BRPD Circular Letter No. 08: Deduction of Income Tax at Source on Mobile Banking Service Charges/Commissions/Fees/Revenue Share under Section 52AA of The Income Tax Ordinance, 1984

BRPD Circular Letter No. 08 Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka. April 08, 2014 BRPD Circular Letter No. - 08 Date: ----------------- Chaitra 25, 1420 Managing Director / Chief Executive Officer All Scheduled Banks operating in Bangladesh. Dear Sir, Regarding deduction of income tax at source on charges/commission/fees/revenue share etc. related to mobile banking services. A copy of the National Board of Revenue letter dated February 12, 2014, reference number 08.01.0000.030.07.003.2013/2(52), on the subject mentioned above, is reproduced herewith for your information and necessary action. 02. You are requested to follow the instructions given below and ensure their compliance. Acknowledge receipt with thanks. Yours faithfully, (Md. Anowarul Islam) Deputy General Manager Phone: 9530094

Government of the People's Republic of Bangladesh National Board of Revenue Rajshahi Bhavan, Segun Bagicha, Dhaka. (Tax Policy Branch) File No: 08.01.0000.030.07.003.2013/2(52) Date: 12.02.2014 Subject: Regarding deduction of income tax at source under Section 52AA on charges/commission/fees/revenue share etc. related to mobile banking services. In accordance with the rules of Section 52AA of the Income Tax Ordinance, 1984, provision exists for deduction of income tax at source at the rate of 10% on any amount payable for the provision of any service other than those specifically mentioned in the First Schedule of the said Ordinance. Along with the expansion of the country's economic activities, mobile banking services are becoming increasingly popular. With the aim of reaching mobile banking services to people across the country, various banks have launched mobile banking services under different names [such as bKash, eCash, iCash, Secure Cash, Mobile Banking, Mobile Money, OneCash (1Cash) etc.] with the approval of Bangladesh Bank. Some banks are operating mobile banking programs using their own technology and utilizing the network and service delivery agents of mobile network operators (MNOs) under bilateral agreements for commission/revenue sharing. Some banks are operating mobile banking programs using their own technology and own service delivery agents while utilizing the network of MNOs. On the other hand, some banks are operating sub-mobile banking programs by entering into separate agreements for technology support, telephone network, and service delivery agents. In some cases, mobile network operators are performing both mobile network services and service delivery agent programs under bilateral agreements with sponsoring banks. Various parties involved in mobile banking services earn income in the form of charges/commission/fees/revenue share etc. from mobile banking programs as follows:

• Bank (Sponsoring Entity): Charges/commission/fees/revenue share etc. received for mobile banking programs;
• Mobile Network Operator (Grameen Phone, Banglalink, Robi, Airtel, Teletalk, Citycell etc.): Charges/commission/fees/revenue share etc. received for mobile network usage/technical assistance/service delivery agent programs;
• Service Delivery Agent (Institutions engaged in delivering grassroots mobile banking services; e.g., outlets/agents of mobile operators, NGOs, or any individual or institution): Charges/commission/fees/revenue share etc. received as agents of the sponsoring bank/mobile network operator at the main service delivery point of the mobile service program;
• Technical Support Providing Institution (Technology Service Provider): Charges/commission/fees/revenue share etc. received for providing software programs and other technical support to the sponsoring bank/mobile network operators in the mobile banking program. Considering the nature of income of various parties involved in the mobile banking program, the National Board of Revenue is issuing the following instructions for the deduction of income tax at source by the sponsoring bank when paying charges/commission/fees/revenue share etc. to the relevant parties for the mobile banking program, in accordance with the rules of Section 52AA of the Income Tax Ordinance, 1984:

1. The sponsoring bank shall deduct income tax at source at the rate of 10% on the amount payable to the mobile network operator for charges/commission/fees/revenue share etc.
2. The sponsoring bank shall deduct income tax at source at the rate of 10% on the amount payable to the technical support providing institution for charges/commission/fees/revenue share etc. for technical support.
3. The sponsoring bank shall deduct income tax at source at the rate of 10% on the amount payable to the service delivery agent/institution/NGO/individual for charges/commission/fees/revenue share etc. for mobile banking service delivery.
4. The mobile network operator shall (where applicable) deduct income tax at source at the rate of 10% on the amount payable to the technical support providing institution for charges/commission/fees/revenue share etc. for technical support.
5. The mobile network operator shall (where applicable) deduct income tax at source at the rate of 10% on the amount payable to the service delivery agent/institution/NGO/individual for charges/commission/fees/revenue share etc. for mobile banking service delivery.
6. If the mobile network operator or technical support providing institution incurs any cost on behalf of the sponsoring bank according to the written contract, no withholding tax shall be deducted by the sponsoring bank when reimbursing such cost to the mobile network operator or technical support providing institution. However, it is a condition that such cost must be reimbursed at the same price without any profit or markup, and the mobile network operator or technical support providing institution must pay such cost to any other third party.
7. In the cases of serial numbers 2 and 4 above, if the technical support providing institution provides "Information Technology Services" as defined in Item 33 of Part-A of the Sixth Schedule of the Income Tax Ordinance, 1984, to the sponsoring bank/mobile network operator, no withholding tax shall be deducted on any charges/commission/fees/revenue share etc. paid on or before June 30, 2015.

Signed Md. Abdur Rahman Khan, FCMA First Secretary (Tax Policy) National Board of Revenue, Dhaka.

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