THE SEVENTH SCHEDULE
COMPUTATION OF RELIEF FROM INCOME TAX BY WAY OF
CREDIT IN RESPECT OF FOREIGN TAX
[See section 144 (4)]
(1) In this Schedule,-
(a) "Bangladesh tax" means income tax charged in accordance with the provisions of the Income Tax Ordinance,1984 ;
(b) "foreign tax" means, in relation to any country an agreement with the Government of which has effect by virtue of section 144 of this Ordinance, any tax chargeable under the laws of that country for which credit may be allowed under the agreement ;
(c) "foreign income tax" means any foreign tax which corresponds to income tax.
(2) Where, an agreement having effect by virtue of the said section 144, provides for any tax chargeable under the laws of the country concerned being treated as income tax, that tax shall be treated as foreign tax or foreign tax other than foreign income tax, as the case may be.
(3) Any reference in this Schedule to foreign tax or foreign income tax shall be construed, in relation to credit to be allowed under any agreement, as a reference only to tax chargeable under the laws of the country with the Government of which the agreement was made.
2. Credit against Bangladesh tax.-
Subject to the provisions of this Schedule, where, under an agreement concluded under section 144, credit is to be allowed against Bangladesh tax chargeable in respect of any income, the amount of the Bangladesh taxes so chargeable shall, subject to the provisions of the said agreement, be reduced by the amount of the credit.
3. Credit admissible to residents.-
Credit shall not be allowed against income tax for any year of assessment unless the persons in respect of whose income the tax is chargeable is resident for the period on the basis of which income is assessed.
4. Computation of credit.-
The amount of the credit to be allowed for foreign tax against Bangladesh tax in respect of any income shall not exceed the amount which would be arrived at by applying the average rate of such tax to the doubly taxed income.
5. Effect on computation of income on allowance of credit.-
(1) Where the income includes a dividend and, under the agreement, foreign tax, whether chargeable directly or by deduction in respect of the dividend or not, is to be taken into account in considering whether any, and if so, how much, credit is to be allowed against the Bangladesh tax in respect of the dividend, the amount of the income shall be treated as increased by the amount of the foreign tax appropriate to the dividend which falls to be taken into account in computing the amount of the credit.
(2) Where the amount of the income is to be treated as increased under sub paragraph (1), the foreign tax not chargeable directly or by deduction which is to be taken into account, shall be so much as borne by the body corporate paying the dividend upon the profits for the period for which the dividend is paid, or, if the dividend is not paid for a specified period, the profits of the last period for which accounts of the body corporate were made up which ended before the dividend became payable.
Explanation.- In this sub-paragraph "paid" means paid, credited or distributed or deemed to have been paid, credited or distributed.
(3) Notwithstanding anything contained in the preceding provisions of this paragraph and in section 30, where part of the foreign tax in respect of the income cannot be allowed as a credit against the Bangladesh tax, t he amount of the income shall be treated for the purposes of income tax as reduced by that part of that foreign tax.
(4) Where the income tax payable depends on the amount received in Bangladesh the said amount shall be treated as increased by the amount of the credit allowable against income tax.
(5) In computing the total income of a person for the purpose of determining the rate mentioned in paragraph 4, sub-paragraph (1) and (3) of this paragraph shall not apply, and for the reference in sub-paragraph (4) of this paragraph, to the amount of the credit allowance against income tax, there shall be substituted a reference to the amount of the foreign tax in respect of the income.
6. Limitation for claim.-
(1) Subject to the provisions of sub-paragraph (2), any claim for an allowance by way of credit for foreign tax in respect of any income shall be made to the Deputy Commissioner of Taxes of the district in which the claimant is chargeable to income tax not later than two years from the end of the year of assessment for which that income falls to be charged to Bangladesh tax or would fall so to be charged if any such tax were chargeable in respect thereof.
(2) Where, the amount of any credit given under the agreement is rendered excessive or insufficient by reason of any adjustment of the amount of any tax payable either in Bangladesh or under the laws of any other country, nothing in the Ordinance limiting the time for the making of ass essment or claims for refund shall apply to any assessment or claim to which the adjustment gives rise, being an assessment or claim made not later than two years from the time when all such assessment, adjustments and other determinations have been made whether in Bangladesh or elsewhere, as are material in determining whether any, and if so, how much, credit falls to be given.
A person claiming an allowance by way of credit for foreign tax may appeal to the Appellate Joint Commissioner against any order of the Deputy Commissioner of Taxes disallowing the claim either wholly or in part, within thirty days of the date on which the order of the Deputy Commissioner of Taxes was communicated to the claimant, and the provisions of Chapter XIX of the Ordinance shall, with the necessary modifications, apply accordingly.
8. Provisions as to the deduction of tax at source.-
(1) The provisions of this paragraph shall have effect where an agreement having effect under section 144 of the Ordinance provides for the exemption from Bangladesh tax of any class of income arising to persons resident in the country with the Government of which the agreement is made, being income from which deduction of tax is required to be made under the Ordinance.
(2) Any person who pays income of any such class (referred to in this paragraph as "the Bangladesh payer") to a person in the said country who is beneficially entitled to the income (such person being referred to in this paragraph as "the non-resident") may be required, by notice given by or under the direction of the Board, to pay any such income to the non-resident without deduction of tax, and where such notice is given, any income from any source specified in the notice, being income for a year for which the agreement has effect, which the Bangladesh payer, the date on which the notice was communicated, pays to the non-resident whose name is specified therein,
shall, subject to the following provisions of this paragraph, be paid without deduction of tax.
(3) Any notice given under sub-paragraph (2) may be expressed to become ineffective if certain specified events happen or, whether so expressed or not, may be cancelled by a notice of cancellation given by or under the direction of the Board, and if, to the knowledge of the Bangladesh payer, any of those events happens or if such notice of cancellation is given, any payment made to the non-resident by the Bangladesh payer after the happening of that event becomes known to the Bangladesh payer, or after the date on which that notice was communicated to the Bangladesh payer, as the case may be, shall be subject to deduction of tax in accordance with the Ordinance.
(4) If it is discovered, after a notice has been given under sub-paragraph (2) that the non-resident is not entitled to exemption from tax in respect of income from any source specified in the notice, any tax which, but for the notice, would have been deductible from any payment made to the nonresident by the Bangladesh payer but by virtue of the notice has not been so deducted shall, if a deduction to that effect is given by or under the direction of the Board, be deducted by the Bangladesh payer out of so much of the first payment made to the non-resident after the date on which the direction was communicated to the Bangladesh payer as remains after the deduction of any
tax deductible therefrom under the Ordinance, and any balance which cannot be deducted out of the first such payment shall be deducted, subject to the same limitation, out of the next such payment, and so on, until the whole of the tax (the amount of which shall be specified in the direction) has been deducted.
(5) Any tax which the Bangladesh payer is required to deduct under subparagraph (4) shall be paid to the Government and the provisions of Chapter VII of the Ordinance relating to deduction of tax at source shall, with necessary modifications, apply accordingly.
(6) A notice may be given under sub-paragraph (2) where income is paid to a person authorized to receive such income on behalf of a non-resident, and in such a case, the reference in this paragraph to payment to the non-resident shall be treated as including references to payment to that person.