Bangladesh:

New capital gains tax introduced on sale/transfer of securities

The Bangladesh Finance Act (No. 33) 2010 introduced a new capital gains tax regime that applies to gains arising on the
sale or transfer of non-government securities, including stock and shares of public companies listed on the Bangladesh stock
exchanges. The regime, which imposes a general 10% tax or a reduced rate of 5%, took effect on 1 July 2010. Previously,
gains on the sale or transfer of such listed securities were not subject to tax.

The new regime applies to any company, which is widely defined to include body corporates, any nationalized banking or
other financial institution, insurance body, industrial or business enterprise and any association or body established in or
outside Bangladesh. The tax authorities have power to define an entity that does not fall within the already broad definition
as a company.

Under the new rules, gain is calculated as the disposal proceeds (i.e. the transfer price) of the qualifying securities less their
purchase/acquisition costs. The 10% capital gains tax applies regardless of whether the transferor company is resident in
Bangladesh, with the reduced rate of 5% applying where the transferor holds more than 10% in the listed company and/or
is a sponsor, shareholder or director of a bank, financial institution, merchant bank, insurance company, leasing company,
portfolio management company, stock dealer or stock broker company deriving income arising from dealings in the
securities of such companies.

Individual investors, other than those falling under the above categories, will continue to be exempt from capital gains tax
on listed securities transactions.

There are no transition rules for securities acquired before 1 July 2010, so investors disposing of investments on or after that
date will be subject to tax on the full gain even though the gain may relate to securities held before the introduction of the
new regime. However, a general exemption applies if an investor is not subject to capital gains tax under the laws of the
jurisdiction in which it is domiciled or resident, if an applicable tax treaty provides for an exemption or if the transfer relates
to the shares of a private power generation company. The Bangladeshi National Board of Revenue, however, has not
published any guidance on the scope and application of these exemptions.

The Securities and Exchange Commission or stock exchanges must withhold tax at source if the investor is subject to the
reduced tax rate of 5%. Tax is not deducted at source if the 10% rate applies; instead, investors, regardless of their
residence, are required to obtain a Tax Identification Number (TIN) certificate and account for the capital gains (as well as
any other income) by submitting an annual tax return and pay advance tax on a quarterly basis if Bangladesh-source
earnings from all qualifying sources exceeds BDT 400,000 in the fiscal year of the investor. Investors subject to the reduced
rate also must obtain a TIN certificate and submit an annual tax return.

In addition to the guidance needed on exemptions from the capital gains tax, other key issues need to be clarified by the
National Board of Revenue or the Securities and Exchange Commission, particularly with respect to tax withheld by
custodians (e.g. banks and other agents) of nonresident investors.

— A.K. Chowdhury (Dhaka)

Managing and Fiscal Partner
Hoda Vasi Chowdhury & Co, an independent correspondent firm of Deloitte Touche Tohmatsu
akchowdhury@hodavasi.com

World Tax Advisor 1 of 2 Copyright ©2010, Deloitte Global Services Limited.

24 September 2010 All rights reserved.
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World Tax Advisor 2 of 2 Copyright ©2010, Deloitte Global Services Limited.

24 September 2010 All rights reserved.