1. I have just started a business, should I get a Tax Identification Number (TIN)?

When you hop on the entrepreneurship journey, presumably you dream of becoming “big” one day. Trust me, you can NEVER be big if you’re callous about regulatory requirements. So, we advise that you SHOULD get a TIN. The question is “when”?

If you want to operate through a company, you should get a TIN before the formation of the company; the company should also get a separate TIN.

On the other hand, as a proprietorship firm/unregistered business, you can practically operate without a TIN for as long as you want, but it will only take you so far.

To give you an idea of the obstacles you may face without a TIN if you are operating through a trade license only, you cannot:

  • renew your trade license;
  • take a loan of more than Tk.500,000 from banks/financial institutions;
  • open letter of credit for the purpose of import;
  • apply for gas/electricity connection for the commercial purpose;
  • get equity funding.

So in short, when you omit to get a TIN, you are not only evading VAT and tax, chances are, your exposure in terms of funding, sponsorship, profit-sharing are also much more limited.

  1. When, as a salaried person, an individual should have a TIN?

Any individual receiving a basic salary of Tk. 1,92,000.00 or more and any person employed in management or administrative position is required by law to obtain TIN. This requirement is enforced by imposing the penalty on the company with which such individuals are employed.

So, for example, if Mr. Rahim is employed with X Limited and X Limited pays Tk.16,000.00 to Mr. Rahim each month as basic salary, totaling Tk. 1,92,000.00 during the income year, without ensuring Mr. Rahim has 12 digit TIN, during the calculation of taxable income the whole amount paid as salary will be disallowed as expenses [see below].

  1. What is the income year?

 A calendar period of 12 months from 1 July-30 June. For income tax purposes, income is calculated and tax becomes payable for this period. Income year has been unified for all entities since the implementation of the Finance Act, 2015 except banks, insurance companies and financial institutions (who can have a January-December income year).

  1. What is the last day of filing income tax return for an individual?

30 November.

  1. What is the last day of filing return for a company?

If the income year is January-December: 15 July.

If the income year is 31 July-30 June: 15 January.

  1. How is the taxable income of a company calculated?

Very broadly, company’s Taxable Income = Gross Profit-Expenses.

An example may illustrate. Suppose, over the income year, X Limited’s total sale is Tk.1,00,000 out of which it has made the gross profit of Tk.60,000. Now, this Tk.60,000 shall be subjected to a deduction of salaries, utility bills, travel expenses etc., which amounts to Tk.20,000. Consequently, the total taxable income of the company will be Tk.20,000.