The National Board of Revenue (NBR) has turned down a fresh plea for exempting Japanese companies from tax and value-added tax (VAT), sources said.
The firms cannot be tax-exempt if engaged in the official development assistance (ODA)-funded projects as subcontractors, sub-consultants and sub-suppliers.
Currently, only the Japanese contractors, consultants, and suppliers are eligible for tax and VAT exemptions if they work for a Japan-funded project, they added.
In that case, tax and VAT are being paid from special allocation kept under Bangladesh government's funds in the development project proposal (DPP) for the schemes.
Otherwise, the NBR exempts tax and VAT by issuing a statutory regulatory order (SRO).
But Japan in its exchange notes of new ODA-aided projects now wants that subcontractors, sub-consultants and sub-suppliers also be given the same privilege.
Sources said economic relations division (ERD) officials recently convened an inter-ministerial meeting on the issue where an NBR representative turned down such a proposal.
"There is a decision to offer no new tax exemption now," the representative told the meeting chaired by ERD additional secretary Shahidul Islam.
If the subcontractors, sub-consultants and sub-suppliers need to be given tax exemptions, allocation has to be kept in the funds of the projects, he said.
The meeting then decided to ask the Japanese embassy in Dhaka to change the exchange notes of the 40th ODA loan package and submit fresh notes.
Under the ODA package, Japan is providing loans to the tune of 275.786 billion yen to fund five projects.
Japan is supporting 38.866 billion yen for Matarbari Port Development Project, 143.127 billion for Matarbari Ultra-Supercritical Coal-fired Power Plant and 52.570 billion for Dhaka Mass Rapid Transit Development.
It is also supplying 21.147 billion yen to Foreign Direct Investment Project and 20.076 billion to Energy Efficiency and Conservation Promotion Financing Project under the loan package.
When asked, Mr Islam said on Tuesday that no new facilities will be granted to anyone in the exchange notes of the loan package.
"We'll follow only the exchange notes of the previous loan packages. No additional tax exemption will be granted," he told the FE over phone.
"We can't add new facilities without any decision made by the government high-ups," he added.
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