TAX PLANNING & COMPLIANCE

Time allowed- 3:30 hours

Total marks- 100
[N.B. - The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take account of
the quality of language and of the manner in which the answers are presented. Different parts, if any, of the same
question must be answered in one place in order of sequence.]

Question 1(a)
Food Grains Limited ("FGL") is a limited liability company registered under the Companies
Act, 1994, and engaged in importing food grains from Egypt and selling them in the local
market. It is a wholly-owned subsidiary of FGL UK Limited. The gross profit margin of FGL
for the last 5 years was 9.9%, 9.52%, 8.7%, 6.93%, and 6.3%. In the assessment year 2022-
2023, FGL filed its corporate tax return under self-assessment with a reported net profit of
Taka 10 crore, and the gross margin was 6.3%. The return was selected for audit, and the
company received the assessment order on June 26, 2024, with an additional tax claim of Taka
2.5 crore. Upon reviewing the assessment order, FGL observed that a substantial amount of
genuine expenses incurred for the operation had been disallowed on the grounds that tax at
source from the payment had not been complied with and insufficient documentation was
furnished in support of those expenditures.
Another surprise came to the attention of FGL's Bangladesh management when the Deputy
Commissioner of Taxes ("DCT") estimated its revenue to maintain the gross profit margin at
9.9%. Here is the extract of the assessment order:
"A perusal of records and returns of income tax documents shows that the assessee company
processed various types of food grains by importing and selling them in the market and earning
income. During the tax year under review, the taxpayer company showed the total sales of
Taka 330 crore and Gross Profit of 6.3%. Considering the market scenario, we believe the sale
and associated gross profit have been understated by the company. Therefore, the sale of the
company for the assessment year has been estimated to Taka 350 crore, and in light of the past
records of the taxpayer company's documents in income tax, the gross profit has been estimated
at 9.9%."
The assessment order shocked the local management as FGL is a compliant company
upholding all the regulations applicable to its operation in Bangladesh. Furthermore, the
financial statements have been audited by one of the leading firms in Bangladesh, which is
well-known for upholding professionalism and audit quality. Local management inquired with
the tax consultant regarding the unfavorable assessment and came to know that the tax official
was approaching the consultant to offer a job opportunity to his cousin at FGL, bypassing the
company's recruitment policy. The consultant discussed this matter with FGL's local tax
manager, who refused the offer.
After communicating the tax audit outcomes, the local finance director, Mr. Tanvir Ahmed,
has been requested to reply to the following questions by the group tax manager sitting in the
UK. The local finance director is not sure whether he should share the underlying job offer by
the tax officer with the group tax manager.
 Shall we go for the appeal to get a favorable order to establish that our line of business
cannot have a fixed gross profit in place as the price of the commodity varies with the
dynamics of the international market?
 What are the key matters we must know regarding the first appeal?
 What are the likely outcomes you believe in the best- and worst-case scenarios we may
expect in appeal proceedings?
 What would be the timelines for filing the appeal and getting the order?
Requirements:
i) Draft an email on behalf of local finance director to the group tax manager of FGL
addressing the questions raised by him. [Marks 8]
ii) Discuss the ethical issues associated with the placement offer made by the tax official and
should it be communicated with the group tax manager? [Marks 5]

Page 1 of 20
Question 1(b)
Mr. A, a foreign national employed in XYZ's quality assurance department, receives a monthly
salary of Tk. 800,000. As per his employment condition, he periodically returns to his home
country (every four months) for a week and renews his tourist visa before returning to
Bangladesh. However, XYZ has employed Mr. A without obtaining any work permit from the
Bangladesh Investment Development Authority (BIDA), which is a mandatory requirement
for employing foreign nationals in Bangladesh. Consequently, Mr. A is unable to remit funds
to his family under the official quota allowed by law. As a result, he resorts to purchasing cash
dollars from the curb market and carries them while traveling back to his home country.
Additionally, for the income year 2023-24, XYZ has an assessed payable tax of Tk. 100
million.
Requirements:
Considering provisions of the Income Tax Act 2023 and the Finance Act 2023 (ignoring the
provisions of the tax laws related to the assessment year 2024-25):
i) Describe the potential tax liabilities and legal consequences for XYZ if it is discovered
that they have employed Mr. A without the necessary work permit and how this may
impact their assessed payable tax for the income year 2023-24 from a tax law perspective.
[Marks 3]
ii) Describe from a tax law standpoint, the potential consequences Mr. A may face for
working without a work permit include potential penalties, deportation, and restrictions on
future entry into Bangladesh. [Marks 2]
Answer to the question# 1(a) (i):

Subject: Response to tax Appeal Outcomes and Recommendations

Dear Mr./Ms.

I hope this email finds you well. Following the recent tax audit outcomes for the
assessment year 2022-2023, I am writing to provide a detailed response to your queries.

Appeal:
It seems that the tax authority has relied on past records of sales and margins, which is
impractical in the business world. If these estimates continue for future periods, the
company may face substantial tax burdens. Sales and GP should ideally reflect the
market scenario, but it appears the tax authority did not consider the dynamics of the
commodity market, further, our historical financial data reflects these variations, and we
can substantiate that a fixed gross profit margin is not feasible for our line of business.

Therefore, it is advisable to challenge the decision before the tax appellate authorities to
prevent future misguided assessments.

Key matters:
Appeal has to be filed before the Commissioner of Taxes (Appeals). No appeal is
permitted if returns are filed but tax liability has not been paid before or at the time of
filing return. Appeal shall be filed in prescribed forms and manner along with a fee of
BDT 200.

The appellate authority shall designate a day and place for the hearing and provide notice
to the appellant. The appellate authority may permit the appellant to raise any ground of
appeal that was inadvertently omitted before or at the time of the hearing. However, the
appellate authority shall not admit any documents or evidence that were not presented
before the DCT unless satisfied with the reasons provided.

Page 2 of 20
 Appeal decision:
Best-Case Scenario: The appellate authority acknowledges our argument and adjusts the
gross profit margin in line with our actual financial performance, leading to a reduction
or elimination of the additional tax claim.

Worst-Case Scenario: The appellate authority upholds the current assessment,

maintaining the additional tax claim of Taka 2.5 crore. However, even in this scenario,
we will have exhausted all available remedies to ensure compliance and transparency.

Timelines:
We must file the appeal within 45 days from the date of receiving the assessment order.
Typically, an appeal order shall be passed within 150 days from the end of the month of
filing appeal, and within 30 days the appeal order shall be communicated.

Please let me know if you need any further information or clarification on these points.

Best regards,
Tanvir Ahmed
Finance Director

Answer to the question# 1(a) (ii):

The tax official’s attempt to influence the assessment by offering a job opportunity to his
cousin is a clear case of bribery and corruption. Such actions undermine the integrity of
the tax system and create an unfair advantage. The consultant and FGL's tax manager
acted ethically by refusing the offer, upholding the company's recruitment policy and
maintaining professional standards. It is essential to maintain transparency and
accountability in all dealings with tax authorities to avoid any legal or reputational
repercussions.

Yes, the placement offers made by the tax official should be communicated to the group
tax manager. Transparency within the organization is crucial, and the group tax manager
must be aware of any unethical practices that may affect the company's operations and
reputation. This will also help in deciding the appropriate course of action and ensure
that such incidents are handled correctly and reported to the relevant authorities if
necessary.

Answer to the question# 1(b) (i):

The potential exposure for XYZ for employing Mr. A, who does not have any
permission from any appropriate authority to work in Bangladesh.

As per Section 19 of the Income Tax Act 2023, any person employs or allows, without
prior approval of the Bangladesh Investment Development Authority (BIDA) or any
competent authority of the Government, as the case may be, any individual not being a
Bangladeshi citizen to work at his business or profession at any time during the income
year, such person shall be charged additional tax at the rate of fifty per cent (50%) of the
tax payable on his income or taka five lakh, whichever is higher in addition to tax
payable under this Income Tax Act 2023. Accordingly, XYZ may exposed to penalty of
Tk. 50 million, being higher of 50% of the tax payable by XYZ for that A/Y and Tk.
500,000.
Non-Compliance Penalties: By employing Mr. A without obtaining the required work
permit from BIDA, XYZ is in violation of immigration laws in Bangladesh. As a result,
the company may face penalties, fines, or legal consequences imposed by the relevant
authorities for non-compliance.

Page 3 of 20
Answer to the question# 1(b) (ii):

Potential exposure for Mr. A. not being a Bangladeshi citizen without prior approval of
the Bangladesh Investment Development Authority (BIDA) or any competent authority
of the Government are as follows:

1) As per Section 243(a) of the Income Tax Act 2023, if tax authority identifies, Mr. A will
not be allowed to leave the country without providing a tax clearance certificate obtained
from fax Authority.

2) Other Legal Consequences:

i. As Mr. A is working in Bangladesh without the necessary work permit, it will be

considered as a violation of immigration laws. Me may face legal consequences,
including fines, deportation, or other penalties imposed by the authorities.

ii. Financial Risks: As Mr. A cannot remit funds through official channels, he
purchases cash dollars from the curb market to carry back to his home country.
This exposes him to potential money laundering law violation risks and
consequences thereon.
Question 2

Mr. Saiful Islam is a veteran War Wounded Freedom Fighter (Gazetted) and a dual citizen
(Bangladeshi by birth and USA nationality through immigration), worked as a contractual employee
in a development organization in Nepal from 1st January 2019 to 30th November 2023. After
completing his stint in Nepal and a short vacation, Mr. Islam returned to Bangladesh on 1st
December 2023. He started a consultancy and supply business in Bangladesh from 1st February
2024. As part of his consultancy business, Mr. Islam often travels abroad. He seeks your advice on
how to file his tax return in compliance with the tax laws related to the assessment year 2024-25.
To assist you, Mr. Islam has provided the following information:
Income from abroad:
Amount
Description
(Taka)
Ex-employer in Nepal remitted for Employee Share Option Scheme (ESOP) granted earlier:

Gross amount accrued for the period July 2022 to June 2023: 2,500,000
Gross amount accrued for the year July 2023 to 30th November 2023: 2,000,000
The amount was remitted to his bank in USA on 15th January 2024 after withholding tax
@ 25%, (Bangladesh and Nepal have a double tax avoidance treaty)
Consultancy fees remitted net-off tax @ 10% by an Indian Company on 30th April 2024 900,000
for services provided for an Indian company in February 2024 credited to his bank account
in USA (Bangladesh and India have a double tax avoidance treaty)

Consultancy services provided in Bangladesh:

Amount
Description
(Taka)
For consultancy services provided during 1st February 2024 to 30th June 2024 fees earned
from a public limited company on which, the company deducted tax at source @ 10% u/s 2,000,000
90 of the Income Tax Act 2023 and Withholding Tax Rules 2023

Supply of chemicals to Company Y up to 30 June 2024 (Tk. 100,000 being 5% was already
deducted as tax u/s 120 of the Income Tax Act 2023 by Customs authorities at port point
on 1st March 2024 and Company Y deducted @ 3% on the total supply value taking into 4,000,000
account the tax already collected by Customs authorities at port point).
Note: This Supply business will be assessed u/s 163 of the Income Tax Act 2023.

Page 4 of 20
 Expenses made by Mr. Islam during 2023-24 income year

Description Amount (Taka)

Expenses relevant for supply business including material cost 2,800,000

Expenses relevant for non-supply business 1,000,000
Bank interest for working capital for non-supply business 300,000
On account of purchase of Bangladesh Shanchay Patra on 25th June 2024 3,000,000
Requirements:
Considering the withholding tax provisions as per the Income Tax Act 2023 and individual tax rate as
per Finance Act 2024 compute:
a) Total income for the income year 2023-2024. [Marks 7]
b) Tax liability for the income year 2023-2024 considering the withholding taxes deducted.
[Marks 3]

Answer to the question# 2(a) & (b):

Mr. Islam
Income Year from 1st July 2023 to 30th June 2024
Assessment Year: 2024-25
Computation of total income
Heads of income Note Amounts Amounts Amounts
in Taka in Taka in Taka
Income from employment: (Section 32) 2
Remittance by ex-employer in Nepal for Salary (ESOP) 2,000,000
Less: Exempted Salary (As per 6th schedule Part 1) (450,000)
Income from employment 1,550,000
Income from business: (Section 45-55)
Consultancy business:
Company in Feb'24 credited to his bank account in Consultancy 3 1,000,000
fees remitted by Indian Company on 30 April 2024 for services
provided for an Indian USA after deduction of tax @ 10% at source

Consultancy fees earned in Bangladesh for consultancy services 2,000,000

provided during 1st February2024 (tax at source @ 10% u/s 90
of the Income Tax Act 2023 and Withholding Tax Rules 2023)
Admissible expenses
Expenses relevant for non-supply business 1,000,000
Bank interest for working capital for non-supply business 300,000 (1,300,000)
Total income from consultancy business 1,700,000
3,250,000
Supply business: (income tax deducted at source is
considered as minimum tax u/s 163)
Supply of chemicals to Company Y up to 30 June 2024 4,000,000

Admissible expenses
Expenses relevant for supply business including material cost (2,800,000)
Income from supply business 1,200,000
Total income 4,450,000

Page 5 of 20
 Tax Slab Rate Amounts in Taka
On the 1st 500,000 0% 0
On the next 100,000 5% 5,000
On the next 400,000 10% 40,000
On the next 500,000 15% 75,000
On the next 500,000 20% 100,000
Balance 1,250,000 25% 312,500
Sub-total 3,250,000 532,500
On supply income (u/s 163) normal tax being higher than 1,200,000 Minimum tax 300,000
withholding tax (Note-4)
Total Tax 4,450,000 832,500
Rebate: [15% on 500,000 on Shanchay patra=Tk.75,000 or 3% of Tk. 15,00,000=46,500] (46,500)
Net tax liability after investment tax rebate 786,000
Less:
Double taxation relief (Foreign Tax credit as per sec 244(4) Withholding tax credit allowed (273,775)
on Salary income in Nepal (Note-5)
Withholding tax credit allowed on Consultancy income in India (Note-6) (100,000)
Less: Tax deducted at source in Bangladesh (Note-7) (320,000)
Net tax liability 92,225

Calculation of eligible amount for investment allowances u/s 76 of Income Tax Act, 2023:
Description Amounts in Taka
Investment in Sanchaya Patra 3,000,000
Maximum allowed in Shanchay patra 500,000
15% of Actual Investment 75,000
Or
(total income Tk. 44,50,000 - income u/s 163 Tk. 29,00,000)=15,50,000 X 3% 46,500
Or 1,000,000
Whichever is lower 46,500
Thus allowable investment tax rebate would be 46500
Note: 1
Mr. Islam arrived in Bangladesh on 31st Deccmber'23, hence for the purpose of the AY 2024-25, Mr. Islam's
status would be resident being it's 183 days.

Note: 2
Remittance by ex-employer in Nepal for ESOP (Treated as Salary income as employee share scheme):

For the income year 2023-24, Mr. Islam is a resident tax payer in Bangladesh. Salary income of Taka 2,500,000
(gross) accrued for the income year 2022-23 should be out of the scope of total income u/s 26 of the Income Tax
Act 2023. Because, this income was generated outside Bangladesh beyond this tax period, when his status was
non-resident.

Salary income of Taka 2,000.000 (gross) accrued or arises to him outside Bangladesh for the year 2023-24 (up
to November'23) should be within the scope of total income u/s 26 of the Income Tax Act 2023. Because, this
income was generated within the same tax period, when his status was resident

Note-3
Consultancy income of Taka 1,000,000 (grossed up: 900,000/(1-90%)) accrued or arises to him outside
Bangladesh for the year 2023-24 (January 2024) should be within the scope of total income u/s 26 of the Income
Tax Act 2023. Because, this income was generated within the same tax period, when his status was resident.
Whether the money was received in USA is not a question, as Resident tax payer's income is assessed on global
income basis.

Page 6 of 20
Note-4
Description Amounts in Tk.
Tax liability for Supply business (u/s 163)
Profit as per normal Tax calculation as per 25% slab, 300,000
or
Withholding tax, treated as minimum tax u/s 163 [40,00,000x3%=120,000-100,000] 20,000
Whichever is higher 300,000
Thus tax liability for supply business u/s 163 300,000

Note-5
Description Amounts in Tk.
Withholding tax credit allowed on Salary income in Nepal Gross salary (ESOP) earned
Taxable in Bangladesh Withholding tax in Nepal @ 25% of Tk. 20,00,000= 500,000
Average tax rate in Bangladesh including foreign income 17.6629%
(Total tax liability Tk. 786,000/Total Income Tk. 44,50,000)
Maximum credit allowed @ 17.6629% 273,775
Credit to be allowed (lower of maximum allowed vs actual) 273,775

Note-6
Description Amounts in Tk.
Withholding tax credit allowed on Consultancy income in India
Gross consultancy fee earned Taxable in Bangladesh Withholding tax in India @ 10% 100,000
Average tax rate in Bangladesh including foreign income Total tax liability/Total Income) 17.6629%
Maximum credit allowed @ 17.6629% 176,629
Credit to be claimed (lower of maximum allowed vs actual) 100,000

Note-7
Description Amounts in Amounts in Amounts in
Tk. Tk. Tk.
Withholding tax in Bangladesh:
On consultancy services to be provided up to 30 June 2024 200,000
(Taka 2,000,000 X 10%)
On Supply business of Tk. 4,000,000:
Tax paid at import point u/s 120 100,000
Tax deducted at supply stage u/s 89 20,000
(Taka 4,000,000 x 3%=120,000-100,000=Tk. 20,000)
120,000
Total withholding tax in Bangladesh 320,000

Question 3
Oracle Ltd ("Oracle" or "the company") is a publicly listed limited company on two stock exchanges in
Bangladesh. The company has been involved in the manufacturing and marketing of consumer goods for the
past 15 years. Oracle operates its own manufacturing unit for its manufactured goods and also imports finished
goods for its trading unit.
For the fiscal period ended on 30 June 2024, following information were disclosed in the financial statement
of the company, which are relevant for computing income tax for Oracle for the income year 2023-2024 (A/Y
2024-2025):
Particulars Amount in Crores Taka
Turnover (including Turnover of Trading unit and exports unit) 2,000
Net Income before tax 200

Page 7 of 20
 In addition to the above, following information were also made available relevant for its tax assessment:
1) During the fiscal period 2022-23, the company out of its own manufactured goods, made exports to
Sri Lanka, Maldives, and Nepal
2) Profit before tax includes Tk. 3 crores as gain on sale of fixed asset. The asset was sold at Tk. 5 crores,
whose original cost was Tk. 3 crores and written down value was 2 crores as per book, while the value
was Tk. 1 crore as per tax.
3) The company maintains a funded gratuity scheme for its permanent employees and for the year 2022-
23 it created a provision for Tk. 9 crores based on actuarial valuation, out of which it paid Tk. 8 crore
to the fund. From the fund Tk. 2 crores were paid to 4 outgoing employees.
4) Interest on foreign loan was Tk. 3 crores. The rate of interest charged by the offshore bank is 6% per
annum. The arm’s length rate in this regard is to be considered as LIBOR+3% (assume the LIBOR
rate will be 1% throughout the period).
5) Excess perquisite was Tk. 3 crores and Royalty expenses charged was 100 crores.
6) Depreciation charged as per book was Tk. 20 crores (Tk. 1 crore included on account of fixed asset
sold during the year), whereas tax depreciation was 25 crores.
7) The Gross Profit ratios between manufacturing, trading unit and Export unit were 65%:25%:10% which
was allowed by tax authority to allocate common business profit between these units.
8) For the fiscal period 2023-24, Customs authority collected Tk. 15 crores as advance income tax u/s
120 of ITA 2023 on account of goods traded under Trading unit.
9) Due to the ongoing liquidity crisis in financial sector, for the fiscal period 2023-24, Oracle distributed
only stock dividend of Tk. 14 crore, which was around 10% of the net income after tax, rest it
transferred to general reserve for distribution of dividend in the coming years, when the situation will
be normal.
10) Oracle Ltd fulfils all the conditions to qualify for the lowest corporate tax rates applicable for a publicly
traded company.
Requirements:
Determine the following for Oracle for the income year ended on 30 June 2023:
a) Total Income [Marks 8]
b) Gross Tax liability [Marks 3]

Answer to the question# 3(a):

Income from business: Tk. in crore

Profit before tax as per statement of profit and loss and other comprehensive income 200
Accounting gain on sale of fixed assets for separate consideration (note-01) (3)
197
Revenue gain on sale of fixed assets (3 crore purchase price-1 crore tax WDV) 2
199
Inadmissible expenses as per provision of tax law:
Accounting depreciation for separate consideration as per 3rd schedule 20
Gratuity provision (as provision is not allowable at tax law other than actual transfer to fund) 9
Excess perquisites as per section 55 3
Excess royalty expenses as per section 55 (100 crore-10% of 200 crore=80 crore) 80
112
311
Admissible expenses as per provision of tax law:
Tax depreciation (assuming that tax dep not allowed in the year of sale of fixed asset) (25)
Gratuity amount actually transferred to the fund (8)
(33)
Income from business 278

Page 8 of 20
Allocation of business income among manufacturing unit (other than section 163) trading unit (section 163) and
Export unit on the basis on gross profit ratio given in the question:

Unit Ratio Amounts in Tk.

(crore)
Manufacturing unit(other than section 163 and Export) 65.00% 180.70
Trading unit(section 163) 25.00% 69.5
Export unit (TDS on export not given in the question so not u/s 163) 10.00% 27.8
Income from business 278
B. Capital gain:
From sale of fixed asset (5 crore sales price-3 crore purchase price) 2

Total income (A+B) 280

Answer to the question# 3(b):

Tax liability/payable Amounts in TK.

Business income from manufacturing undertaking (other than other income falling 36.14
under minimum tax u/s 163 (2)):
[Tax @20% on Tk. 180.7 minimum tax u/s 163(5)]
Income from trading unit (u/s 163): 15
Tax payable @20% on Tk. 69.5=13.90 or AIT at import stage u/s 120=15 Higher one
Income from export unit: as per SRO Tax @ 12% on Tk. 27.80 or TDS @1% on export 3.34
proceeds whichever is higher but TDS figure is not given in the question 54.48
Total tax on business income
Capital gain: Tax @ 15% on Tk. 2.00 0.30
[Turnover tax=2,000 x 0.60%=12 + C/G 2 x 0.60%=0.012/20 x 15=0.009=total 12.009 crore
which is lower than regular tax of Tk. 54.78 crore. So regular tax will be applicable]
Tax payable before charging tax on stock dividend and transfer to retained earnings : 54.78
Charge of tax for shortfall in cash dividend (14 crore x 10%) [u/s 23 of the ITA, 2023] 1.40
Charge of tax for transfer exceeding 70% of net income after tax to retain earnings [u/s 22 14.52
of the ITA 2023] {Tk. [(200 crores-54.78 crores) = 145.22 crore x 10% =
Gross tax payable before considering AIT at import stage 70.70

Notes:

[1] Since the lender bank and the borrower company are not associated enterprises, so transfer pricing adjustment
not needed.
[2] In this math, there is no special business income as per section 56
[3] In case of calculating tax as per section 22, current year’s available data is taken into consideration as previous
year’s data is not given in the question. Moreover, current year’s data is more logical than previous year’s data
and at Income Tax Ordinance, 1984 it was mentioned current year not previous year.

Page 9 of 20
Question 4(a)

You have been working as the lead tax consultant at MMH Chartered Accountants and contacted by some
foreign investors for providing tax advice. The investors would incorporate a subsidiary company in
Bangladesh. The company would manufacture high quality tires for different types of vehicles. The potential
investors have incorporated companies in country A, country B and country C. Any of the companies set up in
these countries may be holding company of the Bangladesh subsidiary and investment can come from any of
these countries. Bangladesh has double taxation avoidance agreement with country B and country C but not
with country A. Corporate tax rates in Country B and Country C are 25% and 17% respectively whereas
Country A is tax heaven country having no tax exposure. The investors would inject both equity and loan. The
Bangladesh subsidiary would also pay a fixed amount of royalty. Distribution of dividend to shareholders is
exempt from tax in each of the countries. Details of projected income and withholding tax rates have been
provided below.
Projected Income
Particulars Amounts in USD
Earnings before interest, royalty and taxes 600,000
Royalty (100,000)
Interest (150,000)
Profit before tax 350,000

Percentage of withholding taxes as per DTAA

Particulars
Country A Country B Country C
Dividend No DTAA 10% 15%
Royalty No DTAA 10% 15%
Interest No DTAA 10% 15%

Requirement:
Considering the above mentioned information, calculate the effective tax rate on earnings before
interest, royalty and taxes for the ultimate shareholders with regard to investment from country A,
country B and country C and suggest from which country the investment may come. For the sake of
calculation assume that 100% of after tax profit will be available for distribution as dividend. Credit
of tax withheld in Bangladesh will be available (to the extent of tax liability) in the country of the
holding company. There is no need to convert USD into Taka. [Marks 8]
Question 4(b)

Nixon GMBH, Germany is a leading manufacturer of garments and textile machineries and equipment
in the world. It incorporated a subsidiary company in Bangladesh and completed constructed of
factory back in May 2023 for manufacturing high quality sewing, cutting, dying machineries and
spare parts and selling the same in the readymade garments and textile industry of Bangladesh. The
factory of the company is located at Bangabandhu Sheikh Mujib Shilpa Nagar, commonly known as
Mirsarai Economic Zone and started commercial production from July 2023. The company needs to
import materials from its parent in Germany. In addition, it takes technical assistance and remits
technical knowhow fee quarterly to its parent company in Germany. Since the income of the company
is 100% exempt from income tax for the first three years vide SRO No. 104-law/Income tax/2020
dated 25 March 2020, the management of the company believes that it does not have any obligation
for transfer pricing study and documentation. The CFO of the company has approached you for
validation of the same.
Requirement:
Briefly evaluate the position of the management of Nixon GMBH mentioning the tax exposure, if any.
[Marks 3]

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Answer to the question # 4(a):

Particulars Country A Country B Country C

Amounts in USD
Earnings before interest, royalty and taxes 600,000 600,000 600,000
Royalty (100,000) (100,000) (100,000)
Interest (150,000) (150,000) (150,000)
Profit before tax 350,000 350,000 350,000
Corporate tax in BD @27.5% (96,250) (96,250) (96,250)
Profit after tax 253,750 253,750 253,750
WHT oh dividend (N-1) (50,750) (25,375) (38,063)
WHT on royalty (N-1) (20,000) (10,000) (15,000)
WHT on interest (N-1) (30,000) (15,000) (22,500)
Total Bangladesh tax (197,000) (146,625) (171,813)
Holding co. tax exposure (N-2) 0 0 0
Global tax exposure (197,000) (146,625) (171,813)
Earnings before interest, royalty and taxes 600,000 600,000 600,000
Effective tax rate 33% 24% 29%
Note 1
In the absence of any double taxation avoidance agreement with Country A, withholding tax rate of 20% as per
Income Tax Act, 2023 has been considered;

Note 2

Calculation of holding co. tax exposure

Particulars Country A Country B Country C

Royalty 100,000 100,000 100,000
Interest 150,000 150,000 150,000
Dividend 253,750 253,750 253,750
Total income 503,750 503,750 503,750
Corporate tax rate 0% 25% 17%
Corporate tax 0 (125,938) (86,674)
Credit of Bangladesh tax 0 125,938 86,674
Net tax exposure 0 0 0

Credit of Bangladesh tax has been allowed to the extent of withholding tax paid in Bangladesh.

Answer to the question # 4(b):

According to Section 236(4) of the ITA, 2023, transfer pricing adjustment attracts income tax liability at
regular rate irrespective of any income tax exemption. Hence, Nixon GMBH would be required to pay
tax on transfer pricing adjustment, if any, disregarding the income tax exemption allowed by SRO No.
104-law/Income tax/2020 dated 25 March 2020. The company is advised to maintain proper transfer
pricing documents and transfer pricing study so that transfer pricing adjustment, if possible, can be
avoided. In the case of failure to maintain TP documentation and failure to file statement of international
transactions, the Deputy Commissioner of Taxes may impose following penalties.

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 SI. Non-compliances Penalties
A Failure to comply with the notice or Not exceeding 1% of the value of each
requisition issued by the DCT u/s 235(5) of international transaction u/s 276 of the ITA, 2023.
the ITA, 2023

B Failure to keep, maintain or furnish any Not exceeding 1% of the value of international
information or documents or records as per transaction u/s 277 of the ITA, 2023
section 237 of the ITA, 2023

C Failure to furnish the statement of Not exceeding 2% of the value of international

international transactions as per section 238 of transaction u/s 278 of the ITA, 2023
the ITA, 2023

D Failure to furnish a report from CA or CMA A sum not exceeding Tk.3,00,000 u/s 279 of the
as per section 239 of the ITA, 2023 ITA, 2023

Question 5
Wolverine Bangladesh PLC ("Wolverine"), a manufacturing concern operating in the FMCG sector since 2017,
recently in July 2024 underwent a VAT return review by Divisional VAT authority for the fiscal period 2023-
2024. Wolverine received a show cause notice from the divisional team, requiring a response within seven (7)
working days. The VAT issues and relevant facts are as follows:
a) Issue: Wolverine claimed input tax credit of Tk. 65 million. However, the Divisional VAT authority
alleges that Tk. 25 million of this amount should be canceled. This is because the Divisional VAT
authority discovered that the respective VAT challans lacked the proper address of Wolverine,
although the registration number was properly mentioned. In support of this, the Divisional VAT
authority shared a statement of all purchase challans, where the address is different from the address
mentioned in the existing BIN.
Facts: Wolverine changed its registered premises address effective from 1st January 2024, and completed
all necessary formalities as per the law. The challans identified by the Divisional VAT authority contain
previous registered addresses, as they were procured prior to the change of registered address.
b) Issue: Wolverine claimed input tax credit of Tk. 34 million for VAT paid on packaging materials used
in a special promotional campaign. The Divisional VAT authority contends that this amount should be
canceled as the packaging materials used for the promotional campaign should be considered as
promotional materials and therefore fall outside the definition of input under the law.
Facts: Wolverine argues that the packaging materials used for this special promotional campaign were
included in Musak 4.3, and a revised input-output coefficient was submitted. Therefore, Wolverine believes
that these packaging materials should be eligible for input tax credit.
c) Issue: The Divisional VAT authority summarized that during this period, the cost of the main raw
materials used by Wolverine had increased on average by 15%, which is more than the allowable limit
of 7.5%. As per them, unless a revised Input Output Coefficient is submitted, Wolverine cannot claim
input tax credit for the additional cost. The Divisional VAT authority computed that as such Tk. 13
million was claimed in excess of their legitimate entitlement and therefore recommended its
cancellation.
Facts: Wolverine did not submit any revised Input Output Coefficient as the total cost of the input did not
exceed 7.5%, even though the raw material price had increased on average by 15%.
d) Issue: Tk. 5 million paid as VAT at the time of remittance of technical knowhow fee was shown in the
VAT return in January 2024 as an increasing adjustment instead of Output VAT, and input tax credit
was also claimed based on the deposited challan. The Divisional VAT authority argues that this is an
import of service and there is a procedural lapse under section 46(1) (KHA) of the VAT & SD Act
2012. Therefore, the input tax credit should be canceled.
Facts: Wolverine believes that there is no difference in whether the amount is shown under increasing
adjustment or under Output VAT, as the financial result will be the same. Therefore, Wolverine sees no
issue in claiming the input tax credit of Tk. 5 million.
Page 12 of 20
 Requirement:
As consultant, assess the matter and provide arguments and remedies for Wolverine in accordance with the
VAT & SD Act 2012, considering the provisions of the Finance Act 2023(not the Finance Act, 2024), if
applicable. [Marks 10]

Answer to the question# 5:

Date:
The finance & Control
Director Wolverine PLC

Subject: Assessment of the legal position and possible arguments/remedies thereof on the alleged non-
compliances under VAT & SD Act 2012 based on VAT returns reviewed by Divisional VAT
Authority for the period 2023-24.

Dear Sir,

This refers to your letter ref. no ......dated ....... on the subject matter. We've gone through the matter in
details and scrutinized the same as per the provisions of VAT & SD Act, 2012, relevant Rules, SROs and
Orders thereof if any. Based on this, we summarize below our assessment on the alleged non-compliances
as pointed out by the Divisional VAT Team including possible arguments/remedies thereof:

Issue (i):
Assessments and arguments/remedies:
Wolverine changed its registered premises address, effective from January 1st, 2024, and completed all
necessary formalities as per the law. The challans identified by the VAT authority still contain the old
addresses, as they were procured prior to the change of registered address. This can be further
substantiated by the Purchase Account Book (Musak 6.1) and Musak 2.5, which provide communication
on the change of address submitted to the authority. Therefore, we do not see any non-compliance, and
as a result, the entire amount claimed as input tax credit should be allowed.

Issue (ii):
Assessments and arguments/remedies:
Wolverine used the packaging materials for the special promotional campaign, which were included in
Musak 4.3, and a revised input-output coefficient was submitted. Although the packaging material was
used for special packaging purposes during the special promotional campaign, it did not lose its character
as an input, as defined under section 2(18KA) of the VAT & SD Act 2012. In fact, upon careful analysis
of the definition of input under section 2(18KA) of the VAT & SD Act 2012, it is evident that the
definition includes packaging material without further qualification regarding its use for normal purposes
or promotional campaigns. Therefore, we are of the opinion that these packaging materials used for the
special promotional campaign should be eligible for input tax credit.

Issue (iii):
Assessments and arguments/remedies:
As per section 46(1)(DHA) of the VAT & SD Act 2012, if the total input cost increases by more than
7.5%, no input credit shall be allowed for the increased amount unless a revised input-output coefficient
(Musak 4.3) is submitted. In the case of Wolverine, no revised Input Output Coefficient was submitted
as the total cost of the input did not exceed 7.5%. despite the average increase in raw material prices by
15%. Therefore, we are of the opinion that claiming input tax credit for the increased raw material price
is not an issue as long as the total input cost increase remains below 7.5%. Hence, no input tax credit
should be cancelled.

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 Issue (iv):
Assessments and arguments/remedies:
For the import of services, where the service provider is a non-resident staying abroad and cannot obtain
registration under the VAT law applicable in Bangladesh, the reverse charge mechanism has emerged as
a solution to address this circumstance. However, there are certain mandatory compliances that must be
fulfilled in order to claim input tax credit for VAT payment on imported services.
According to section 46(1)(KA) of the VAT & SD Act 2012, it is specified that in order to claim input
tax credit for imported services, the amount must be shown separately in the return as output tax as well.
In this case, Wolverine failed to comply with this requirement, although there is no impact on the amount
of VAT payable. Here it is to be noted that in terms of rule 49(3)(Ka) of the VAT & SD Rules, 2016,
amendment of return can be submitted within 4 (four) years of submission of the relevant return.
However, in terms of rule 49(3)(Kha) of the VAT & SD Rules, 2016, amendment of return cannot be
submitted if the VAT authority starts any audit or enquiry or in any other manner the error is discovered.
Accordingly, considering the provisions of law, as VAT authority has already started enquiring the VAT
Returns, amendment shall not be allowed. Therefore, Wolverine can not mitigate the potential financial
risks of having the input tax credit of Tk. 5 million cancelled.
Finally, we would like to inform you that on the matters pointed out by the Divisional VAT team, you're
in a strong defendable position, except issue under (iv).
In view the above, we would advise you to provide the response to Divisional VAT team within the
timeline they specified and if you need any further assistance in this regard, please do not hesitate to
contact us.
Thank you.
Yours-sincerely,
Consultant
Question 6(a)
Illuminating Bangladesh Limited(IBL) manufactures and distributes different types of lamps in Bangladesh. A
summary of assets and liabilities of the company as on 30 June 2023 is provided as below.
Assets Figures in BDT Liabilities and equity Figures in BDT
Property plant and equipment 35,000,000 Share capital 50,000,000
Inventories 120,000,000 Retained earnings 75,700,000
Trade receivables 40,000,000 Trade payable 8,600,000
Advance, deposits and prepayments 15,000,000 Provision for tax 8,700,000
Advance income tax 3,500,000 Deferred tax liability 5,500,000
Cash and cash equivalents 5,000,000 Loan from bank 70,000,000
Total 218,500,000 218,500,000
The company has signed an agreement to transfer the whole business (i.e. all the assets, production facilities
and human resources) to a competitor lamp manufacturer namely, Dhaka Lamp Company Limited (DLCL).
It has offered a transfer price of BDT 150,000,000 and will also take over all the liabilities of the company.
DLCL would utilize all the assets of IBL and continue to run the production facility under its own brand
name. All the goods will also be marketed under the brand of DLCL. VAT authority has a disputed demand
against IBL for BDT 4,000,000 which is pending for adjudication before the VAT Appellate Tribunal. IBL
is yet to recognize any provision for the same.
Requirement:
Considering the above, explain the VAT implication of transfer of all the assets and liabilities from IBL to
DLCL. Briefly explain if there is any condition in the VAT laws to effect such transfer. [Marks 5]
Question 6(b)
The factory manager of Angel informed its management that its Boiler used in the factory requires certain
repairs, which is not possible in Bangladesh and therefore it needs to be sent to the supplier in Italy.
Accordingly, the Boiler is to be re-imported to Bangladesh after being exported for repairs, however there
will be no change in its forms, features, characteristics, and the qualitative standards.
Requirement:
Quoting the reference of law, describe how the value for assessment of VAT on such Boiler shall be
determined when it will be re-imported back to Bangladesh. [Marks 4]

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Answer to the question# 6(a):

According to Section 36 of the VAT and SD Act, 2012, transfer of a going concern is not considered as
a supply under the VAT and SD Act, 2012 and does not attract VAT. In this case, a going concern or a
running business establishment has to be acquired with an intent to keep the economic activity running
after the sale is effected and the purchaser has to fully acquire all that is necessary for an uninterrupted
management of the economic activity transferred. Transfer of the going concern/business establishment
would require payment of all due VAT liabilities before effecting the transfer. Alternatively, it requires
submission of an application to Commissioner of VAT for permitting the transfer without payment of the
dues. In this case, the purchaser has to submit continuous and unconditional bank guarantee of a
scheduled bank for payment of arrear VAT liabilities before a minimum of 15 (fifteen) days of the sale
of such business.

Considering the abovementioned provisions of the VAT law, transfer of business from IBL to DLCL would
not attract any VAT but in this case, IBL has to pay the pending demand. Alternatively, if DLCL wants to
continue the pending litigation, it has to file an application before the Commissioner of VAT for permitting
the transfer without payment of the demand. In this case it has to submit continuous and unconditional bank
guarantee of a scheduled bank for payment of arrear VAT liabilities, in case the ultimate outcome of the
pending case goes against DLCL. According to Rule 22 of the VAT & SD Rules, 2016, if the Commissioner
finds the bank guarantee appropriate after verification, s/he may grant permission for transfer of the going
concern within 7 days of receiving the application. In the case of transfer of a going concern, the seller i.e.
IBL has to provide the prescribed documents and information to the purchaser i.e. DLCL.

a. Latest information of ownership;

b. Complete set of financial statements;
c. Statement of all the assets;
d. Statement of all the liabilities;
e. Information of pending lawsuits;
f. Statement of registration, license with/from different departments of the Government;
g. Other relevant information.

Answer to the question# 6(b):

As per section 29 of the VAT & SD Act 2012, when the Boiler is re-imported back to Bangladesh, the
value for assessment of VAT on such Boiler shall be determined based on the combination of the value
to the extent that it is enhanced as a result of the repair and the expenses incurred on their insurance,
freight and landing charges provided that the forms, features, characteristics and the qualitative standards
of the goods remain unchanged after such repairs.

Question 7

ABC Trading Ltd. ("ABC") is a diversified trading company based in Dhaka, Bangladesh, engaged in
importing and distributing various goods including electronics, textiles, and industrial machinery. ABC is
registered under the VAT & SD Act, 2012, and complies with VAT regulations applicable in Bangladesh. The
company sources products from suppliers across Asia and Europe and distributes them to local wholesalers,
retailers, and also exports to neighboring countries. During the VAT period ending June 30, 2023, ABC had
the following transactions and records:
Sales:
1. Sales of electronics to local retailers: Taka 40,000,000 (including VAT at 15%).
2. Sales of textiles to local wholesalers: Taka 30,000,000 (excluding VAT at 15%).
3. Sales of industrial machinery to local factories: Taka 20,000,000 (including VAT at 15%).
4. Export sales of electronics to India: Taka 15,000,000 (zero-rated).
5. Export sales of textiles to Nepal: Taka 10,000,000 (zero-rated).

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 Purchases:
1. Purchase of electronics from suppliers in China: Taka 25,000,000 (excluding VAT at 15%).
2. Purchase of textiles from local manufacturers: Taka 20,000,000 (including VAT at 15%).
3. Purchase of industrial machinery from suppliers in Germany: EUR 1,000,000 (including VAT,
converted to BDT).
Expenses:
1. Freight and logistics expenses for imported goods: Taka 5,000,000 (including VAT at 15%).
2. Advertising and promotional expenses: Taka 3,000,000 (excluding VAT at 15%).
3. Staff salaries and benefits: Taka 8,000,000 (not subject to VAT).
ABC applied for a VAT refund on export sales for the previous period amounting to Taka 2,500,000, which
was approved and received during the current month. During the VAT audit by the internal auditor for the
previous months, it was identified that ABC had incorrectly calculated VAT on certain imports, resulting in an
underpayment of VAT.
Requirements:
Considering the above circumstances and the VAT regulations in Bangladesh, answer the following questions:
a) Calculate the output VAT liability for ABCTL for the period ending June 30, 2023. [Marks 4]
b) Calculate the input VAT that ABCTL can reclaim for the period ending June 30, 2023. [Marks 4]
c) Discuss the corrective measures ABCTL should take regarding the incorrect VAT calculation on imports
identified during the previous periods’ audit. How should ABCTL rectify this error? [Marks 4]
d) Explain the VAT implications and compliance requirements for ABCTL’s export sales to India and Nepal
under the Bangladesh VAT & SD Act, 2012. [Marks 4]
Answer to the question# 7(a):
Domestic sales:
Sales of electronics to local Retailers:
Sales Value (including VAT): Taka 40,000,000
VAT Liability (15%); Taka 40,000,000/ 1.15 x 15% - Taka 5,217,391

Sales of textiles to wholesalers:

Sales Value (excluding VAT): Taka 30,000,000
VAT Liability (15%): 4,500,000

Sales of industrial machinery to factories:

Sales Value (including VAT): Taka 20,000,000
VAT Liability (15%): Taka 20,000,000 / 1.15 x 15% = Taka 2,608,696

For export, VAT liability shall be zero.

Total output VAT liability:

Total Output VAT Liability = Taka 5,217,391 + Taka 4,500,000 + Taka 2,608,696 = Taka 12,326,087

Answer to the question 7(b):

VAT on purchases:
Purchase of Electronics from Suppliers in China: Taka 25,000,000 x 15% = Taka 3,750,000
Purchase of textile from local manufacturer: Taka 20,000,000 x 15/115 = 2,608,696
Purchase of industrial machinery from Germany: Taka 1,000,000 x 117 x 15/115 = 15,260,870
Total = Taka 21,619,566

VAT on expenses:
VAT on Freight and Logistics Expenses: Taka 5,000,000 x 15/115 = Taka 652,174
Advertising and Promotional Expenses: Taka 3,000,000 x15% = Taka 450,000
Total = Taka 1,102,174

Total input VAT: Taka 21,619,566+1,102,174 = Taka 22,721,740

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Answer to the question# 7(c):

ABC Trading Ltd. should take the following steps to rectify the incorrect VAT calculation on imports:

Review and correct: Review the import documentation and VAT calculations to identify the specific
errors made.

Calculate correct VAT: Recalculate the VAT payable on the imports based on the correct VAT rate
and value of imports.

Amendment of VAT returns: Amend the VAT returns for the periods affected by the incorrect
calculations to reflect the accurate VAT liabilities.

Payment of additional VAT: Pay any additional VAT liabilities identified as a result of the correction.

Documentation: Maintain clear documentation of the corrections made and ensure compliance with
VAT regulations moving forward.

Answer to the question# 7(d):

Export sales to India and Nepal

Zero-rated supplies:
Export sales of goods to India and Nepal are considered zero-rated supplies under the Bangladesh VAT
& SD Act, 2012.

Implications:
ABC Trading Ltd. does not charge VAT on these export sales.

Compliance requirements:
■ Maintain proper documentation to substantiate export transactions, including invoices, shipping
documents, and customs declarations.
■ Maintain proper VAT records (including Tax Invoice) under the VAT & SD Act and Rules.
■ Claim input tax credit attributable to these zero-rated exports on usual manner as per section 46.
■ Ensure decreasing adjustment of AT.
■ Ensure decreasing adjustment of SD (where applicable) attributable to these zero-rated exports
subject to procedures described in VAT & SD Act and Rules.
■ Ensure compliance with export regulations and VAT reporting requirements specified under the VAT
& SD Act, 2012.
■ Provide evidence of export to substantiate zero-rating during VAT audits or assessments.

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 Question 8
Pharma World Ltd., a multinational pharmaceutical company, is planning to expand its operations into
Bangladesh. The company intends to import raw materials, semi-finished products, and specialized machinery
for its new manufacturing plant in Dhaka. Pharma World Ltd. has partnered with a local pharmaceuticals
company, Bionic Medicine Bangladesh Ltd., to facilitate the import process and ensure compliance with
Bangladesh customs regulations.
 Pharma World Ltd. has received an initial shipment consisting of the following items:
 Active Pharmaceutical Ingredients (API): 500 kg of a patented API, invoiced at $100 per kg.
 Semi-finished Products: 2000 units of semi-finished tablets, invoiced at $5 per unit.
 Specialized Machinery: A state-of-the-art tablet pressing machine, invoiced at $50,000.
During the customs clearance process, Pharma World Ltd. and Bionic Medicine Bangladesh Ltd. encountered
several challenges, including issues related to customs valuation, applicable duties and taxes, and the
classification of goods under the Harmonized System (HS) code. Additionally, they need to consider potential
delays and penalties due to non-compliance with customs regulations.
Requirements:
a) Calculate the customs value of the total shipment if Bangladesh Customs decides to use the transaction
value method. Include relevant duties and taxes such as customs duty, VAT, and any other applicable
charges. Assume the following rates:
i) Customs Duty on API: 10%
ii) Customs Duty on Semi-finished Products: 5%
iii) Customs Duty on Machinery: 15%
iv) VAT: 15% on all items
v) AT:5% for all items
vi) AIT:5% for all items
vii) Landing Charges: 1%.
b) Explain the methods of customs valuation that may be used to determine the value if transaction value
method is not appropriate. [Marks 3]
c) Describe the importance of correctly classifying goods under the Harmonized System (HS) Code.[Marks
2]
d) Outline the key compliance requirements Pharma World Ltd. must meet to avoid delays and penalties
during the customs clearance process in Bangladesh. [Marks 2]
e) Suggest strategies Pharma World Ltd. and Bionic Medicine Bangladesh Ltd. can implement to mitigate
risks associated with customs clearance, including potential non-compliance and logistical challenges.
[Marks 3]

Answer to the question# 8(a):

Invoice values:

■ API: 500 kg x$100/kg = $50,000

■ Semi-finished Products: 2000 units x $5/unit = $10,000
■ Machinery: $50,000
■ Total Invoice Value: $50,000 + $10,000 + $50,000 = $1 10,000

Note: Assumed that freight charges are included in invoice value.

Insurance:

■ API: $50,000 x 1% = $500

■ Semi-finished Products: $10,000 x 1% = $100
■ Machinery: $50,000 x 1% = $500

Total Insurance charge = $500+$100+$500 = $1,100

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 Landing charge:

■ API: ($50,000 + $500)x1% = $505

■ Semi-finished Products: ($10,000 + $100) x1% = $101
■ Machinery: ($50,000 + $500) x 1% = $505

Total Landing charge = $505+$101+$505 = $1,111

Assessable Value:

■ API: ($50,000 + $500 + $505) = $51,005

■ Semi-finished Products: ($10,000 + $100 + $101) = $10,201
■ Machinery: ($50,000 + $500 + $505 = $51,005

Total assessable value = $51,005 + $10,201 + $51,005 = $112,211

Customs duties:

■ API: 10% of $51,005 = $5,100.5

■ Semi-finished Products: 5% of $10,201 = $510.05
■ Machinery: 15% of $51,005 = $7,650.75

Total Customs Duty: $13,261.3

Total assessable value and Customs duties:

$112,211 + $13,261.3 = $125,472.3

VAT (15% on assessable value and customs duty): 15% of $125,472.3 = $18,820.85
Advance Tax (AT) (5% on assessable value and customs duty): 5% of $125,472.3 = $6,273.62
Advance Income Tax (AIT) (5% on assessable value): 5% of $112,211 = $5,610.55

Total customs value:

Total assessable value and customs duties + VAT + AT + AIT = ($125,472.3 + $18,820.85 + $6,273.62
+ $5,610.55) = $156,177.32

Answer to the question# 8(b):

In terms of rule 3(Kha) of Customs Valuation (determination of value for import of goods) Rules, 2000,
if the transaction value method is not appropriate, the following methods can be used in chronological
manner:
1) Transaction value of identical Goods: Uses the transaction value of identical goods sold for export
to the same country and at or about the same time as the goods being valued.
2) Transaction value of similar Goods: Uses the transaction value of similar goods sold for export to
the same country and at or about the same time as the goods being valued.
3) Deductive value method: Based on the resale price in the importing country, less any costs incurred
after importation such as transport and insurance.
4) Computed value method: Based on the cost of production of the goods, plus an amount for profit
and general expenses typically reflected in sales of goods of the same class or kind.
5) Fallback/other method: Uses reasonable means consistent with the principles and general
provisions of the customs valuation agreement, adapted to fit specific circumstances.
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Answer to the question# 8(c):

Correct classification of goods under the Harmonized System (HS) code is important because:
1) Determination of duties and taxes: The HS code determines the applicable customs duties, VAT,
and other taxes, which directly affect the total cost of imported goods.
2) Regulatory compliance: Proper classification ensures compliance with import regulations, avoiding
penalties, delays, and possible seizure of goods. It also facilitates accurate and efficient customs
clearance procedures.

Answer to the question# 8(d):

To avoid delays and penalties, Pharma World Ltd. must meet the following key compliance requirements:
1) Accurate documentation: Provide correct and complete documentation, including invoices, packing
lists, bills of lading, certificates of origin, and import permits.
2) Correct HS classification: Accurately classify all goods under the appropriate HS codes to ensure
the correct calculation of duties and taxes.
3) Timely payment of duties and taxes: Ensure prompt payment of all applicable customs duties,
VAT, AT, AIT, and any other charges.
4) Adherence to regulatory standards: Comply with Bangladesh's regulatory standards and requirements
for pharmaceuticals and machinery, including obtaining necessary approvals and certifications.

Answer to the question# 8(e):

To mitigate risks associated with customs clearance, the following strategies can be implemented:
1) Engage experienced Clearing & Forwarding Agent (C&F Agent): Partner with experienced
Clearing & Forwarding Agent (C&F Agent) who are familiar with Bangladesh's customs regulations
to ensure accurate and efficient processing.
2) Pre-clearance procedures: Use pre-clearance services to review and verify all documentation before
shipment arrival, minimizing errors and delays.
3) Compliance training: Conduct regular training for staff on customs regulations and procedures to
ensure they are aware of the latest requirements and best practices.
4) Robust tracking and monitoring: Implement a tracking system to monitor the shipment's progress
and address any issues promptly.
5) Contingency planning: Develop contingency plans to handle unexpected delays or compliance issues,
including alternative logistics arrangements and additional resources for urgent problem-solving.

--- The End---

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