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2013-12-19

Added 2026-08-11 · Updated 2026-08-14

BRPD Circular Letter No. 22: Clarification about Local L/C under Section 52 of Income Tax Ordinance, 1984

All scheduled banks operating in Bangladesh are required to deduct tax at source as advance income tax from amounts payable through Local L/Cs, as mandated by Section 52 of the Income Tax Ordinance, 1984, and Rule 16 of the Income Tax Rules, 1984. This obligation applies even if banks rename such transactions, for example, as Invoice Financing or Supplier Financing. The National Board of Revenue emphasizes that if a transaction is inherently similar to a Local L/C, tax deduction at source is mandatory. Banks are instructed to ensure that all their branches immediately follow these guidelines and ensure compliance.

Bangladesh

Bangladesh Bank

Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka. December 19, 2013 BRPD Circular Letter No. 22 Date:-------------------- Poush 05, 1420

Managing Director/Chief Executive Officer All Scheduled Banks Operating in Bangladesh.

Dear Sir,

Subject: Clarification regarding Local Letter of Credit (Local L/C) included in Section 52 of the Income Tax Ordinance, 1984.

Your attention is drawn to BRPD Circular Letter No. 06 dated July 19, 2012, regarding the subject mentioned in the title. In this regard, National Board of Revenue's letter No. 08.01.0000.031.03.004.2013/109 dated November 07, 2013, is reprinted verbatim on the next page for your information and necessary action.

You are requested to ensure that all your branches immediately follow the instructions mentioned and ensure their compliance.

Please acknowledge receipt.

Yours faithfully, (Md. Anwarul Islam) Deputy General Manager Phone: 9530094

Government of the People's Republic of Bangladesh National Board of Revenue Revenue Building Segun Bagicha, Dhaka.

File No.-08.01.0000.031.03.004.2013/109 Date: 07/11/2013

Subject: Clarification regarding Local Letter of Credit (Local L/C) included in Section 52 of the Income Tax Ordinance, 1984.

According to Section 52 of the Income Tax Ordinance, 1984, and Rule 16 of the Income Tax Rules, 1984, it is mandatory to deduct tax at source as advance income tax from the amount payable/paid through Local L/C to the beneficiary or recipient. This provision was introduced through the Finance Act, 2012. Which tax deducting authorities will deduct tax at source in this sector has been described in detail in paragraph 10 of National Board of Revenue's Circular-1 (Income Tax)/2012, dated 12/08/2012. It is expected that various tax deducting authorities will fulfill their legal responsibilities by properly considering the spirit of the law. However, it is known that some banks, as tax deducting authorities, are refraining from deducting tax at source by not properly applying the said law and by naming Local L/C activities with different names such as Invoice Financing, Supplier Financing, etc.

In this situation, regardless of the name by which it is referred, in cases where a transaction is inherently similar to a Local L/C, all concerned are specifically requested to remain vigilant in properly deducting tax at source according to Section 52 of the Income Tax Ordinance, 1984, and Rule 16.

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