Worldwide transfer pricing reference guide 2014

Bangladesh
Taxing authority and tax law
Taxing authorities: National Board of Revenue (NBR)
Tax laws:
• Section 107A to 107J of the Income Tax Ordinance, 1984 as amended by Finance Act 2012
• Rule 70 to 75 of Statutory Regulatory Order 2012
The Finance Act 2012 introduced transfer pricing regulations in Bangladesh. However, the transfer pricing provisions shall come into
force from the date specified by the NBR through notification in the official Gazette. Since, no notification has been issued by the NBR;
the transfer pricing regulations are presently not applicable in Bangladesh.
Relevant regulations and rulings
The pricing of any income or expense arising from international transactions between associated enterprises will need to be determined
with regard to the arm’s length principle, using methods prescribed under Bangladesh transfer pricing legislation. Associated enterprises
are those enterprises where more than 25% voting power in one is held by the other or a common parent holds more than 25% of voting
power in both such enterprises. Transfer pricing provisions are applicable to the following types of transactions between associated
enterprises, with at least one of them being a non-resident:
• Purchase, sale or lease of tangible or intangible property
• Provision of services
• Lending or borrowing money
• A mutual agreement or arrangement for cost allocation/apportionment
• Any other transaction having a bearing on the profits, income, losses, assets, financial position or economic value of such enterprises
Transactions with a third party is deemed to be as transactions between associated enterprises if the third party has a prior agreement
with the associated enterprise, or if the terms of the relevant transaction are determined in substance between the third party and the
associated enterprise. An enterprise means a person or a venture of any nature and also includes a permanent establishment of such
person or venture.
Priorities/pricing methods
Bangladesh legislation prescribes the following methods: CUP, RPM, Cost Plus, Profit Split, TNMM and any other method. Where it can
be demonstrated that none of the first five methods can reasonably be applied to determine the arm’s length price for an international
transaction, Section 107C allows the use of any other method that can yield a result that is consistent with the arm’s length price.
For the purpose of determining a comparable uncontrolled transaction, Rule 71(3) provides that data pertaining to only the relevant
financial year should be used. However, the rule permits the use of data prior to the relevant financial year if it can be substantiated that
such data bears facts which could have an influence on the analysis of comparability.
OECD guidelines treatment
Bangladesh legislation is broadly based on the OECD Guidelines. Five of the six methods prescribed in the legislation to compute
arm’s length prices are in conformity with the OECD Guidelines.
Transfer pricing penalties
• For a failure to keep, maintain or furnish any information or documents as required by Section 107E, the taxpayer is imposed a penalty
not exceeding 1% of the value of international transaction
• For a failure to comply with the notice or requisition under section 107C of the ordinance by the Deputy Commissioner of Taxes, the
taxpayer is imposed a penalty not exceeding 1% of the value of international transaction
• For not furnishing an Accountant’s Certificate, the taxpayer is fined an amount not exceeding BDT300,000 (approximately US$3,900)
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