Transfer Pricing Cell swings into action

The tax authority has moved to compile a statement of international transaction (SIT) for the first time by collecting details of all of the cross-border financial transactions conducted by the taxpayers across the country.

The Income Tax wing under the National Board of Revenue (NBR) has taken the initiative to run its Transfer Pricing Cell (TPC) in full swing.

Officials said the TPC would scrutinise income tax returns containing cross-border financial transactions for the first time in 2015-16 tax year.

The TP cell recently sent letters to all of the tax offices across the country requesting them to furnish all details of their respective taxpayers who have conducted international transactions and submit SIT.

According to the Income Tax Ordinance, 1984, section 107 EE, and Income Tax Rules, 1984, rules 75A, taxpayers having international transactions have to submit SIT to their respective tax offices.

In the letter, the TPC requested the tax offices to furnish SIT every month on two specific dates, the first day and the 15th day of the month.

It has sent a prescribed format for furnishing SIT data including name of taxpayers, TIN, tax zone and circle, date of income tax return submission and date of SIT submission.

A senior tax official said tax offices need to know how many taxpayers conduct international transactions and its volume.

“The TP cell will maintain the data and work on its basis,” he added.

The cell will profile and conduct audit on the basis of the data that would be sent by the field-level tax offices, he said.

Mostly corporate taxpayers will be under the net of the TP cell as a negligible number of individual taxpayers usually are involved in international transactions, he added.

Earlier the NBR formed a watchdog team to check transfer mispricing by the corporate taxpayers.

Officials said multinational companies’ cross-border transactions would be monitored by the team, comprising some seven tax officials.

They said there are some 175 MNCs operating in Bangladesh which would come under TPC scanner.

The TP rule was issued by the NBR under a provision incorporated into the Finance Act 2012.

According to the rules, accounts and records of the MNCs will be maintained separately as prescribed. Particulars of international transactions, tangible property of revenue and capital nature of transaction should be furnished in the form.

It has been alleged that high rate of corporate tax in Bangladesh is a major reason for transfer mispricing.

Many companies are discouraged from showing high profit as they have to pay corporate tax at a higher rate.

Banks and non-baking financial institutions are paying 40 per cent corporate tax while cigarette companies pay 45 per cent. Experts said the actual tax incidence is much higher on taxpayers as taxmen disallow claimed expenditures of the taxpayers.