Whether it is profit or loss, tax has to be paid, the rate has increased further

Regardless of the profit or loss of a business entity, tax has to be paid. Finance Advisor Salehuddin Ahmed has proposed to increase that tax rate in the budget for the upcoming 2025-26 fiscal year.

The finance bill for the new fiscal year states that the turnover tax or transaction tax of an entity will be 1 percent, which is currently 0.6 percent. Transaction tax means that if an entity sells goods and services and earns 100 taka, the government will collect 1 taka in tax on it, regardless of profit or loss.

In general, 1 taka against 100 taka may seem low. But it should be kept in mind that the government will collect this 1 percent as income tax, apart from value added tax (VAT) and other taxes. Even if the company is in loss at the end of the year, this tax will have to be paid. Although this budget has provided an opportunity to adjust the tax collected with subsequent years.

Let’s say a company has sold goods worth 100 crore taka. Then it will have to pay transaction tax of 1 crore taka; But at the end of the year, it was found that the company had lost 10 crore taka by selling the products. Then no corporate tax or income tax would be applicable on it. Still, the government will take 1 crore taka from it, which is called transaction tax, but it is basically corporate tax.

This type of tax has a greater impact on companies that are in loss. It does not have much of a negative impact on those who make a lot of profit. Because, the amount of income tax at the end of the year is more than their transaction tax. As a result, they can deduct the money paid for transaction tax and pay the remaining money to the government.

The country has had a transaction tax for many years. Businessmen have been protesting against it. Especially companies in the telecommunications sector have been demanding its withdrawal or reduction. In their case, however, in this year’s budget, this tax rate has been reduced from 2 percent to 1.5 percent. On the other hand, the manufacturers and sellers of tobacco and tobacco products and soft drink manufacturers have been kept at 3 percent as before.

It has been increased for companies outside this. They will have to pay 1 percent tax on their total sales. In the new budget, the corporate tax for general companies has been set at 27.5 percent (25 percent if more transactions are made in banks). This corporate tax is combined with the transaction tax.

The finance bill states that for new investments outside tobacco, telecommunications and beverage companies, the transaction tax will be 0.1 percent for the first three years of starting commercial production.

Snehashish Barua, director of tax consultancy firm SMAC Advisory Services Limited, told Prothom Alo that the 1 percent transaction tax is a big blow to companies that are in losses and have a profit-loss balance. As a result, some companies will have to pay tax from their capital. Such arbitrary tax policies encourage tax evasion. Companies that comply with tax laws and regulations are affected.

Snehashish Barua also said that this is a big blow to individuals. In that case, the tax rate has been increased from 0.25 to 1 percent.
What is the corporate tax rate?

The Finance Advisor said in his budget speech that in the 2025-26 fiscal year, the general corporate tax rate for companies not registered in the capital market will be 27.5 percent. However, if a single transaction exceeds Tk 5 lakh and an annual total of Tk 36 lakh is made through the banking system, the company will be able to pay tax at a rate of 25 percent. The corporate tax rate will also be 27.5 percent in the 2026-27 and 2027-28 fiscal years.

Companies registered in the capital market will have to pay 22.5 percent tax in the 2025-26 fiscal year. This rate will be 20 percent if the relevant institution makes transactions through the banking system beyond the specified limit. In the 2026-27 and 2027-28 fiscal years, to get the 20 percent tax benefit for companies registered in the capital market, all transactions will have to be made through the banking system.