Freight tax

Income tax is levied at the rate of 8% of:

  1. Outward gross freight   
  2. All freight (voyage charter, time charter and bareboat hire) earned during coastal and/or domestic transportation by foreign flagged vessels.    

Exemption Agreements

Double taxation agreements, based on residency of the freight recipient, have been concluded with the following countries, which may reduce or waive income tax.  

Country Reduction Date of entry into force Date of effect
Bahrain 50%  30/04/2018 01/07/2019
Belgium 50% 14/01/1998 01/07/1998
Canada 0% 06/06/1985 01/07/1982
China 1 50% 13/05/1997 01/07/1998
Denmark 50% but tax rate not to exceed 4% 17/03/1997 01/07/1997
France 3 50% 04/10/1989 01/07/1989
Germany 2 100% 01/01/1994 01/01/1990
India 50% 27/02/1993 01/07/1993
Indonesia 50% 24/10/2008 01/07/2009
Italy 2, 3 50% 12/03/1997 01/07/1980
Japan 50% or tax rate of 4%, whichever is less 06/08/1991 01/07/1992
Korea, Republic of 50% but tax rate not to exceed 4% 22/08/1984 01/07/1984
Malaysia 50% 15/02/1990 01/07/1982
Mauritius 50% 15/09/2010 ?????? 
The Netherlands 3 50% but tax rate not to exceed 4% 14/09/1994 01/07/1995
Norway 50% 12/02/2006 01/07/2006
The Philippines
01/01/2004 01/01/2004
Pakistan 50% 11/07/1988 01/01/1980
Poland 50% 03/03/1999 01/07/2000
Romania 50% but tax rate not to exceed 2.5% 23/11/1988 01/07/1989
Singapore 50% 21/04/1982 01/07/1980
Saudi Arabia 2, 3 Tax rate not to exceed 4% 01/10/2011 01/07/2012
Sri Lanka 0% 10/12/1988 01/07/1989
Sweden 50% 19/10/1983 01/07/1984
Switzerland 50% 08/01/2009 01/07/2010
Thailand 50% 07/10/1998 01/07/1999
Turkey 50% 09/07/1998 01/01/1999
United States 100% 07/08/2006 01/01/2007
Vietnam   19/08/2005  01/07/2005
Limited Treaties (Air, Land and/or Sea)
China 4 0% 09/12/2005 01/07/2005
Oman 0%    
United Arab Emirates 0% 13/06/2011  
United Kingdom 0% 08/07/1980 01/07/1978
Treaty negotiations currently in progress:
Signed but not ratified
Bhutan Signed 18/04/2017
 
Belarus      
Czech Republic  Signed 11/12/2019    
Iran      
Kuwait Signed 19/02/2014    
Morocco Signed 28/2/2018     
Myanmar      
Nepal  Signed 05/03/2019
 
Qatar      
Saudi Arabia Signed 04/01/2011
 
In the process of negotiation or finalised but not signed
Australia   Azerbaijan  
Austria   Nigeria  
Cyprus   Russia   
Egypt   South Africa  
Finland   Spain   
Greece   Tunisia   
Maldives      

Notes

  1. The treaty does not apply to residents of Hong Kong, SAR, Macao, SAR or Taiwan, Province of China.
  2. Profits from the operation of ships in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.
  3. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident.
  4. The treaty only applies to residents of Hong Kong, SAR.

Remarks

Extract from Income tax Ordinance 1984 and subsequent amendments.

Chapter X - Liability in Special Cases

102. Liability to tax in case of shipping business of non-resident.

(1) Notwithstanding anything contained in this Ordinance, where a non resident carries on the business of operation of ships as the owner or charterer thereof (hereinafter in this section referred to as the principal) tax shall be levied and collected in respect of such business in accordance with the provisions of this section.

(2) Before the departure from any port in Bangladesh of any ship, the master of the ship shall prepare and furnish to the Deputy Commissioner of Taxes a return showing-
(a) the amount paid or payable whether in or out of Bangladesh to the principal, or to any person on his behalf, on account of the carriage of passengers, livestock, mail or goods shipped at the port since the last arrival of the ship; and
(b) the amount received, or deemed to be received in Bangladesh by, or on behalf of, the principal on account of the carriage of passengers, livestock, mail or goods at any port outside Bangladesh.

(3) On receipt of the return, the Deputy Commissioner of Taxes shall determine the aggregate of the amounts referred to in sub-section (2) and, for this purpose, may call for such particulars, accounts or documents, as he may require and the aggregate of the said amounts so determined, shall be deemed to be income received in Bangladesh by the principal from the said business chargeable to tax under this Ordinance under the head "Income from business or profession", and tax thereon shall be charged at the rate of eight percent. of such income.

(4) Where the Deputy Commissioner of Taxes is satisfied that it is not possible for the master of the ship or the principal to furnish the return required under sub-section (2) before the departure of the ship from the port and the principal has made satisfactory arrangements for the filing of the return and payment of the tax by any other person on his behalf, the Deputy Commissioner of Taxes may, if the return is filed within thirty days of the departure of the ship, deem the filing of the return by the person so authorised by the principal as sufficient compliance with sub-section (2).

(5) No port clearance shall be granted to the ship until the Commissioner of Customs or any other officer duly authorised to grant the same, is satisfied that the tax payable under sub-section (3) has been duly paid or that satisfactory arrangements have been made for the payment thereof.

(6) Nothing contained in this Ordinance shall be so construed as to allow any expense against the aggregate amount of receipts as determined under sub-section (3).

(7) The tax paid under this section shall be deemed to be the final discharge of the tax liability of the assessee under this Ordinance, and the assessee shall not be required to file the return of total income under section 75 nor shall he be entitled to claim any refund or adjustment on the basis of such return.  

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