Global Tax Alert
30 October 2014
EY Global Tax Alert Library
Access both online and pdf
versions of all EY Global Tax
Alerts.
• Copy into your web
browser:
http://www.ey.com/GL/en/
Services/Tax/International-
Tax/Tax-alert-library#date
News from Transfer Pricing
Bangladesh Transfer Pricing
Regulations – Finance Act,
2014
The transfer pricing regulations in Bangladesh have been made effective from 1 July
2014 by the Finance Act, 2014.1 These regulations were originally introduced in the
Finance Act 2012.
The National Board of Revenue (NBR) is the taxing authority and the tax laws have
been introduced as:
• Section 107A to 107J of the Income Tax Ordinance, 1984 (the Ordinance)
• Rule 70 to 75A of the Income Tax Rules, 1984 (the Rule)
This Alert outlines the provisions in these tax laws.
Associated Enterprise – Section 107(A)(2)
The pricing of any income or expense arising from international transactions between
associated enterprises will need to be determined with regard to the arm’s length
principle, using methods prescribed under Bangladesh transfer pricing legislation.
According to Section 107(A)(2), an associated enterprise is an enterprise that at any
time during the income year has any one of the following relationship with the other
enterprise:
(a) One enterprise participates directly or indirectly or through one or more
intermediaries in the management or control or capital of the other enterprise
(b) Same person or persons participates directly or indirectly or through one or more
intermediaries in the management or control or capital of both enterprises
(c) One enterprise holds directly or indirectly shares carrying more than 25% of the
voting power in the other enterprise
(d) Same person or persons controls shares carrying more than 25% of the voting
power in both enterprises
(e) The cumulative borrowings of one enterprise from other enterprise exceeds
50% of the book value of total assets of that other enterprise
 (f) The cumulative guarantees
provided by one enterprise in
favor of the other enterprise
exceeds 10% of the book value
of total borrowings of that
other enterprise
(g) More than half of the board
of directors or members of
the governing board of one
enterprise are appointed by
the other enterprise
(h) Any executive director or
executive members of the
governing board of one
enterprise is appointed by or
is in common with the other
enterprise
(i) Same person or persons appoint
more than half of the board of
directors or members in both
enterprises
(j) Same person or persons
appoint any executive director
or executive members in both
enterprises
(k) One enterprise has the practical
ability to control the decision of
the other enterprise
(l) The two enterprises are
bounded by such relationship
of mutual interest as may be
prescribed
International Transaction –
Section 107(A)(5)
Transfer pricing provisions are
applicable to the following types of
international transactions between
associated enterprises, at least one
of them being a nonresident:
• Purchase, sale or lease of tangible
or intangible property
• Provision of services
2 Global Tax Alert Transfer pricing
• Lending or borrowing money
• A mutual agreement or
arrangement for cost allocation
or apportionment in connection
with a benefit, service or facility
provided or to be provided
• Any other transaction having a
bearing on the profits, income,
losses, assets, financial position
or economic value of such
enterprises
If an enterprise enters into a
transaction with a third party, where
there is a prior agreement between
the third party and the associated
enterprise, or if the terms of the
relevant transaction are determined
in substance between the third party
and the associated enterprise, then
such transactions shall be deemed
to be an international transaction.
Enterprise means a person or a
venture of any nature and also
includes a permanent establishment
of such person or venture.
Methods for computation
of Arm’s Length Price –
Section 107(C)
Bangladesh transfer pricing
legislation prescribes the following
methods for the determination of
arm’s length price:
• Comparable Uncontrolled Price
Method (CUP)
• Resale Price Method (RPM)
• Cost Plus Method (CPM)
• Profit Split Method (PSM)
• Transactional Net Margin Method
(TNMM)
• Any other method
Where it can be demonstrated
that none of the first five methods
can be reasonably applied to
determine the arm’s length price
for an international transaction,
Section 107C allows the use of any
other method that can yield a result
consistent with the arm’s length
price.
For the purpose of determining
a comparable uncontrolled
transaction, Rule 71(3) provides that
data relating to the relevant financial
year should be considered. However,
the proviso to the Rule permits the
use of data relating to the period
prior to the relevant financial year
if it can be substantiated that such
data bears such facts that could
have an influence on the analysis
of comparability.
As per the proviso to section 107C,
transfer pricing provisions shall not
apply if it results in lowering the
total income computed by virtue
of complying with the arm’s length
principle.
The Bangladesh transfer pricing
provisions do not provide any
tolerance band when determining the
arm’s length price for benchmarking
international transactions.
Documentation requirements as
per Rule 73
A detailed list of the documentation
requirements are listed in Rule 73.
Some of the key documentation
requirements are:
• Profile of the multinational
group including the consolidated
financial statements of the group
• Profile of each member of
the group including business
relationships between each
member
• Profile of each associate enterprise
including tax registration numbers
and financial statements of any
associated enterprise operating
in Bangladesh
• Business description
• The nature and terms (including
prices) of international
transactions
• Description of functions
performed, risks assumed and
assets employed
• Record of any financial estimates
• Record of uncontrolled
transaction with third parties and
a comparability evaluation
• Description of methods considered
• Reasons for rejection of alternative
methods
• Details of transfer pricing
adjustments
• Any other information or data
relating to the associated
enterprise which may be relevant
for determination of the arm’s
length price
As per Rule 73, the above-mentioned
information and documents shall
be kept and maintained for a period
of eight years from the end of the
relevant assessment year.
Endnotes
1. The Finance Act, 2014 was introduced on 30 June 2014.
2. As per section 2(35) of the Income Tax Ordinance, 1984, income year has been defined to mean the financial
year opted by the assessee.
3. As per conversion rates applicable on 15 September 2014 which is 1 Taka = 0.013 US$.
The above documentation
requirements shall not be applicable
in case of an assessee where the
aggregate value of international
transactions entered into during
an income year,2 as recorded in
the books of accounts does not
exceed Taka 30,000,000 (approx.
US$ 390,000).3
Statement of international
transactions – Section 107(EE)
The Finance Act, 2014 has
inserted a new section 107EE by
virtue of which every person who
has entered into an international
transaction shall furnish, along with
the return of income, a statement
of international transactions in the
form and manner as prescribed
under Rule 75A.
Accountants report –
Section 107(F)
Under Section 107F, every
person who has entered into
an international transaction or
transactions the aggregate value
of which exceeds Taka 30,000,000
(approx. US$ 390,000) during an
income year shall furnish, on or
before the specified date, in the
form and manner as prescribed
under Rule 75, a report from a
Chartered Accountant.
Global Tax Alert Transfer pricing
Transfer pricing penalties –
Section 107(G), 107(H), 107(I)
For failure to keep, maintain
or furnish any information or
documents or records as required
by Section 107E, the tax officer
may impose a penalty on the
taxpayer not exceeding 1% of
the value of each international
transaction. Such penalty shall
be levied without prejudice to
the provisions of chapter XV of
the Ordinance, which deals with
imposition of penalties.
For a failure to comply with
the notice or requisition under
section 107D of the ordinance
by the Deputy Commissioner of
Taxes, the tax officer may impose
a penalty on the taxpayer not
exceeding 1% of the value of each
international transaction.
For a failure to furnish a report
from a Chartered Accountant as
required by section 107F of the
Ordinance, the tax officer may
impose a penalty on the taxpayer
of an amount not exceeding
Taka 300,000 (approx. US$ 3,900).
APA opportunity/Safe harbor
rules
Currently, there is no formal APA
program or safe harbor rules in
Bangladesh.
3
 For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (India), Kolkata

• Dinesh Agarwal +91 33 6615 3470 dinesh.agarwal@in.ey.com
• S
 achin Agarwal +91 33 6615 3632 sachin4.agarwal@in.ey.com
• Amit Poddar +91 33 6615 3592 amit.poddar@in.ey.com
• Ankur Goel +91 33 6615 3502 goel.ankur@in.ey.com

4 Global Tax Alert Transfer pricing

EY | Assurance | Tax | Transactions | Advisory

About EY
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build trust and
confidence in the capital markets and in economies the world over. We
develop outstanding leaders who team to deliver on our promises to all
of our stakeholders. In so doing, we play a critical role in building a better
working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of

the member firms of Ernst & Young Global Limited, each of which is a
separate legal entity. Ernst & Young Global Limited, a UK company limited
by guarantee, does not provide services to clients. For more information
about our organization, please visit ey.com.

© 2014 EYGM Limited.

All Rights Reserved.

EYG No. CM4855

This material has been prepared for general informational purposes only and is not intended to
be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for
specific advice.

ey.com