Chattogram bourse proposes investment friendly tax policies

The Chittagong Stock Exchange (CSE) has submitted to the National Board of Revenue (NBR) its fiscal recommendations that are believed to be investment-friendly.

In the proposals last week, the port city bourse demanded a flat 15 percent corporate tax for stock exchanges as these are research-oriented specialized public interest entities partnering with the country's economic development.

After a five-year diminishing tax rebate facility, stock exchanges have been subject to 35 percent corporate tax since the 2019-20 fiscal year.

CSE also demanded bringing down the corporate tax for listed companies to 20 percent from 25 percent.

Except for banks, insurance and non-banking financial institutions, tobacco and telecom operators are now subject to a flat 35-percent corporate tax which is 10 percent less if the company is a listed one.

Currently, if a company gets listed with floating 20 percent of shares it can enjoy a 10 percent tax rebate for the year of listing. CSE proposed the facility should be extended for the next two years with a 5 percent rebate if the company ensures "A" category in the stock exchanges.

To inspire SME companies' listing in the exchanges' small cap platform, CSE proposed zero corporate tax for them for the first three years of listing and a flat 15-percent income tax thereafter.

Listed companies paying at least 35 percent cash dividends should be awarded 10 percent tax rebate. The rebate can be 5 percent in case of cash dividends over 20 percent but less than 35 percent, according to the recommendations.

The NBR must make it clear that 0.05 percent advance income tax is not applicable to the trading of listed bonds.

Besides, CSE requested to bring down at source advanced income tax on securities transaction by stockbrokers to restore to 0.015 percent from 0.05 percent and consider it as a part of the ultimate tax liability of brokers. Brokers' facility to carry forward the losses up to six years' tax return should be extended up to 8 months.

To inspire export stars' listing, tax deducted at source on export subsidy should be reduced to 7.5 percent for listed companies, which is 10 percent for all companies right now.

Currently, individual investors' capital gain is not taxable while institutional investors have to pay a 10 percent tax on their capital gains. CSE requested to reduce it to 7.5 percent to attract institutional investment, which will increase market's depth and stabilize it.

Individual investors' tax-free limit of annual dividend income from listed companies is Tk50,000 which is Tk25,000 from closed-end and open-end mutual funds. Citing Singapore's zero tax on dividend income, CSE requested to raise the limit to Tk1,00,000.

On top of that, CSE also said that companies deduct 10 percent tax at source before disbursing cash dividends to individuals and that should be included as the ultimate tax liability of the individuals.

Individuals' annual investment limit for income tax exemption is 25 percent of their annual taxable income which is not more than Tk1.5 crore. CSE proposed to make it 35 percent.

Besides, CSE proposed to reduce tax on listed companies' dividend income from other listed companies to 15 percent from existing 20 percent if the shares are held for at least three months before the record date.

To attract foreign portfolio investment, the government should reduce dividend income tax on foreigners to 15 percent from 20 percent if the dividends are from a listed company and to 25 percent from existing 30 percent in case of dividends from other securities, said CSE.

Alongside all these, the exchange also recommended supportive tax measures for stockbrokers.