Payments Trends in 2023

by Tahmidur Remura Wahid | Apr 6, 2023 | 2023, Law

Payments Trends and Cross-border transactions

Each transaction consists of two components: receipts and payments. This is the accounting golden rule. The same applies to international transactions. For example, a buyer makes payments to a seller, who then receives payment for the transaction. On the other hand, an importer transfers funds to a bank for international transfer to the supplier. Thus, a transaction occurs.

It is commonly believed that hundi circumvents legal transactions. In order to conceal money laundering, formal channels can also facilitate illicit transactions by over-invoicing imports and under-invoicing exports. It is possible to conduct international transactions without the assistance of banking channels.

These are accomplished through two channels: current transfers and financial or capital transfers.

Foreign Exchange Regulation Act of the country defines current account transactions as -

(i) receipts and payments due in connection with foreign trade, other current business including services, and normal short-term banking and credit facilities in the ordinary course of business;
(ii) receipts and payments due as interest on loans and as net income from investments; and
(iii) moderate amounts of amortisation of loans or for depreciation of direct investments.

Capital account transaction is a transaction for the creation, modification, transfer, or liquidation of a capital asset, including but not limited to securities issued in capital and money markets, negotiable instruments, non-securitised claims, units of mutual fund or collective investment securities, commercial credits and loans, financial credits, surety bonds, guarantees, deposit account operations, life insurance, personal capital movements, and real estate.

The taka is theoretically freely convertible for current account transactions. It means that regulator approval is not required for transactions on current accounts. However, insiders hold differing opinions; under general authority, banks are permitted to execute transactions within the indicative limit.

To exceed the authorization, central bank approval is required. Despite the fact that ease of doing business is a topic that is frequently discussed, discord is caused by contradictory perspectives in business transactions.

Open are transactions under capital account for inward investments such as direct investments and portfolio investments. Other transactions require government authorization.

As Taka is not convertible for outward remittances on capital account transactions, the central bank monitors every transaction under current account. Every import payment is subject to documentary proof by the entry of corresponding goods; each export shipment must be accompanied by incoming payments.

Every outbound transfer must be reported to the central bank. All of these measures are intended to prevent capital transfers disguised as current payments. It is debatable whether the monitoring system produces effective results.

Ongoing international efforts are made to address obstacles and frictions in cross-border payments.

For the next phase of work under the G20 Roadmap for Enhancing Cross-Border Payments, the Financial Stability Board (FSB) published a report in February 2023 detailing actions to be taken on payment system interoperability, legal, regulatory, and supervisory frameworks, and cross-border data exchange.

Prior to the G20 Roadmap's 2027 deadline, the FSB makes it clear that much work remains to be done to improve the cost, speed, accessibility, and transparency of cross-border payments.

What to expect in future about cross border transactions

The Taka is presumed to be fully convertible for capital account transactions. In this situation, it is questionable whether a monitoring framework is required. Such a monitoring mechanism is disregarded by the central banks of countries with a convertible capital account framework. They simply gather data to generate various macroeconomic reports.

If current account transactions were fully convertible in the true sense and capital account transactions were partially convertible, the demand for shadow transactions would have decreased. Consequently, a framework for monitoring cross-border transactions would have been superfluous.

For money to be transferred under the guise of current accounts through banking channels or shadow channels, foreign currency inflows are required. Balance of payments displays incoming and outgoing funds. Exports account for more than fifty percent of total inflows, followed by wage remittances.

Exporters are required to submit regulatory declarations regarding their exports of goods, for which payments must be repatriated within four months of shipment date. In the absence of repatriation, exporters may face regulatory actions and be denied policy supports such as cash incentives, bond facilities, low-interest loans, etc. The use of autopilot for the repatriation of export profits is effective.

In addition to the export of physical goods, international service delivery according to mode 1 of the GATS is considered an export of services.

Consultancy, law, engineering, accounting, and information technology are a few examples. The central bank permits service exporters to retain a significant portion of their foreign currency inflows to cover expenses, as the service industry is deemed a promising sector.

Despite this, the sector has yet to demonstrate a significant position in international transactions.
There are complaints that service exporters do not properly repatriate earnings. According to industry insiders, the underlying reason is that service exporters require outward remittances for which required tax payments impose an additional cost burden.

Sendings from Bangladeshi expatriates are the second largest source of foreign income. It is not required that non-residents send their earnings abroad. Non-residents may use the income in their home country. We are all aware that the majority of residents in megacities like Dhaka come from rural and urban areas.

There are white collar, blue collar, and red collar jobs, among others. People who fall under the white category typically save money and invest in capital goods, such as real estate. They occasionally send money to their village of origin. Frequently, others send money. But income generated in megacities is not required to return to its earners' origins.

The same is true for non-residents, who send modest amounts of money home. Only blue collar workers consistently send money home.

The demand for international transactions conducted through shady channels generates alternative foreign exchange markets. The foreign exchange rate for incoming remittances is higher than that for export receipts. A higher rate for wage receipts indicates that the remittances are exchanged for transfer in another manner.

Now comes the question of which fund is sent overseas by adjusting wage remittances. Unquestionably, restrictions on outward remittances and relevant formalities result in shadow markets.

Not generally permissible for which specific approval is required are payments of this nature. It is true that where there is a demand, a market will form. If demand is eliminated, the market will cease to exist.

If we see other countries alongside Bangladesh, in Europe, changes will be compelled by regulators, such as instant euro payments in the EU. In light of the slow market adoption of technology to process instant euro payments, the Commission proposes to implement the so-called Instant Payments Regulation.

This would require payment service providers that offer euro credit transfers to offer instant euro payments at the same or a lower fee than that applicable to euro credit transfers that are not instant.

In accordance with the G20 Roadmap's priorities, global regulators and market participants will work to advance payment system interoperability, including interlinking arrangements for payment systems that reduce reliance on intermediaries by allowing banks and other payment service providers to transact directly.

Additionally, domestic advancements will allow the focus to shift abroad. For instance, in the United States, the Federal Reserve anticipates launching the FedNow Service, a new instant payment service that would allow consumers and businesses to settle payments almost instantly through deposit accounts with banks that maintain a master account at a Federal Reserve Bank.

The Federal Reserve has stated that, at launch, the FedNow Service will only support domestic payments between US depository institutions; however, if access is expanded to non-US financial institutions in the future, the service could be used to facilitate cross-border payments.

Central bank digital currencies

More than 114 countries, representing over 95% of global GDP, are examining the potential benefits of central bank digital currencies (CBDCs) – a digital representation of fiat currency issued by a central bank. A few nations, including the Bahamas and Jamaica, have already implemented CBDCs, whereas the majority are still in pilot or research stages.

Despite the fact that some CBDCs are based on blockchain or distributed ledger technology (DLT), many jurisdictions are investigating a variety of alternative technologies.

What are the implications of these developments for Bangladesh? A digital taka (e-taka) could make the payment system more efficient and affordable. Currently, it takes 30 minutes and a surcharge of 100 taka to transfer 1 lac taka via the real-time gross settlement service between 10 a.m. and 3 p.m.

In Europe, payment processing takes only 10 seconds and costs €0.002 per transaction (equivalent to 20 paisa in Bangladesh). An e-taka will also save hundreds of billions of taka in printing costs. For instance, it costs eight taka to print a one thousand taka note and nearly two taka to mint a five taka coin.

The most significant advantage of e-taka, however, is that it will enable the government to track its expenditures for development and other operational services.

Therefore, it will be extremely difficult, if not impossible, for public officials who take advantage of stealing and accumulate physical money because it takes the government time to identify them (often they are identified right after their retirement) to steal public e-money.

Similarly to how the introduction of the electronic government procurement (E-GP) system has increased the quality and competitiveness of public project bidding, the mandatory use of e-taka in public works will make the system more transparent and combat corruption.

Concept of Digital Taka

A digital taka can provide unanticipated benefits in our personal lives.

For instance, parents will be able to track where their children spent their money, thereby reducing misuse. In addition, digital currency can be programmed to exclude certain transactions. A diabetic patient, for instance, may not be able to purchase unhealthy food with digital taka or digital currency. We can also track the expenditure of our zakat and sadaqah contributions.

All these advantages come at the expense of our highly valued privacy in Bangladesh. As a result, it is believed that the CBDC will be most successful in China, where Chinese citizens are most accustomed to being monitored by their government.

In conclusion, CBDCs can theoretically be extremely potent in the sense that they can displace credit cards and banks. However, this will defeat the purpose of the system.

Despite the fact that the new competition from CBDCs is likely to make banking services cheaper, faster, and more equitable. Whether digital currency is administered by private banks or a central bank, the greater concentration of digital currency will make the system more susceptible to cyberattacks.

China invented paper currency in the seventh century and monopolized the issuance of currency in the eleventh century. It is therefore not surprising that the People's Bank of China is the first major central bank to introduce an e-currency.

In the coming years, the Fed, the ECB, and other central banks will likely issue their own CBDCs. CBDCs could serve as an effective countermeasure to cryptocurrencies and have the potential to become the predominant medium of exchange.

Numerous CBDC projects emphasize domestic retail. However, international standard-setting organizations such as the Bank for International Settlements (BIS) are promoting the use of CBDCs to facilitate international payments. Solving the interoperability problem between initiatives is crucial.

What to expect form Central bank digital currencies in 2023

Changes will be compelled by regulators, such as instant euro payments in the EU. In light of the slow market adoption of technology to process instant euro payments, the Commission proposes to implement the so-called Instant Payments Regulation.

This would require payment service providers that offer euro credit transfers to offer instant euro payments at the same or a lower fee than that applicable to euro credit transfers that are not instant.

In accordance with the G20 Roadmap's priorities, global regulators and market participants will work to advance payment system interoperability, including interlinking arrangements for payment systems that reduce reliance on intermediaries by allowing banks and other payment service providers to transact directly.

Additionally, domestic advancements will allow the focus to shift abroad. For instance, in the United States, the Federal Reserve anticipates launching the FedNow Service, a new instant payment service that would allow consumers and businesses to settle payments almost instantly through deposit accounts with banks that maintain a master account at a Federal Reserve Bank.

The Federal Reserve has stated that, at launch, the FedNow Service will only support domestic payments between US depository institutions; however, if access is expanded to non-US financial institutions in the future, the service could be used to facilitate cross-border payments.

Stable-coins:

Stablecoins, in contrast to CBDCs, are privately issued DLT-based cryptoassets that include a mechanism to minimize price fluctuations and "stabilize" their value.

Their objective is to create an alternative form of low-risk digital unit that businesses and consumers can use directly. The most prevalent potential stabilisation method is the collateralised stablecoin model, which achieves stability by linking the currency to a reserve of stable real assets, such as fiat currencies or commodities.

Alternate options include crypto-collateralized stablecoins (where a reserve is comprised of other cryptocurrencies) and uncollateralized stablecoins (which do not have any reserve but instead use central bank-like monetary policy to maintain a fixed price by controlling supply with algorithms which respond to market conditions).

Since the failure of Libra/Diem, global regulators have been closely monitoring stablecoin market developments, and the collapse of USD Terra last year has heightened their concerns.

This has prompted several jurisdictions, including the United Kingdom, to prioritize the creation of a regulatory framework for stablecoins over other cryptoassets in their draft Financial Services and Markets Bill.

In addition to the regulatory framework for cryptoassets and security tokens that will be implemented in 2020, Japan is currently implementing a framework for the issuance and distribution of stablecoins.

In contrast, the EU's new Markets in Crypto-Assets Regulation (MiCA) will introduce a comprehensive new regulatory framework for the issuance and sale of all cryptoassets, as well as significant additional requirements for the sale of stablecoins.

In the United States, a number of bills to regulate stablecoin issuers have been proposed, each imposing variations of bank-like requirements (such as FDIC insurance, chartering framework, and liquidity requirements), but none have reached the floor of the US Congress for a vote.

What follows?

The EU's MiCA will be formally adopted in 2023, with some of its provisions becoming applicable in 2024. It is also anticipated that the Financial Services and Markets Bill will be passed in 2023. With the introduction of these regimes, stablecoins can be utilized in more conventional consumer and wholesale settings.

Additionally, there will be additional legislative and regulatory changes in additional jurisdictions.

In the United States, we anticipate the introduction of new legislation and the continuation of debate on the appropriate regulatory framework for stablecoin issuers, including how to address uncollateralized or algorithmically-stabilized stablecoins such as USD Terra and the extent to which stablecoin issuers may be regulated like banks.

Operational resilience

Increasing digitalization of customer experiences, increased automation of internal processes, and increased use of third-party service providers all make businesses more susceptible to technological disruptions and hence Operational resilience is extremely important for companies in 2023.

Due to the financial, reputational, and societal consequences of high-profile IT failures, operational resilience (or ensuring the continuity of essential business services) remains a top priority for boards, regulators, and customers.

Bangladesh's achievements over the course of this 50-year partnership with World Bank have vastly surpassed the initial World Bank assessments conducted in the early 1970s.

Since this initial emergency credit, the World Bank has committed approximately $39 billion in funding from the International Development Association (IDA) in the form of grants, interest-free loans, and concessional credits to assist the country in developing its indigenous strategies to address its most pressing development challenges.

With approximately $15 billion in ongoing programs, Bangladesh has the largest IDA program in the world at the present time. The World Bank is also the largest development partner for Bangladesh.

Bangladesh has made remarkable progress in numerous areas, but three strategic development decisions it has made over the years have yielded the greatest returns: investing in people, empowering women, and preparing for disasters and adapting to climate change.

Bangladesh quickly realized that investing in people is equally as important as investing in infrastructure. In 1972, the life expectancy was less than 50 years, whereas a newborn today is expected to live over 70 years. The fertility rate has decreased from 6,1 births in 1971 to merely 2,1 births in 2018. The vast majority of children attend school.

The strategy for reducing poverty in Bangladesh centered on the empowerment of women.

In 1991, Bangladesh had one of the lowest levels of female education attainment. Bangladesh was one of the first developing nations to achieve gender parity in secondary school enrollment, thanks to a pioneering school stipend program for poor rural girls, which was replicated in Mexico, Cambodia, and other nations.

In 1970, only 17 percent of lower secondary school enrollment was made up of females; this number has since increased to more than half. Hundreds of thousands of rural women were employed by its thriving ready-made garment industry. The female labor force participation rate rose from 21 percent in 1990 to 35 percent in 2021, an increase of 73 percent.

Bangladesh has met the challenges of being severely impacted by natural disasters and climate change by becoming a leader in climate adaptation and disaster preparedness.

Since independence, a network of embankments, cyclone shelters that function as primary schools during normal weather, early warning systems, and forestation have reduced cyclone-related fatalities by a factor of one hundred.

The numbers tell the tale: More than 300,000 people were killed by Cyclone Bhola in 1970, while Cyclone Sidr in 2007 claimed 3,363 lives and Cyclone Mora in 2017 claimed only 18 lives.

In response to a request from the G20, the FSB published a consultation in October 2023 titled Achieving Greater Convergence in Cyber Incident Reporting.

The FSB's proposals include recommendations to address the obstacles to achieving greater international convergence in cyber incident reporting, work on establishing common terminologies related to cyber incidents, and a proposal to develop a standard format for exchanging incident reports.

The purpose of the EU's new Digital Operational Resilience Act (DORA) is to establish uniform requirements for the security of network and information systems of companies operating in the financial sector, including cryptoasset service providers, as well as any critical third parties that provide them with information communication technologies services.

Following its exit from the EU, the United Kingdom has introduced the Financial Services and Markets Bill, which includes provisions to regulate cloud service providers and other critical third parties that provide services to UK-regulated firms and financial market infrastructures.

Under the proposed legislation, HM Treasury would have the authority to designate certain service providers as "critical," and UK regulators would be granted new direct oversight authority over designated service providers, who would be subject to new minimum resilience standards.

In the absence of a general election, the Bill should be passed and signed into law by the end of the current session of Congress (expected to be in May 2023). While the United Kingdom's proposals and DORA's requirements share the same objectives, there are a number of differences between them, including with respect to the "critical" designation criteria and the enforcement regime.

What to expect in Operational resilience in 2023 around the globe?

Efforts to harmonize global standards at the national level will continue. The FSB is scheduled to release a revised report to the G20 in April 2023. This report will include expectations for financial authorities' oversight of financial institutions' reliance on critical service providers, such as "Big Tech" and fintech firms.

Once in effect, the requirements of DORA and the new UK regime for contracting with payment service providers will impose a significant legal burden on businesses that provide payments technology.

The implementation of a new incident reporting mechanism by DORA, including a requirement that "major" incidents be reported to competent authorities within strict timeframes, will necessitate substantial process investments.

In the United States, we anticipate the banking agencies to finalize their 2021-proposed guidance on "third-party risk management," which will establish supervisory expectations for risks posed by third-party relationships as well as higher standards for providers of "critical services."

The guidance requires, among other things, that covered institutions conduct due diligence, provide ongoing oversight of a third party's information security programme and information systems, and assess the third party's ability to continue providing services during a disruption event.

Additional global regulators will launch comprehensive regulatory regimes to ensure that financial institutions have appropriate internal governance and control frameworks surrounding the use of ICT, including the use of third-party technology providers.

We are also likely to see a rise in regulatory enforcement actions related to operational disruptions; TSB Bank plc was recently fined £48.65 million by UK financial regulators for operational risk management and governance failures related to its IT upgrade program.

Similarly, the same technology disruption events are likely to result in civil claims and litigation, whether for contract breach, negligence, or data breach.

Multiple jurisdictions have implemented open banking regimes, permitting third-party payment service providers (TPPs) to initiate payments or access account information on behalf of their customers. Regulators anticipate that firms will fulfill their regulatory obligations while competing on the basis of quality and value.

Some jurisdictions have taken this concept a step further, applying it to other types of accounts and financial products as part of a broader "open finance" initiative.

Open Finance

Multiple jurisdictions have implemented open banking regimes, permitting third-party payment service providers (TPPs) to initiate payments or access account information on behalf of their customers.

Regulators anticipate that firms will fulfill their regulatory obligations while competing on the basis of quality and value.
Some jurisdictions have taken this concept a step further, applying it to other types of accounts and financial products as part of a broader "open finance" initiative.

Developing comprehensive legislative frameworks for such initiatives is time-consuming, but essential for ensuring that TPPs are regulated to provide clarity around I security, consent, data use, privacy, and ethics, and to build customer trust.

In the context of Open Banking, the recast EU Payment Services Directive's rules on TPP access, strong customer authentication, and secure communication standards may provide a blueprint for expansion in the European Union.

The Consumer Financial Protection Bureau (CFPB) in the United States is in the process of developing a proposal for an Open Banking rule that would give consumers more control over their financial data by allowing them to access and share it with other providers.

The concept of Open Application Programming Interface (API) for use in the banking industry i.e open finance has emerged as one of the most significant developments over the past few years. Open banking entails making the APIs accessible to third parties (financial technology companies), who can use the shared consumer data to create innovative products and services, as well as to generate offers and discounts based on consumer spending habits.

The API will allow the company's software to access information from another company's software. When we order an Uber, the Google Maps API allows us to track our car's journey to the pickup location.

Without these APIs, if you want to share the information in your bank account with another organization, you must give them your login credentials. These new APIs will allow you to safely and securely share your bank account information without disclosing your password.

The objective of Open Banking regulations is to transfer account information ownership from banks to customers. It enables individuals to securely share transaction information with other banks and third parties.

The fundamental aspect of open banking is that customers are not required to share their data with third parties. When you sign up for a service, each provider will ask for your permission to access your information.

The system will then send a request to your bank, which will then process the request and share your information. You may also revoke your consent at any time. The rules only apply to online-accessible accounts, and you must connect your online banking to the third party for it to obtain your data.

It is ultimately your decision whether or not to share your information. Under Open Banking, however, your financial information will be more secure than ever before. All banks, apps, businesses, and other third parties operating within the Open Banking framework are evaluated according to the highest privacy and security standards.

Here are a few real-world examples of how the customer could benefit:

• Customers can obtain better deals on credit cards, loans, and mortgages by comparing them across multiple financial institutions and third parties based on their individual circumstances.
• Gain a comprehensive perspective of accounts in a single location.
• Monitor multiple bank accounts and credit cards for fraud with ease.
• Utilize a unified platform to efficiently and safely manage your finances across multiple services and providers, from banking to online shopping.
• Open banking is not limited to developed nations; many markets around the world have sought to adopt similar principles with the ultimate goal of enhancing customer financial outcomes.

The rule is intended to promote competition by making it simpler for consumers to "walk away" from their current providers and transfer their financial data to other providers via application programming interfaces (APIs).

Future of Open Finance in 2023

There will be a renewed emphasis on open finance and the development of more innovative use cases. With web 3.0 and metaverse applications raising a new set of legal and regulatory questions, consumers will receive payment services through channels that are novel.

Following a consultation in 2023 , the publication of a new framework for Open Finance in the EU is scheduled for the second quarter of 2023.

In Bangladesh's banking industry and open finance, there are numerous supply difficulties. The cost of providing financial services is disproportionately high to the price of the product. Open Banking is the only remedy for this issue.

Despite digitization and open source, industries such as retail, transportation, food and beverage, education, etc. are experiencing significant disruptions. However, the trend will have a much greater impact on the financial services industry, whose business models are on the verge of digital transformation.

Multiple parties are involved in Open Finance, and it is unclear who should be responsible for data protection and security and who owns customer data. It will be difficult to determine who owns all of this information, as it will continue to flow from screen to screen. In the future, accelerating data ownership and customer privacy will be crucial.

The evolving landscape of banking presents both challenges and opportunities. Our banks should collaborate with other service providers to enrich and streamline the customer experience.

As the Open Banking community continues to expand throughout 2023, new obstacles and opportunities will emerge. Banks must continue to prioritize data privacy, cyber security, and customer protection throughout the implementation phase. However, the benefits Open APIs offer to customers and banks will drive their growth and adoption.

The CFPB is expected to issue a proposed Open Banking rule later this year in the United States. Significant issues remain unresolved, including the rule's applicability to non-banks as well as privacy and data security concerns.

Smaller banks have urged the CFPB to phase in a ban on "screen scraping," in which a third party uses a customer's login credentials to access their account information, because they lack the technological resources to build a library of APIs.

Hire a Competent law firm for your cross border transactions in Bangladesh:

Tahmidur Rahman Remura Wahid TRW Associates is comprised of competent Barristers and Advocates with expertise in multiple legal fields, allowing them to provide the required services to a high degree and allowing clients to acquire all necessary and supplementary legal services under one roof.

The Barristers, Advocates, and attorneys at Tahmidur Rahman Remura Wahid TRW in Mohakhali New DOHS, Dhaka, Bangladesh have extensive experience assisting clients with all sort of licensing matters. For questions or legal counsel, please contact us at:

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Corporate Income Tax in Bangladesh in 2023

by Tahmidur Remura Wahid | Apr 3, 2023 | 2023, Law

Corporate Income Tax in Bangladesh

Corporate income tax is an important source of revenue for a government. Bangladesh's national parliament proposed and approved a national budget, and the National Board of Revenue (NBR) of Bangladesh publishes the Finance Act every year in order to update tax rules and regulations and accelerate tax revenue.

While one can understand that the essence of many updates in tax laws has been the Government's excessive tax collection target, certain recent tax law updates appear extremely aggressive for honest taxpayers. In July 2019, the Finance Act 2019 was published, and it added a new section 30B "Treatment of disallowances" to the Income Tax Ordinance.

Section 30B is unquestionably one of Bangladesh's most aggressive and unfair tax collection measures. Before we get into section 30B, let's go over section 30 "Deduction not admissible in certain circumstances" briefly and simplify the likely consequences. This section discusses specific business expense limits, compliances, and rules.

Some of the points in this section are logical, while others are highly debatable. The following are some examples of contentious compliances:

• Perquisites (house rent, conveyance etc) (house rent, conveyance etc.) given to an employee in excess of Tk 550,000 per year
• A royalty or fee for technical services that exceeds 8% of the disclosed net profit
• Overseas travel costs that exceed 1.25% of the disclosed turnover

Without a doubt, all of the expenses listed above are legal and reasonable for any business anywhere in the world.

All of these expenses are taxable income for an entity, and tax is payable at a regular rate if they exceed the limit set in Section 30 of the IT Ordinance 1984. Until the Finance Act of 2018, all entities treated those inadmissible expenses as part of their taxable income.

Income from business or profession

According to Finance Act 2019, new Section 30B of the IT Ordinance 1984 states that any amount of disallowances made under Section 30 shall be treated separately as "Income from business or profession" and tax shall be payable thereon at a regular rate.

It applies regardless of whether a business is assessed under Section 82C or whether a loss or profit is computed under the regular "Income from business or profession" section. As a result, even a losing business will be required to pay additional tax.

In a country like Bangladesh, where a minimum tax is already in place and all entities, including loss-making ones, are required to pay income tax based on turnover/gross receipts, the additional tax under Section 30B appears to be a penalty rather than a direct tax.

Corporate Tax refund in Bangladesh:

So, in this simple example, a loss-making company is entitled to a tax refund in Bangladesh.

In 2011, X had to pay a minimum tax of Tk 60 in 2018, but with the addition of Section 30B, his tax liability has increased to Tk 260.

The treatment of disallowances under Income Tax Ordinance 1984 Section 30B has a significant impact on tax liability. Disallowances occur when an expense exceeds the specified limit or for any violation of the law.

Section 30 of the ITO 1984 also addresses expense heads that differ by industry. Previously, any disallowance was calculated using u/s.

Section 37 of the IT Ordinance 1984 required that 30 be added to regular business income and taxed after deducting any losses. Following the passage of the Finnace Act 2019, all disallowances under Section 30 are treated separately as business income and taxed directly. The amount payable cannot be compared to the minimum tax liability or adjusted in any way.

Loss:

This will result in an additional cash outflow as a tax charge on top of the regular minimum tax for that year. This treatment results in a significant tax penalty for a business entity.

Business requirements vary by industry, and a standard expense limit is illogical. Furthermore, charging tax directly to an expense violates tax principles. In general, this move is not business-friendly because it worsens the situation for loss-making companies.

Direct income tax should be charged on income rather than expenses, according to basic tax principles. However, the newly added provision acts as a penalty measure, which should not be used to collect revenue.

What is the policy regarding foreign investor income tax in Bangladesh?

The Income Tax Ordinance, 1984 (as amended annually by the Finance Act) and a number of Statutory Regulatory Orders govern the income tax regime (SROs).

Over the past several decades, the government has gradually reduced the general Corporate Income Tax (CIT) rate (currently, 30% for unlisted companies and 25% for listed companies, excluding certain industries).

Capital gains are subject to a separate 15% tax rate.

CIT regime is considered standard based on usual determination of taxable income and deductible expenses, but differs from other countries in the application of:

i) differentiated tax rates (whether limited liability company or sole proprietorship business, publicly-listed or not, and depending on sector); and

ii) advance/ presumptive payments. Certain forms of income in Bangladesh are presumed to be taxable.

For instance, export proceeds must be withheld at source based on FOB value. Withholding practices also apply to proceeds from services, import payments, royalties/technical license fees, dividends, and loan interest. These taxes are advanced payments and are therefore credited to the final tax liability.

There is also a turnover tax (0.6% of gross receipts excluding certain industries) that can be imposed on all companies, regardless of taxable income and potential loss, constituting a minimum obligation.

Companies in Bangladesh are required to register with the National Board of Revenue (NBR) and obtain a Taxpayer Identification Number (TIN) for income tax reporting/filing purposes.

Disallowed expenses are taxed separately under the heading "income from business or profession" at the regular tax rate. Amortization and depreciation are permitted, and pre-commencement expenses, such as feasibility studies, modeling, prototype creation, and experimental production, may be amortized at a rate of 20% using the straight line method.

Lessors of assets under a finance lease may not claim depreciation.

When the employer fails to provide mandatory information regarding that employee's tax return filing, salary expenses for that employee are not deductible when calculating the employer's income.

Bangladesh Corporate Taxation Rate:

For publicly traded companies, the standard rate is 22.5%. Publicly traded companies that raise more than 10% of their paid-up capital through an initial public offering are taxed at a 20% rate.

Banks, insurance companies, and financial institutions (except merchant banks) pay 40% tax, with a lower rate of 37.5% available if the company is publicly traded or received specific government approval in 2013.

Listed mobile phone companies pay 40% tax; non-listed mobile phone companies and cigarette and other tobacco manufacturing companies pay 45% tax. All other businesses (including private limited companies and foreign subsidiaries) are taxed at a rate of 27.5%.

All income, receipts, and individual transactions worth more than BDT 500,000, as well as all types of expenses and investments worth more than BDT 3.6 million, must be transferred by bank transfer; otherwise, the applicable corporate income tax rate on a taxpayer's total income is increased by 2.5 percentage points.

If a person employs or allows a non-Bangladeshi individual to work in its business or profession at any time during the fiscal year without prior approval from the appropriate governmental authority, the employer will be charged additional tax at a rate of 50% of the total annual income tax payable or BDT 500,000, whichever is greater.

Bangladesh Surtax:

There is no surcharge.

Alternative minimum tax:

In terms of alternative minimum tax, a minimum tax of 0.6% is levied on gross receipts from all sources for any company or firm with gross receipts of more than BDT 5 million, regardless of profit or loss, where the minimum tax exceeds the corporate tax liability.

The applicable rates for manufacturers of cigarettes and other tobacco products and mobile phone operators are 1% and 2%, respectively.

For the first three income years following the start of commercial production, the rate of taxation is 0.1% on gross receipts for an industrial undertaking engaged in the manufacture of goods, and for a startup in its growth years (see "Incentives," below).

A prescribed method is used to calculate the minimum tax applicable to taxpayers who have income from any source that is exempt or subject to tax at a reduced rate.

Dividend taxation:

Dividends paid by resident corporations are generally taxed as income at a rate of 20%. Dividend income is exempt from multi-tier taxation for both resident and nonresident shareholders.

If a stock dividend (interim or otherwise) declared or distributed in an income year exceeds the amount of any cash dividend, listed companies must pay an additional 10% tax.

Listed companies are also subject to an additional 10% tax on the total amount transferred to retained earnings, reserves, or surplus if the amount transferred exceeds 70% of net income after tax.

Capital gains:

Capital gains are taxed at a 15% rate, with some exceptions.

Losses:

Business losses can be carried forward for up to six years. Loss carryback is not permitted.

Foreign tax breaks:

A resident entity may deduct foreign-source income tax from its Bangladesh tax liability. The credit is equal to the lesser of the foreign income tax paid or the Bangladesh tax payable on the foreign-source income.

Exemption from participation:

There is no exemption from participation.
Holding company regime: There is no such thing as a holding company regime.

Incentives:

Certain income, such as income from an infrastructure facility or industrial undertaking established in Bangladesh, the business of information technology-enabled services (ITES), and exports of handicrafts and industries established in an export promotion zone, are eligible for incentives if certain conditions are met. Industrial enterprises located in specific regions can benefit from area-based tax breaks.

A 10-year 100% corporate income tax holiday is available to newly established manufacturing companies in the following sectors, subject to certain conditions:

• Products relating to information and communication technology;
• Automobile manufacturing (three- and four-wheelers); • Agricultural and dairy products;
• Lighting and home appliances; • General and specialized hospitals; and
• Education and training in a professional or vocational field.
  
  The 100% corporate income tax exemption for income derived from information technology services and ITES provided by companies engaged in cloud services, e-learning platforms, e-book publications, mobile application development services, and other similar activities has been extended until 30 June 2024.

A company that works toward the deployment or commercialization of new products and employs processes or services that are driven by innovation, development, and technology, or intellectual property, may be classified as a "startup" and be eligible for a preferential tax regime.

To qualify, the startup's annual turnover cannot exceed BDT 1 billion in any given fiscal year, and it cannot be a subsidiary of another company holding 50% or more of its shares, or the result of an amalgamation or demerger. Startups benefit from a variety of tax breaks, including the following:

• No expense disallowance;
• Losses can be carried forward for up to nine years;
• No compliance obligations other than filing an income tax return, assuming the company meets the tax registration requirements; and
• A minimum tax of 0.1% on gross receipts.
  
  Companies formed prior to 1 July 2017, as well as companies formed between 1 July 2017 and 30 June 2023 that fail to obtain tax registration by 30 June 2023, are ineligible for the startup regime. To be eligible, newly incorporated companies must register for tax by 30 June of the year following their incorporation.

The transfer of shares in a nonresident company is considered the transfer of an asset located in Bangladesh to the extent that the value of the transferred shares is directly or indirectly attributable to the value of assets in Bangladesh.

What is Bangladesh's policy regarding personal income tax?

Bangladesh applies a progressive tax rate to personal income (for residents with a physical presence in the country:

i) for 182 or more days in a single fiscal year or
ii) for 90 or more days in a single fiscal year or
iii) for 365 or more days in the four preceding fiscal years), which ranges from 0% to 25%. (surcharge is payable by wealthy individuals).

Each fiscal year, the Finance Act will establish the personal income tax rate. Following are the current personal income tax rates:

First BDT 300,000 = Nil Following BDT 100,000 = 5% Next 300,000 BDT equals 10%.

The following BDT 400,000 equals 15% Following BDT 500,000 = 20% On balance = 25% Individuals who make eligible investments may be eligible for investment tax credits.

Treaties to avoid double taxation are also available to foreign nationals.

The budget for FY 2021-2023 proposes to maintain the existing rate for individual taxpayers. However, a special provision for the third gender community is introduced, as well as a proposal to set the tax-exempt ceiling for this community at 350,000.

What types of taxes and tariffs apply to imported capital equipment and raw materials?

Customs Duty (CD) specifies tariff rates of 2% to 5% for basic raw materials and capital goods, 10% for intermediate goods, and a maximum rate of 25% for final goods (mostly on domestically produced items) in general.

Regulatory Duty (RD), Supplementary Duty (SD), Value Added Tax (VAT), Advance Income Tax (AIT), and Advance Trade VAT (ATV) may be imposed in addition to CD, depending on the nature of the goods being imported into Bangladesh.

Hire the best law firm in Bangladesh to take care of your corporate taxation needs:

Tahmidur Rahman Remura Wahid TRW Associates is a full-service law firm in Dhaka that provides all types of legal and financial services, including Corporate Income Tax, Income Tax Ordinance, Tax refund, company registration, obtaining the proper licenses, drafting contracts and notices, and providing annual compliances and litigation services.

Tahmidur Rahman Remura Wahid TRW Associates is comprised of competent Barristers and Advocates with expertise in multiple legal fields, allowing them to provide the required services to a high degree and allowing clients to acquire all necessary and supplementary legal services under one roof.

The Barristers, Advocates, and attorneys at Tahmidur Rahman Remura Wahid TRW in Mohakhali New DOHS, Dhaka, Bangladesh have extensive experience assisting clients with trade licensing matters. For questions or legal counsel, please contact us at:

GLOBAL OFFICES:
DHAKA: House 410, ROAD 29, Mohakhali DOHS
DUBAI: Rolex Building, L-12 Sheikh Zayed Road
LONDON: 1156, St Giles Avenue, 330 High Holborn, London, WC1V 7QH

 Email Addresses:
info@trfirm.com
info@tahmidur.com
info@tahmidurrahman.com

 24/7 Contact Numbers, Even During Holidays:
+8801708000660
+8801847220062
+8801708080817

Trade license fee and e-trade license cost in Bangladesh

by Tahmidur Remura Wahid | Apr 2, 2023 | 2023, Law

TRADE LICENSE FEE, PROCESS AND COST IN BANGLADESH TRADE LICENSE PROCESS AND COST IN BANGLADESH

In Bangladesh, receiving a trade license is the initial step of beginning a business.

Doing business in Bangladesh requires a formal authorization from Dhaka City Corporation or Municipality’s important office (Union Parishad, pouroshava, upozilla or zillaparishad) to work.

This authorization is given as Trade License. This writing talks about the trade license process and cost in Dhaka Bangladesh.

INTIAL STEPS:

To get a Trade License in Bangladesh the lawful premise of this prerequisite is being presented in Bangladesh under the City Corporation Taxation Rules 1983 and Municipal Taxation Rules 1986. It is issued when a business visionary is connected through the license form/structure. Working business without an exchange permit is unlawful in Bangladesh.

A business visionary must use the proper application format and submit an application to the relevant authority's office in order to obtain a valid exchange permit. For example, Dhaka City Corporation is divided into north and south sections.

The candidate will be required to pick the right structure contingent upon the territory where the business is found.

One should begin by obtaining legal authorisation and a business license from the City Corporation or City Council of the relevant business zone. The expense of getting a business permit is BDT 2000.

PROCEDURE:

The procedure is supervised by the City Corporation or city committee in the location where the business is located. A permit is issued solely for the sake of the licensee and such permit is not transferable.

The licensee will not use the permit for anything other than the reason and nature of calling, trade, or calling for which it was issued. A renewed Trade License is given by the concerned staff of the zonal tax collection office.

An expense for exchange permit must be kept at any Bank as demonstrated on the Trade License form/structure.

The list of required archives for obtaining a trade license is as follows:

• Dhaka City Corporation Application Form (North Form) or (South Form)
• National identification card of the entrepreneur Recent receipt or proof of ownership
• Recent photograph of the entrepreneur in passport format Work permit from the Board of Investment Statement of bank solvency and TIN certificate.

ADDITIONAL DOCUMENTS REQUIRED FOR TRADE LICENSE:

• In the case of a standard Trade License, an attested copy of the rent receipt or rental agreement, as well as a copy of the Holding Tax payment receipt, are required.
• In the case of a Trade license for industries – Everything mentioned in serial number 1 plus the following:
• No objection notice on the adjacent Location Map
• Fire certificate copy
• Statement on non-judicial stamp of tk 150/to comply with DCC rules and regulations.
• In the case of a Clinic or Private Hospital, the Director General of Health must grant permission.
• In the case of a Limited Company: Articles of Association Certificate of Organization
• In the event that Printing Press and Residential Hotel Permission is Required from DC
• In the case of Recruitment Agencies, a license from the Manpower Man-power Export Bureau is required.
• In the event of Arms and Ammunition – Arms License Copy.
• In the case of drugs and narcotics, please provide a copy of your drug/narcotics license.
• In the case of Travailing Agency – Civil aviation authority approval.

PROCESSING TIME LIMIT:

Projection of Processing The license is typically issued within three to four business days; however, this may vary depending on the nature and type of business.

RESERVED ADMINISTRATION PAYMENT:

The fee for submission is BDT 10.00.

The license fee ranges from BDT 100.00 to BDT 40,000.00 depending on the nature and type of business.
License fees for Limited Companies are based on paid-up capital.

RECERTIFICATION OF BUSINESS (COMMERCIAL COMPANIES):

Licenses for conducting business must be renewed annually. The required documents are the License Book, which is issued upon issuance of a Trade License, the Challan Book, proof of rent and ownership, and the TIN Certificate.

The candidate is required to store the planned charges at the designated bank as part of the renewal strategy. If the various requirements are met, the relevant zonal office of the City Corporation or Municipality will complete the restoration process after receiving the charge receipt.

Obtaining a business license is the first step in starting a business. Working in Bangladesh necessitates a formal authorization from an important office of the Dhaka City Corporation or Municipality (Union Parishad, pouroshava, upozilla, or zillaparishad). This permission is granted as a Trade License. This text describes the procedure and cost for obtaining a commercial license in Dhaka, Bangladesh.

LEGAL STEPS:

Bangladesh's City Corporation Taxation Rules 1983 and Municipal Taxation Rules 1986 stipulate the legal basis for this requirement in order to obtain a Trade License. It is issued when a business visionary is linked via the license structure/form. Working business without an exchange permit is unlawful in Bangladesh.

The business visionary must use the proper application format and submit an application to the relevant authority's office in order to obtain a valid exchange permit. For example, Dhaka City Corporation is divided into north and south sections.

The candidate will be required to pick the right structure contingent upon the territory where the business is found. Begin by obtaining legal authorization and a business license from the City Corporation or City Council of the relevant business zone. The cost of obtaining a business license is BDT 2,000.

PROCEDURE:

The procedure is supervised by the City Corporation or city committee in the location where the business is located. A permit is issued solely for the licensee's benefit and cannot be transferred.

The licensee will not use the permit for anything other than the reason and nature of calling, trade, or calling for which it was issued.

The concerned personnel of the zonal tax collection office issues a renewed Business License. A cost for exchange permit must be maintained at any bank, as indicated on the Trade License application/structure.

The list of required archives for obtaining a trade license is as follows:

Dhaka City Corporation Application Form (North Form) or (South Form)
National identification card of the entrepreneur Recent receipt or proof of ownership
Recent photograph of the entrepreneur in passport format Work permit from the Board of Investment Statement of bank solvency and TIN certificate.

ADDITIONAL DOCUMENTS REQUIRED FOR TRADE LICENSE:

In the case of a standard Trade License, an attested copy of the rent receipt or rental agreement, as well as a copy of the Holding Tax payment receipt, are required.

In the case of a Trade license for industries – Everything mentioned beforehand and the following:

• No objection notice on the adjacent Location Map
• Fire certificate copy
• Statement on non-judicial stamp of tk 150/to comply with DCC rules and regulations.
• In the case of a Clinic or Private Hospital, the Director General of Health must grant permission.
• In the case of a Limited Company: Articles of Association Certificate of Organization
• In the event that Printing Press and Residential Hotel Permission is Required from DC
• In the case of Recruitment Agencies, a license from the Manpower Man-power Export Bureau is required.
• In the event of Arms and Ammunition – Arms License Copy.
• In the case of drugs and narcotics, please provide a copy of your drug/narcotics license.
• In the case of Travailing Agency – Civil aviation authority approval.

PROCESSING TIME LIMIT:

Projection of Processing The license is typically issued within three to four business days; however, this may vary depending on the nature and type of business.

RESERVED ADMINISTRATION PAYMENT:

The fee for submission is BDT 10.00.
The license fee ranges from BDT 100.00 to BDT 40,000.00 depending on the nature and type of business.
License fees for Limited Companies are based on paid-up capital.

RECERTIFICATION OF BUSINESS (COMMERCIAL COMPANIES):

Licenses for conducting business must be renewed annually. The required documents are the License Book, which is issued upon issuance of a Trade License, the Challan Book, proof of rent and ownership, and the TIN Certificate.

The candidate is required to store the planned charges at the designated bank as part of the renewal strategy. If the various requirements are met, the relevant zonal office of the City Corporation or Municipality will complete the restoration process after receiving the charge receipt.

ট্রেড লাইসেন্স ইস্যু ও নবায়ন পদ্ধতি

ট্রেড লাইসেন্স ইস্যু:

ট্রেড লাইসেন্স নবায়ন:

Tahmidur Rahman Remura Wahid TRW Associates is a full-service law firm in Dhaka that provides all types of legal and financial services, including organization registration, obtaining the proper licenses, drafting contracts and notices, and providing annual compliances and litigation services.

Tahmidur Rahman Remura Wahid TRW Associates is comprised of competent Barristers and Advocates with expertise in multiple legal fields, allowing them to provide the required services to a high degree and allowing clients to acquire all necessary and supplementary legal services under one roof.

The Barristers, Advocates, and attorneys at Tahmidur Rahman Remura Wahid TRW in Mohakhali New DOHS, Dhaka, Bangladesh have extensive experience assisting clients with trade licensing matters. For questions or legal counsel, please contact us at:

GLOBAL OFFICES:
DHAKA: House 410, ROAD 29, Mohakhali DOHS
DUBAI: Rolex Building, L-12 Sheikh Zayed Road
LONDON: 1156, St Giles Avenue, 330 High Holborn, London, WC1V 7QH

 Email Addresses:
info@trfirm.com
info@tahmidur.com
info@tahmidurrahman.com

 24/7 Contact Numbers, Even During Holidays:
+8801708000660
+8801847220062
+8801708080817

Contract Types in Bangladesh

by Tahmidur Remura Wahid | Apr 2, 2023 | 2023, Law

A contract is a legally binding agreement that establishes, specifies, and governs the rights and obligations of the parties. Contracts typically involve the transfer of goods, services, money, or the promise to transfer any of these at a later date. Section 2(h) of the Bangladeshi Contract Act of 1872 defines a "Contract" as "A legally enforceable agreement." 

Contract Types in Bangladesh and its components

The Bangladeshi Contract Act of 1872 specifies the conditions that must be met for a contract to be recognized as valid.

These consist of:

• Offering and Acceptance
• Free permission
• Volume
• Legitimate consideration

These requirements are intended to ensure that both parties to a contract are of legal age, possess the requisite capacity, and are acting voluntarily and lawfully. The contract must also include an offer and a method for accepting it that can be verified. 

In other words, any legally enforceable agreement falls under the definition of a contract. Contracts are subdivided into additional categories based on their function and requirements. 

According to the Bangladeshi Contract Act, there are four broad categories for the various types of business contracts. According to formation, nature, execution, and validity, these are the primary categories of contracts. 

Formation-based agreements 

Contracts governed by the characteristics of the parties' relationship and the considerations they exchanged 

Execution-based agreements 

Contrats based on validity 

Each of these contract categories is subdivided into additional categories. 

Formation Based Agreements 

These types of contracts are divided into four subcategories based on their formation method: 

Implied Contracts –

An implied contract is a legally enforceable obligation that results from the actions, behavior, or circumstances of one or more parties to a contractual agreement. 

Express Contracts –

An express contract is one in which all terms are agreed upon by the parties at the time the agreement is made verbally or in writing. 

Quasi-Contracts –

The Quasi-Contract is a contract with a retrospective nature between two parties. In this type of contract, there are no previous ties between the parties. It is created by a judge to rectify situations in which one party gains something at the expense of the other. 

E-Contracts –

E-contracts are contracts that are created using electronic, cyber, or electronic data exchange methods. Email, the telephone, and, more recently, digital signatures are all instruments that can be used to create an electronic contract. 

Agreements Based On Character & Consideration 

This category is assigned to contracts whose nature is diverse and unique to the parties. In general, they can be categorized as

Unilateral Contracts –

In these types of contracts, one party agrees to pay a specified sum only after the occurrence of a specified event. Such contracts can only be executed if the promise made by the other party is kept. 

Bilateral Contracts –

These are contractual agreements in which both parties reach a mutual understanding. Thus, the parties involved are identified, and the contract is formed through the exchange of proposals and agreements. These contracts, also known as two-sided contracts, are the most prevalent type of contract used today. 

Contracts With a Focus on Time:

These are contracts that can be executed according to schedule. For contracts based on execution, the timeline for the fulfillment of the commitment must be taken into account. Contracts classified according to time periods can be divided into the following categories: 

Executory Contracts –

A contractual agreement in which both parties have ongoing performance obligations or unfulfilled responsibilities. The majority of leases and contracts for the sale of goods in which the buyer has not made the required payment and the seller has not delivered the goods are executory contracts. 

Executed Contracts –

An executed contract is a signed agreement that establishes a business relationship between two or more parties. Once the contract has been fully executed, each party promises to uphold the legal obligations outlined in the agreement. 

Contracts Based on Validity 

These types of contracts are based on legal consequences. The following legal contracts fall under this category: 

According to the definition of a valid contract, it is an agreement that is legally binding. To be enforceable, a contract must comply with section 10 of the Bangladeshi Contracts Act of 1872.

Section 10 of the Bangladeshi Contracts Act of 1872 states that all agreements are considered contracts if they are freely entered into by parties with the legal capacity to do so, if they are formed for legal consideration, if they have a legal purpose, and if they are not expressly disregarded by this declaration. 

Void Contracts –

The Bangladeshi Contracts Act of 1872, section 2(j), defines a void contract. A void contract was once a valid contract, but due to modifications made to some of its terms, it is now null and void. A contract that is null and void contains no obligations or rights and cannot be enforced by any party. Even if both parties are in agreement, these contracts are unlawful and cannot be enforced. 

Voidable Contracts –

A contract is said to be voidable if it is legally enforceable at the option of one or more parties but not at the option of the other parties. Simply put, at least one party must be bound by the terms of the contract.

The other party, who may be a minor or temporarily incapable of entering into a contract for other reasons, is not bound by the terms and is free to reject or accept them. The agreement is null and void if either party decides to withdraw. 

Unenforceable Contracts -

A contract is unenforceable if it does not meet the necessary legal requirements. A contract of this type can be enforced after these requirements, which typically take the form of technical errors, are met. 

Illegal Contracts –

Section 23 of the act states that a contract may be void or illegal. Illegal contracts are those that violate a law or conflict with public policy. Illegal contracts are distinct from void contracts. The law only prohibits courts from enforcing these types of contracts, as opposed to illegal contracts, whose consideration is prohibited. 

Contracts in Project Administration 

Without contracts outlining the obligations between one or more parties, a project is incomplete. Types of project management agreements include: 

Fixed-Price Contracts –

Fixed-price contracts are used when the criteria for the work are understood and the scope of the work is clearly specified. Once the agreed-upon scope of work has been adequately specified, the vendor is expected to provide a fixed-price quote.

When preparing a fixed-price quotation, the seller must be aware of both the project's requirements and any potential risks that may arise. Therefore, the seller must be competent and mature enough to warrant a fixed-price transaction. 

Time-and-Material Contracts –

Time-and-material contracts are a common type of contract used for the purchase of common goods. In the majority of instances involving time-and-materials contracts, the organization will select its preferred vendor based on its capacity and experience. The supply price will then be negotiated and paid for. 

Cost Reimbursable Contracts -

In a cost-reimbursable contract, the buyer is responsible for both the seller's actual expenses and a surcharge or profit. Typically, these types of contracts involve two separate payments for two components. Typically, the charged amount is predetermined, whereas actual expenses are reimbursed as they occur. 

The aforementioned contract types can also be subdivided into categories of services contract types. A service contract is an agreement between a business and its clients or customers. This document describes the terms and conditions of the services the company will provide. 

Types Of Service Arrangements 

In addition to those described above, the following contract types exist in the services industry: 

A Not To Exceed (NTE) contract is a hybrid of a time-and-materials contract and a fixed-price contract. These contract arrangements, also known as time-and-materials with a limit, aim to reduce the client's risk exposure even further than a fixed-price contract. 

Retainer Agreements –

Retainers appear in a variety of professional services contracts, such as consulting agreements. When short turnaround times are required and the completion time of the work is unknown, retainers are frequently used in the context of professional services.

The fundamental tenet of a retainer-based agreement is that the client will pay a predetermined sum in advance in exchange for receiving services within a predetermined time frame. 

Recurring Subscription Contracts –

The primary product of a professional services firm is rapidly evolving to include subscription-based services. Depending on the services a PSO provides, a subscription model may be effective. Under this type of arrangement, clients will pay a monthly fee for recurring services. 

Managed Services Contracts –

Increasingly, conventional professional services organizations and consulting firms are utilizing managed services contracts. In the past, managed service providers (MSPs) offered managed services agreements that centered on the delivery of a specific level of services over an extended period. 

Management of the Contract Lifecycle: A One-Stop Solution 

The journey of a contract, from its initial drafting to its final execution, is referred to as its lifecycle. Management of the oversight and optimization of contract lifecycles is known as contract lifecycle management. 

A "life cycle" in the context of contracts is a model used to comprehend and classify a contract's various stages. The contract lifecycle journey begins with the submission of a contract request and includes all significant phases of a contract, including execution, tracking, intelligence, and renewal. 

The procedures involved in automated contract management include: 

The use of clm software 

A contract is requested and assigned to a member of the legal department. Contract requests are monitored using an intelligent dashboard. 

Authorising –

Clause and template libraries are utilized to create legally enforceable contracts. 

After the contract has been approved, the parties are invited to negotiate the terms of the contract digitally. Parties make and accept negotiating suggestions, and comment and suggestion histories are recorded to maintain transparency. 

Utilizing digital signatures, the parties execute the agreement. A signature certificate is created, which can be used to validate the signers. The contract is then tagged and stored in a central repository that is searchable, where only authorized users can access it. 

Performance –

The contract is executed by both parties, and contract performance is monitored through the use of intelligent analytics and employed as a tool for risk management and enhanced decision making. 

Renewal – Relevant users are notified via automated alerts when a contract is about to expire or is up for renewal. 

Consequences of noncompliance:

If any of the above contracts are made in a format other than writing, the legal status of such contracts may be called into question. If the statutory requirement is that the contract be executed in a particular manner and that requirement is mandatory, there can be no doubt that the document must either be executed in that manner or not at all.

The contract is invalid if it is executed in violation of this requirement.

Given the cardinal rule, it should be noted that in some instances a contract may remain valid despite the fact that it violates a statute by not being in writing. In such a situation, if one party denies the existence of the contract, the other party would have a heavy burden to establish the existence of the contract and any alleged breach of its terms.

The following contracts must be stamped:

Numerous contracts must not only be in writing, but also be properly executed and stamped (although many of such instruments are absolved from being registered compulsorily). The Stamp Act of 1899 establishes the general stamp requirements for legal instruments (excluding pleadings).

The Stamp Act, among other things, specifies different types of stamps for different instruments, the procedure for affixing stamps, and the consequences for failing to comply with the stamp requirement. The following are some examples of instruments that must be executed with an appropriate stamp.

Contracts that require a Registered Deed:

It has been stated elsewhere in this article that although the Contract Act does not prescribe any form for the validity of a contract, it expressly states that the provisions of the Contract Act are subject to the provisions of other laws in force in Bangladesh requiring different contracts to be made in different forms.

The Registration Act, 1908, the Transfer of Property Act, 1882, amongst other statutes, provide guidelines as to what contracts are to be made by whom and in what form. Due to the fact that these guidelines are not self-explanatory in certain respects, the judiciary has been called upon on numerous occasions to intervene.

Consequently, a review of pertinent provisions of the aforementioned statutes and legal decisions thereon may be an appropriate method for determining which contracts are required to be registered. The following contracts fall under this category:

Non-testamentary instruments affecting real property interests:

Non-testamentary instruments that purport or operate to create, declare, assign, limit, or extinguish, in the present or future, any right, title, or interest, whether vested or contingent, to or in immovable property must be registered, per Section 17(1)(b) of the Registration Act of 1908.

The scope of this section has been greatly expanded by removing the phrase "of a value exceeding one hundred taka." The effect of the amendment is that instruments falling under section 17 (1) (b) must be registered regardless of their monetary value.

Another aspect of this rule is that it is sufficiently broad to include not only instruments that create any right, title, etc., but also instruments that purport to create any right, title, or interest. The following instruments are deemed to fall within the scope of the preceding rule:

(a) Sales agreements for immovable property

(b) A document that gives a creditor the right to have an immovable property sold and to recover the money lent to him from the proceeds.

(c) A compromise document affecting immovable property

d) A "power of attorney" that creates a lien in favor of the done on the immovable property mentioned in the document.

e) Any transfer of real estate by a Muslim husband to his wife in lieu of dower."

(g)Exchange deed pertaining to immovable property;

(h) A document imposing a lien on property

(i)A combination or era containing a contract for the sale of Iand-grown straw.

(j) A document granting a Hindu wife, in exchange for marriage, the right of residence and maintenance from the house's rents.

(k) A "power of attorney" authorizing the done to collect the rents of an immovable property owned by the donor for the done's benefit;

(l) The document itself that creates an interest in real estate, even though it contemplates the execution of another document;

(m) Deed for the transfer of a partner's interest in a partnership firm that owns immovable property.

(n) A written release or receipt to relinquish any claim or interest in immovable property;

(o) Instruments that alter the terms of registered documents, etc.

Why should you hire Tahmidur Rahman Remura Wahid for your contractual needs and to safeguard your interests

Tahmidur Rahman Remura Wahid TRW Associates is a full-service law firm in Dhaka that provides all types of legal and financial services, including organization registration, obtaining the proper licenses, drafting contracts and notices, and providing annual compliances and litigation services.

Tahmidur Rahman Remura Wahid TRW Associates is comprised of competent Barristers and Advocates with expertise in multiple legal fields, allowing them to provide the required services to a high degree and allowing clients to acquire all necessary and supplementary legal services under one roof.

GLOBAL OFFICES:
DHAKA: House 410, ROAD 29, Mohakhali DOHS
DUBAI: Rolex Building, L-12 Sheikh Zayed Road
LONDON: 1156, St Giles Avenue, 330 High Holborn, London, WC1V 7QH

 Email Addresses:
info@trfirm.com
info@tahmidur.com
info@tahmidurrahman.com

 24/7 Contact Numbers, Even During Holidays:
+8801708000660
+8801847220062
+8801708080817