The government plans to withdraw tax exemption benefits for IT and IT enabled services (ITES) from FY2024-25 in line with the International Monetary Fund (IMF) recommendations, if such companies fail to become fully cashless.
As the companies are playing a pivotal role in providing digital services, they should be smart and digital first by adopting a full-fledged cashless transaction system to keep their existing tax benefits for another three years, finance ministry sources say.
To help build a Smart Bangladesh, the government may propose an exemption from tax for the income arising from any of the following business activities of a resident individual or a non-resident natural Bangladeshi citizen, for another three years, on the condition that all business activities of such person are cashless.
Under the part of being cashless, business entities must transact through bank or digital transfer in case of operating expenditure, service providing charge, miscellaneous costs, and investment capital.
If any IT services company fails to maintain cashless transactions fully, the respective firm will be subject to pay a 27.5 per cent corporate tax on their income.
New 4 services included, 11 repealed
The new list may include four new services, including AI based solution development, blockchain based solution development, robotics process outsourcing, software as a service, and data science.
The new list may include the these previous services – Cyber security service, digital data analytics, mobile application development service, software development and customization, software test lab service, web listing, website development and service, IT assistance and software maintenance service, geographic Information Service.
Besides, digital animation development, digital graphics design, digital data entry and processing, e-learning platform and e-publication, IT freelancing, call center service, document conversion, imaging and digital archiving may be included in the list.
The excluded 11 services will be subject to pay 27.5 corporate tax on their services.
27 services now enjoying benefit
Currently, there are 27 types of companies are getting benefitted from tax exemption includes those business entities involved in software development, software or application customisation, nationwide telecommunication transmission network (NTTN), and digital animation development.
Besides, website development, website services, web listing, IT process outsourcing, website hosting, digital graphics design, digital data entry and processing, digital data analytics, graphics information service (GIS), IT support and software maintenance service, software test lab service, call centre service, overseas medical transcription, and search engine optimisation service are included in the exemption facility.
Document conversion, imaging and digital archiving, robotic process outsourcing, cyber security service, cloud service, system integration, e-learning platform, e-book publication, mobile app development service, and IT freelancing companies are in the list.
According to the Bangladesh Association of Software and Information Services (BASIS), the annual domestic market size in the ITES sector is around Tk 2,000 crore – Tk 2,500 crore, but contribution of the sector to the economy is invaluable and large, as agriculture, education, health, media and RMG sectors are using this technology.
