Withholding tax returns come under crosscheck

Revenue appraisers began crosschecking the withholding tax returns from some companies to determine propriety of the pay disbursed to their foreign and local employees and consultants.

In recent times, the submitted accounts on the pay-as-you-earn tax of some multinational companies (MNCs) and domestic firms have been under surveillance of the taxmen.

“We will start scrutinising the withholding tax returns for the first time to check proper deduction of payroll tax from employees,” said a senior tax official.

The crosscheck move has been taken in line with a law incorporated into the current fiscal year’s budget, he added.

The income-tax wing of the National Board of Revenue (NBR) has made a provision of mandatory submission of withholding-tax returns for the first time and it is incorporated into the budget for Fiscal Year (FY) 2016-17.

As per the provision, companies, cooperatives and non-government organizations (NGOs) will have to submit withholding-tax returns on a mandatory basis, twice a year from the current FY.

Officials said the Large Taxpayers Unit (LTU) under the IT unit decided to audit the US oil company Chevron’s withholding-tax returns.

The international oil major has already submitted the returns as a compliant taxpayer although deadline is January 31.

The multinational will face the audit as tax-deducting authority of its employees.

Currently, Chevron has staff strength of some 600 employees in Bangladesh. Its number of foreign employees came down to 2.0 to 3.0 per cent in recent times after it scaled down its operations in Bangladesh.

In case of failure in deduction of tax or deduction at lower rate or failure in depositing the amount, the deducting authorities may have to take the liability for the tax which was supposed to be deducted and deposited with the government exchequer.

They have to pay 2.0 per cent additional tax on the payable amount, as per provision of the income tax ordinance. The provision in the income tax law is meant for checking irregularities in tax collection in this sector that contributes 57 per cent of the total tax-revenue receipts.

The tax official said pay-roll tax, deducted at source by the employers from salaries of employees, contributes only 4.0 per cent to 5.0 per cent to total tax collected at source.

As per law, the withholding-tax returns should be submitted twice a year. First returns will have to be submitted by 31 January of the year in which the deduction or collection is made.

A second return will have to be submitted by 31 July of the next year following the year in which the deduction or collection was made, says the finance bill on the fiscal rules.

However, the deputy commissioner of taxes (DCT) holds the authority to extend the last date for tax return by 15 days.

The withholding-tax returns can be filed both manually or electronically to the tax authority. DCT, with the approval from the National Board of Revenue, will select some withholding-tax returns for audit. Audit has to be done within four years of the submission of returns.

“No return shall be selected for audit after the expiry of four years from the end of the years in which the return was filed,” it is stated in the finance bill.

Tax officials said only current year’s withholding-tax-return information of Chevron will be scrutinized by the taxmen to see compliance of the companies on deduction of withholding tax, proper deposit of the tax, issuances of tax-clearance certificates and the like.