have an annual budget cycle which begins with the Pre
Budget Report in late May/early June and ends with the enactment of a
Finance Act in June.
■ This is supplemented by a huge body of case law and practical
interpretation.
■ The Income Tax Ordinance 1984, The Value Added Act 1991 are the
main sources of tax law.
■ The National Board of Revenue (NBR), a statutory body is the highest
authority for the purpose of these Ordinance and Acts.
■ Income of different types is taxed at different rates.
■ Before calculating income tax liability one should have the concept of
income, tax, income tax and income tax rate and other relevant issues.
■ Residential status has significance for determining tax liability. One way
of helping people to deal with complexity in the tax system is to use
technology.
– Presently people can use computerized system to calculate tax on
his/her taxable income.
– Even NBR website gives the opportunity to compute tax by using
income tax calculator.
■ Taxes are one of the many factors influencing decision- -making
in companies, especially with regard to investment and funding
policies.
■ Shareholders are interested to reduce the burden of taxes in order
to increase company value.
■ Tax management, tax administration, tax planning, and tax
avoidance are defined as a legal way of reducing expenses on
taxes, when taxpayers identify opportunities in the laws to
decrease companies’ tax burden.
■ Therefore, tax management seeks, through legal ways and among
the opportunities observed in tax legislation, to reduce the current
value of companies’ taxes in order to increase their performance
and, as a consequence, their market value.
■ Tax management is a legal transfer of State resources to companies with a view to
increase their performance, by reducing expenses on taxes.
■ As a result, many researchers have shown that tax management is a valuable activity for
shareholders.
■ The conceptual structure of tax planning revolves around three central themes (known
as all parties, all taxes, and all costs):
– a) An effective tax planning requires the planner to take into account the tax
implications of a transaction proposed for all parties involved in the transaction
(all parties).
– b) An effective tax planning requires the planner, when making investments and
financial decisions, to take into account not only explicit taxes, value paid directly
to the authorities, but also implicit taxes, value paid indirectly in the form of lower
return rates before taxes on encouraged investments (all taxes).
– c) An effective tax planning requires the planner to recognize that taxes represent
only one among many business costs, and all of them must be considered in the
planning process; to be implemented, some proposals require costly restructuring
procedures (all costs).
■ Therefore an effective tax management must take into
account
– (i) tax implications for all parties involved in the
transaction,
– (ii) all taxes, either explicit or implicit, and
– (iii) all costs involved in the issue.
 WHAT IS TAX?

■ The term taxation comes from Latin word ‘taxo” or “Taxatio”.

■ It means the rate so as to determine the payable quantum on estimate.
■ Taxing authority determines tax to be payable by the assesse.
■ So tax is the revenue collected by the government from persons and
organizations under different taxing acts.
■ In other words, it is liability imposed upon the assesse who may be
individuals, groups of individuals and other legal entities.
■ Dictionary meaning of Tax: tax means charge, duty, levy, tariff, impost,
toll and the like.
■ Legal Context: tax means compulsory payments imposed by government on
persons, products/services and the like under respective acts payable by the
assesses as per provisions of concerned acts.
■ Constitutional premise of definition of tax: tax in any country is to be
imposed by parliament under the provisions of constitutions.
■ Definition given by different authorities:
– Justice Holmes: the price paid to the government for living in a civilized
society is the tax.
– Taylor: taxes are the compulsory payments to government without
expectation of direct benefit to the tax payer.
– Dalton: a tax is a compulsory contribution imposed by a public authority
irrespective of the exact amount of services rendered to the tax payer in
return and not imposed as penalty for any legal offence.
 CLASSIFICATION OF TAX

■ (A) on the basis of incidence

■ On the basis of incidence tax can be classified into Direct and Indirect
Taxes:
■ The distinction between direct and indirect taxes is based on whether or
not the burden of a tax can be shifted wholly or partly to others.
■ If a tax is such that its burden cannot be shifted to others and the person
who pays it to the Government has also to bear it, it is called a direct tax.
– Income tax, annual wealth tax, capital gains tax are examples of
direct taxes.
– In case of a direct tax there is a direct contact between the tax payer
and tax levying public authority.
■ On the other hand, indirect taxes are those whose burden
can be shifted to others so that those who pay these taxes to
the Government do not bear the whole burden but pass it
on wholly or partly to others.
■ For instance, excise duty on the production of sugar is an
indirect tax because the manufactures of sugar include the
excise duty in the price and pass it on to buyers.
– Ultimately, it is the consumers on whom the incidence of
excise duty on sugar falls as they will pay higher price
for sugar than before the imposition of the tax.
■ (B) On the basis of progression
■ Tax can also be classified on the basis of degree of
progression as Progressive, Proportional and
Regressive Taxes:
■ In case of proportional tax, the same rate of the tax is
charged, whatever be the magnitude of the base on
which it is levied.
– For instance, if rate of income tax is 25 per cent
whatever the size of income of a person, it will then
be a proportional income tax. Likewise, if rate of
wealth tax is 5 per cent, it will be proportional
wealth tax.
■ Thus, in case of proportional tax it is the rate which is fixed and not the
absolute amount of the tax.
■ Thus with the rate of 25 per cent proportional income tax, a person with
income of taka 25,000 will pay taka 6,250 as the tax, and a person with
income of 50,000 will pay taka 12,500 as the tax.
– Thus, even under proportional income tax, a richer person has to pay
greater amount of tax though rate of the tax is the same.
■ On the other hand, in case of a progressive tax, rate of the tax increases
as the amount of the tax base (income, wealth or any other object)
increases.
■ The principle underlying a progressive tax is that greater the tax base, the
higher the tax rate. In Bangladesh, income tax, an important direct tax
levied by the Central Government, is progressive.
■ Its rate at present varies from 10 per cent in the slab of taka 4,00,000 to
5,00,000 to 30 per cent in the slab of income above taka 30,00,000.
■ Under progressive income tax, the richer person pays not only absolutely
more tax but also a higher rate of the tax.
– Thus, the burden of progressive tax falls more heavily on the richer
persons as compared to proportional income tax.
■ A regressive tax is the opposite of a progressive tax.
■ In case of a regressive income tax, the rate is lowered as the income rises.
■ Thus, under regressive tax system, the burden of the tax is relatively
more on the poor than on the rich.
■ A regressive tax is therefore inequitable and no civilised Government in
the world today will levy such a tax.
■ (C) On the basis of Base
■ Tax can be classified into two on the basis of base as
Single tax and multiple tax.
■ One simple form of a single tax is the poll tax, or the
head tax which is imposed on a person irrespective of
his income, or wealth or profession, etc.
■ The other examples can be a single tax on income, or
a tax on land rent.
■ A multiple tax refers to the tax system in
which taxes are levied on various items or bases.
 BANGLADESH TAX STRUCTURE
■ The tax structure of Bangladesh consists of both direct (income
tax, gift tax, land development tax, non-judicial stamp,
registration, immovable property tax, etc) and indirect
(customs duty, excise duty, motor vehicle tax, VAT,
Supplementary Duty, foreign travel tax, electricity duty,
advertisement tax, etc) taxes.
■ Analysis of revenue collection activities in Bangladesh reveals
that tax revenue accounts for 80 percent of government
revenue and direct taxes represent only about 19% of total
taxes.
The significant features of Bangladesh tax system are as
follows:

■ A) Multiple tax system: The tax system of Bangladesh consists of various types of taxes
which are as follows:
■ I. Taxes on Income and Profit
– (i) Income tax – Company (ii) Income tax – Persons other than Company
■ II. Taxes on Property & Capital Transfer
– (i) Estate Duty, (ii) Gift Tax, (iii) Narcotics Duty, (iv) Land Revenue (v) Stamp Duty - non
judicial (vi) Registration
■ III. Taxes on Goods and Services
– (i) Customs Duties, (ii) Excise Duties, (iii) Value Added Tax (VAT), (iv) Supplementary
Duty (on luxury items and in addition to VAT), (v) Taxes on Vehicles, (vi) Electricity Duty
(vii) Other Taxes and Duties (travel tax, turn over tax, etc.)
■ B) Inadequate and stagnant revenue yield relative to GDP:
■ The ratio of tax revenue to GDP is very low comparing to other developing countries.
We can see the status of the ratio of tax revenue to GDP of Bangladesh in the following
table for the last six years:
Table: Revenue Receipt
Table-Item wise revenue collection
■ C) Tax administration in Bangladesh:
■ National Board of Revenue (NBR) is the central authority for tax
administration in Bangladesh and collects almost 80 percent of total revenue
for the country.
– Various reform measures have been taken and still in consideration to
make the tax system of the country more effective and efficient.
■ D) Tax avoidance behavior of the Taxpayers:
■ The heavy reliance on indirect taxation has been treated as one of the main
obstacles in attaining economic progress in Bangladesh since only a few tax
payers share the burden of taxes.
■ Despite NBR's untiring effort, the progress is not still satisfactory.
■ People and corporate firms use various measures to evade tax using loopholes
of the current tax system.
■ E) Narrow Tax base:
■ Our tax base is too narrow and the tax law is full of exemptions and allowances.
■ Agricultural sector provides employment for around 60 percent of the population
contributes only 25 percent of GDP and virtually pays little in the form of income tax.

■ From the above discussion, it is clear that attaining an optimal tax

structure is one of the most important issues for the government of
Bangladesh to increase the revenue generation from taxes for accelerating
growth and to improve the quality of life of the citizens.
■ A long-term sustainable solution to enhance transparency, promote
growth, improve tax compliance and thus to increase tax to GDP ratio is a
much desirable issue in the context of Bangladesh.
 SOURCES OF TAX LAW AND PRACTICE

■ A. Legislation
■ The basic rules of Bangladesh taxation system are based on the
Income Tax Ordinance 1984 and the Income Tax Rules 1984. The
Value Added Tax Act 1991 is the main source of VAT laws.
■ The tax legislation is amended each year by the Finance Act. This
is based on proposals in the Budget each year. The Finance Act
generally relates to the income year and assessment year starting
on July of that year.
– Therefore, the Finance Act 2020 relates mainly to the
assessment year 2020-2021.
■ B. Case law
■ Over the years, many hundreds of tax cases have been
brought before the courts where the interpretation of
statute law is unclear.
■ Decisions made by judges to resolve these cases form
case law.
■ Many judgments are precedent for future cases which
means that they must be followed unless superseded
by legislation or the decision of a higher court.
■ C. NBR Publication
■ The National Board of Revenue (NBR) is a statutory body having
the highest executive authority and empowered to make necessary
rules concerning income tax matters and is authorized to give any
interpretation of any provision in any section of the Ordinance.
■ NBR makes available some forms, notifications, brochures, and
guidelines of income tax, VAT and customs through its websites
and other forms of communication for public at large.
■ There are many Statutory Regulatory Orders (SROs) and circulars
on income tax and VAT published by NBR providing guideline for
tax purpose.
SCOPE OF BANGLADESH INCOME
TAX
■ Some provisions, rules and regulations have to be kept in mind in order
to determine income tax on the income of an assessee in Bangladesh.
They are as follows:
■ (I) The Income Tax Ordinance, 1984: The Income Tax Ordinance, 1984
came into force on 1st July, 1984 as Income Tax Manual I. It has 23
Chapters, 187 sections, numerous subsections and seven schedules
containing provisions regarding assessment, penalty, appeal etc.
■ (II) Income Tax Rules, 1984: Income Tax Rules, 1984 has framed
various rules for the administration of the Income Tax Ordinance, 1984 as
provided therein.
■ (III) Finance Act: To give effect to the various proposals in
the annual budget covering the areas of direct and indirect
taxes, Finance Act is issued.
– It contains various applicable tax rates and other
amendments of the Income Tax Ordinance and Rules, 1984.
■ (IV) SRO (Statutory Regulatory Orders): According to the
Section 185 of the Income Tax Ordinance, 1984, NBR can
issue certain circulars as and when necessary.
– The provisions of these SROs are also to be considered at
the time of computing income tax like the provisions of
Income Tax Ordinance and Rules.
■ (V) Income Tax Case Law: In the course of assessment
proceedings, there may sometimes arise a dispute between the
NBR and the assessee over the interpretation of some of the
provisions of the act and rules.
■ The assessee can go the court objecting the NBR's interpretation,
and the judgments given by the courts act as guidance to the
assessing officers and the assesse in similar circumstances in the
future.
 STRUCTURE OF INCOME TAX ORDINANCE, 1984

■ The Income Tax Ordinance, 1984 came into force on

1st July, 1984 as Income Tax Manual 1.
■ It has 23 Chapters, 187 sections, numerous sub-
sections and seven schedules containing provisions
regarding assessment, penalty, appeal etc.
■ A brief description regarding these enumerated below:
■ Manual I: The Income Tax Ordinance, 1984 - Chapters and
Sections
■ Chapter 1 Preliminary (Sections 1-2)
■ Chapter 2 Administration (Sections 3-10)
■ Chapter 3 Taxes Appellate Tribunal (Sections 11-15)
■ Chapter 4 Charge of Income Tax (Sections 16-19)
■ Chapter 5 Computation of Income (Sections 20-43)
■ Chapter 6 Exemption and Allowances (Sections 44-47)
■ Chapter 7 Payment of Tax before Assessment (Sections 48-
74)
■ Chapter 8 Return and Statement (Sections 75-80)
■ Chapter 9 Assessment (Sections 81-94)
■ Chapter 10 Liability in Special Cases (Sections 95-103)
■ Chapter 11 Special Provisions relating to avoidance of tax (Sections
104-107)
■ Chapter 12 Requirement of furnishing certain information (Sections
108-110)
■ Chapter 13 Registration of firms (Sections 111) (omitted)
■ Chapter 14 Powers of Income Tax Authorities (Sections 112-122)
■ Chapter 15 Imposition of Penalty (Sections 123-133)
■ Chapter 16 Recovery of Tax (Sections 134-143)
■ Chapter 17 Double Taxation Relief (Sections 144-145)
■ Chapter 18 Refunds (Sections 146-152)
■ Chapter 18A Settlement of Cases (Sections 152A-152E)
(omitted)
■ Chapter 18B Alternate Dispute Resolution (Sections 152F-
152S)
■ Chapter 19 Appeal and Reference (Sections 153-162)
■ Chapter 20 Protection and Information (Sections 163)
■ Chapter 21 Offences and Prosecution (Sections 164-171)
■ Chapter 22 Miscellaneous (Sections 172-184)
■ Chapter 23 Rules and Repeal (Sections 185-187)
■ Manual II: The Income Tax Ordinance, 1984-Schedules
■ First Schedule:
– Part-A Approved Superannuation Fund or Pension Fund
– Part – B Recognized Provident Fund
– Part – C Approved Gratuity Fund
■ Second Schedule: Rates of income tax in certain special
cases
■ Third Schedule: Computation of Depreciation Allowance
■ Fourth Schedule: Computation of the Profits and Gains of
Insurance Business
■ Fifth Schedule:
– Part-A Computation of Profits and Gains from Exploration
and production of petroleum and the determination of tax
thereon.
– Part- B Computation of Profits and Gains from Exploration
and Extraction of Mineral deposits in Bangladesh (except oil
and gas).
■ Sixth Schedule:
– Part-A Exclusions from total Income
– Part - B Exemptions and allowances for assessees being
resident and nonresident Bangladeshi
■ Seventh Schedule Computation of relief from income tax by way
of credit in respect of foreign tax
■ III. The Income Tax Rules, 1984
■ The IT Rules, 1984, comprises sixty nine rules to
supplement various sections and provisions of
the IT Ordinance, 1984.
■ National Board of Revenue (NBR) enjoys
flexibility to amend or change any rules through
the notification in the official gazette.
 COMPANY
■ Company [U/S 2(20)]: "Company" means a company as defined in the
Companies Act, 1913 (VII of 1913) or the Companies Act, 1994 (VIII of
1994)] and includes-
■ (a) a body corporate established or constituted by or under any law for
the time being in force;
■ (b) any nationalized banking or other financial institution, insurance body
and industrial or business enterprise;
■ (bb) an association or combination of persons, called by whatever name,
if any of such persons is a company as defined in [the Companies Act,
1913 (VII of 1913) or the Companies Act, 1994 (VIII of 1994);
■ (bbb) any association or body incorporated by or
under the laws of a country outside Bangladesh;
and;]
■ (c) any foreign association or body, [not
incorporated by or under any law], which the
Board may, by general or special order, declare
to be a company for the purposes of this
Ordinance;
 TYPES OF COMPANY

■ There are two types of companies:

■ (1) Domestic Company: it means a Bangladeshi company or
any other company which, in respect of its income liable to
income tax, has made the prescribed arrangements for the
declaration and payment of dividends (including dividends on
preference shares) within Bangladesh, payable out of such
income.
■ (2) Foreign Company: Foreign company means a company
which is not a domestic company.
 WHAT IS TAX PLANNING?

■ Tax planning is the analysis of a financial situation or plan from a tax

perspective. The purpose of tax planning is to ensure tax efficiency.
■ Through tax planning, all elements of the financial plan work together in
the most tax-efficient manner possible.
■ Tax planning is an essential part of an individual investor's financial plan.
■ Reduction of tax liability and maximizing the ability to contribute to
retirement plans are crucial for success.
 HOW TAX PLANNING WORKS?

■ Tax planning covers several considerations.

Considerations include timing of income, size, and
timing of purchases, and planning for other
expenditures.
■ Also, the selection of investments and types of
retirement plans must complement the tax filing status
and deductions to create the best possible outcome.
 WHAT IS TAX EVASION?

■ Tax evasion is an illegal activity in which a person or entity deliberately

avoids paying a true tax liability.
■ Those caught evading taxes are generally subject to criminal charges and
substantial penalties.
■ To willfully fail to pay taxes is state offense under the NBR tax code.
■ Tax evasion applies to both the illegal nonpayment as well as the illegal
underpayment of taxes.
– Generally, a person is not considered to be guilty of tax evasion unless
the failure to pay is deemed intentional.
 TAX AVOIDANCE 

■ Tax avoidance is the legal usage of the tax regime in a single

territory to one's own advantage to reduce the amount of tax
that is payable by means that are within the law. 
■ Tax sheltering is very similar, although unlike tax avoidance
tax sheltering is not necessarily legal. 
■ Tax havens are jurisdictions which facilitate reduced taxes.
■ While forms of tax avoidance which use tax laws
in ways not intended by governments may be
considered legal, it is almost never considered
moral in the court of public opinion and rarely
in journalism.
■ Conversely, benefiting from tax laws in ways
which were intended by governments is
sometimes referred to as "tax planning".
 END
OF
CHAPTER-01