The National Board of Revenue (NBR) has withdrawn the income tax exemption ceiling of Tk 0.2 million on contract value for contractors and suppliers from the current fiscal year (FY).
The NBR issued a Statutory Regulatory Order (SRO), scrapping the exemption ceiling and increasing the rates of advance income tax (AIT) on the income of contractors and suppliers they earned through execution of contracts and supply of goods.
Until last FY 2016-17, contractors enjoyed tax exemption on contracts valued below Tk 0.2 million.
Contractors and suppliers have to pay 2.0 per cent AIT, known as withholding tax, on the base amount of contracts up to Tk 1.5 million.
Income tax wing has also merged the two separate tax rates into one for contractors and suppliers.
AIT would be deducted by the persons or organisations at the time of making payments.
The rate of AIT will be 3.0 per cent for the base amount of above Tk 1.5 million and below Tk 2.5 million.
AIT would be deducted at 4.0 per cent for the base amount of Tk 2.5 million to Tk 10 million.
The tax will be 5.0 per cent where the base amount will go above Tk 10 million, but will not exceed Tk 50 million.
As per the latest SRO, contractors and suppliers will have to pay 6.0 per cent AIT on contract value ranging from Tk 50 million to Tk 10 million and 7.0 per cent on the rest of the amount.
In FY 2016-17, withholding tax rates for contractors for execution of contracts like physical work, construction, machinery setup, and repairing and maintenance activities were 1.0 per cent for contract value ranging from Tk 0.2 million to Tk 0.5 million while 2.0 per cent for contract value ranging from Tk 0.5 million to Tk 1.0 million.
It was 3.0 per cent for contract value ranging from Tk 1.0 million to Tk 2.5 million while 4.0 per cent for contract value ranging from Tk 2.5 million to Tk 10 million.
Besides, the rate was 5.0 per cent for contract value ranging from Tk 10 million to Tk 50 million while 6.0 per cent for contract value ranging from Tk 50 million to Tk 100 million and 7.0 per cent for the rest of the contract amount.
Withholding tax rates were 3.0 per cent for the amount up to Tk 2.0 million, 4.0 per cent for the amount above Tk 2.0 million, but up to Tk 10 million and 5.0 per cent for the amount above Tk 10 million.
According to the SRO, taxpayers will have to pay 50 per cent higher tax if he/she does not have 12-digit electronic taxpayers' identification number at the time of making payments.
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Source: The Financial Express