FEPD Circular No. 03: Export subsidy against export of Software, ITES and Hardware

Foreign Exchange Policy Department Bangladesh Bank Head Office Dhaka. Ref. No. FEPD-Circular-03 Magh 26, 1424 FEPD Circular No. 03 Date: ---------------------- February 08, 2018

To All Approved Dealers for Foreign Exchange Transactions.

Dear Sirs,

Regarding the provision of export subsidy against the export of Software, ITES (Information Technology Enabled Services) and Hardware from Bangladesh.

This is to bring to the attention of all concerned that the Government has decided to provide a subsidy against the export of Software, ITES (Information Technology Enabled Services) and Hardware from Bangladesh to encourage the country's export trade. This facility will be applicable to services/goods shipped/exported from the 2017-2018 fiscal year onwards.

The following instructions are given to the Approved Dealer Banks regarding the payment of subsidy:

2. Recipient of Subsidy and Extent of Entitlement: The manufacturer/exporter shall be entitled to a subsidy at the rate of 10% on the net FOB value against the export of Software, ITES and Hardware manufactured in their own factory/establishment. The aforementioned facility shall not be applicable to exports from establishments located in Special Areas (EPZ, IZ, HTP).

3. Products/Services under Software, ITES and Hardware: The list of services/products covered under Software, ITES and Hardware is as follows:

(a) Software: Software means all software developed domestically within the country.

(b) ITES: The following sectors mentioned in the explanation given in Section 33 of Chapter A of Section 6 of the Income Tax Ordinance, 1984 (Ordinance No. XVIII of 1984) and the "List of Taxable Income Heads Proposed in the Budget 2017-18" published by the National Board of Revenue may be considered as falling under the definition of Information Technology Enabled Services (ITES): Business Process Outsourcing, Call Center (Type 2 and Type 3), E-commerce IT Enabled Services (E-ITES), Tele-medicine and Tele-education Services, Online Services, English Language Training Centers, Data Entry, Data Processing, Web Hosting, E-learning and E-publishing, Online Business Process Outsourcing, Online Gaming, E-Governance and E-Services, Online Banking, Online Insurance, Business Consulting, IT Enabled Financial Services, Online Advertising, IT Enabled: Non-Real Estate Services, Animation and Visual Effects, Online Non-Real Estate Services, Virtual Currency Trading.

(c) Hardware: Hardware means all types of digital machines, machine parts and auxiliary equipment developed, assembled or integrated domestically, such as computers, laptops, smartphones, tablet computers, IoT devices, IoT/Internet Enabled Devices, Digital Display Devices, Semiconductors and all related machines, machine parts and auxiliary equipment.

4. Extent of Local Value Addition: In the case of export of Software and ITES, a minimum of 30% local value addition percentage shall be applicable, and in the case of export of Hardware, a minimum of 20% local value addition percentage shall be applicable. The export subsidy and duty drawback/bond facility shall not be applicable simultaneously in the aforementioned sector.

5. Deadline for Submission of Export Subsidy Application:

(a) The aforementioned subsidy shall be provided in accordance with the Customs Rules against the expenses incurred for handling, quality inspection, processing of exported goods, and domestic and international transportation and freight charges.

(b) Exporters may submit application Form-C to the Approved Dealer Bank branch for subsidy against the repatriation of export proceeds generated from subsequent export documents under the export letter of credit/contract or through Documentary Collection. In the TT facility, the Approved Dealer Bank branch must ensure the authenticity/reliability of the foreign buyer, accuracy of value, and actual export from Bangladesh through the TT advice and other documents against the export documents or against the export letter of credit/contract with the condition of advance repatriation of export proceeds. The payment of value through TT must be made directly through banking channels (excluding Exchange Houses) by the export order giver or importer, and the TT advice must mention information related to the import. In all cases, the application for subsidy must be submitted to the respective Approved Dealer Bank branch within 180 days from the date of valuation of the export proceeds (repatriation of export proceeds) in the Nostro account of the respective bank abroad. Furthermore, the instructions of FEPD Circular No. 12, dated December 20, 2012 shall be followed regarding the submission of subsidy applications against exports through different shipments for the same export. However, in cases where the time limit for submitting applications for the aforementioned facility has already expired, applications for the subsidy facility may be submitted within 60 (sixty) days from the date of issuance of this circular.

(c) Required documents for export, such as the full set of Bill of Lading/Air Waybill issued and endorsed by the carrier as proof of shipment, Commercial Invoice, Packing List, Bill of Exporter (issued and examined by Customs and endorsed by the carrier for export), etc., must be submitted.

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6. Receipt, Examination and Payment Decision of Application by Approved Dealer Bank Branch:

(a) The Approved Dealer Bank shall ensure in the initial examination that all documents, certificates, and endorsements mentioned in various sections of the export subsidy application form are complete and attached with the application. For the export of software, a certificate in accordance with the attached table (Form-B) from the Bangladesh Association of Software and Information Services (BASIS), for the export of hardware, a certificate from the Bangladesh Computer Society (BCS), and for the export of ITES, a certificate from BASIS/Bangladesh Association of Call Center and Outsourcing (BSCC) must be submitted along with the subsidy application. The respective bank branch shall also ensure the authenticity of the documents processed by the bank branch and the accuracy of the information mentioned therein. The Approved Dealer Bank branch shall inform the applicant establishment in writing within 03 (three) working days of receipt of the application regarding any defect/incompleteness observed in the initial examination (if any).

(b) In order to ensure that the export mentioned in the application is consistent with the production capacity (and appropriate professional manpower, if applicable) of the applicant establishment, additional explanations/information from the applicant and information/certificates collected from other bank branches from the bank branch's own records, if necessary, shall be attached to complete the application. After the application is received in complete and full form, the Approved Dealer shall determine the amount payable. This process shall be completed by following the instructions provided in the designated section of the application form for use by the Approved Dealer Bank branch sequentially.

(c) Each application shall be audited by an appointed external audit firm to ensure the accuracy of the amount payable according to the subsidy application. After conducting the audit, the claim for the amount payable against the export subsidy shall be sent to the Accounts and Budgeting Department of the Head Office of Bangladesh Bank through the Head Office of the Approved Dealer Bank in Form-D. The statement of amounts paid in favor of the applicant establishment in respect of subsidies drawn from Bangladesh Bank shall be submitted to the Foreign Exchange Inspection Department of the Head Office of Bangladesh Bank through the Head Office of the Bank in Form-E within the second week of the following month.

(d) Along with the approval of subsidy payment, the relevant export proceeds repatriation certificate (according to Appendix-5/23 of Guidelines for Foreign Exchange Transaction-2009, Volume-1), Bill of Lading/Air Waybill as proof of shipment, Commercial Invoice, Packing List, and Bill of Exporter endorsed by Customs shall be stamped with the amount of subsidy paid at an easily visible place and signed by the authorized officer of the payment approval authority, so that there is no scope for misuse of those documents. In the case of invisible export of software/ITES, certificates issued according to RD-2-A, Commercial Invoice, and certificates issued by the relevant export association shall be stamped with the amount of subsidy paid at an easily visible place and signed by the authorized officer of the payment approval authority. The Approved Dealer Bank branch shall take special care that PRIs are not issued multiple times for the same export for the same facility. Additionally, before processing the application, the Approved Dealer Bank must ensure that the export proceeds of the relevant exporter have not been unrepatriated, in accordance with the instructions of FEPD Circular No. 30, dated August 16, 2017, by checking the Bangladesh Bank's Online Exporter Monitoring System. However, before processing the application for invisible export of software/ITES, an undertaking must be obtained from the applicant establishment stating that there has been no case of export proceeds repatriation beyond the deadline in the past 2 years, and if such undertaking is found to be false, legal action will be taken against them.

(e) In the case of invisible export of software/ITES services, the Approved Dealer Bank branch must ensure that the exporter complies with the C-Form and I-UC standards appropriately, so that the subsidy is paid against the actual export of software/ITES services.

(f) All documents related to the decision of subsidy payment shall be preserved at the branch for a minimum of 03 (three) years from the date of payment for inspection by the Bangladesh Bank's Inspection/Government Commercial Audit Department.

(g) In case of any ambiguity regarding export or need for information collection, the respective bank and audit firm shall consult the Export Promotion Bureau, TSCB Building, 1 Kawran Bazar, Dhaka and Bangladesh Computer Council, E-14/X, BSCC Building, Agargaon, Dhaka.

7. Punitive Measures for Illegal Payment of Subsidy:

(a) If subsidy is paid illegally, the paid amount shall be recovered by adjusting it against the account of the paying bank kept with Bangladesh Bank.

(b) Appropriate punitive measures shall be taken against the bank officials/officers involved in the irregularity.

(c) If any officer of the exporter association is involved in the irregularity or assists in the irregularity by providing false information, appropriate punitive measures shall be taken against the exporter association/officer.

8. Process of Payment of Amount for Subsidy: The amount shall be provided in favor of the respective bank against the submitted application for subsidy from the funds released against the government budget allocation.

All concerned parties are requested to be informed about the matter.

Yours faithfully,

Enclosure: As per description.

(Md. Harun-Ar-Rashid) Deputy General Manager Phone: 9530142

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(Form 'C' (See Paragraph 05(b) of FEPD Circular No. 03/2018) Application for Export Subsidy against Export of Software, ITES (Information Technology Enabled Services) and Hardware from Bangladesh

(a) Name and Address of Applicant Establishment: ---------------------------------- Export Registration Certificate (ERC) Number: -----------------------------------------------

(b) Export Letter of Credit/Contract Number, Date and Value ------------------------------------- (A legible certified copy must be submitted)

(c) Source, Quantity and Value of Local Procurement of Services/Goods Used in Production of Exported Services/Goods:

Name and Address of Supplier	Quantity	Value
1	2	3

(Certificate from the relevant service/good association regarding the description, value and source of procurement of services/goods exported must be submitted.)

(d) Imported Services/Materials Used in Production of Exported Services/Goods:

Name and Address of Supplier	Name and Quantity of Service/Goods	LC/Back-to-Back LC/Documentary Collection/TT Remittance Number, Date	Value
1	2	3	4

(A legible certified copy of the LC in column 3 must be submitted. In the case of service import, the Approved Dealer Branch must ensure that the appropriate procedure has been followed. The exporter must submit a declaration that duty bond facility has not been availed/duty drawback facility has not been taken for materials used in the production process and no application will be made in the future.)

(e) Details of Export Shipment:

Description of Goods	Quantity	Name of Importer's Country	Invoice Value (Foreign Currency)	Date of Shipment/Export	EXPI Number*	Repatriated Export Proceeds and Date of Repatriation (Foreign Currency)
1	2	3	4	5	6	7

• Applicable in case of visible goods export

(Legible certified copies of Commercial Invoice, Packing List, full set of Bill of Lading/Air Waybill issued and endorsed by the carrier as proof of shipment, Bill of Exporter (issued and examined by Customs and endorsed by the carrier for export), etc., and export proceeds repatriation certificate must be submitted. However, in the case of invisible service export, there is no need to submit shipment documents and Bill of Exporter.)

(f) Amount Applied for Subsidy:

Repatriated Export Proceeds	Amount of Ship Hire (if applicable)	Commission, Insurance etc. Payable in Foreign Currency (if any)	Net FOB Export Proceeds
1	2	3	4

(1-(2+3))

(Legible copy of Freight Surcharge Certificate mentioning ship hire, if applicable, must be submitted)

Value of Services/Goods Used in Production of Exported Services/Goods	Local Value Addition Rate
[(4-6)/4] * 100

Payable Subsidy*	Domestic Goods/Services	Imported Services/Goods
4	5	6

(*4 * 10%)

(*Subsidy shall be payable if the rate in column 7 is consistent with Paragraph 4 of the aforementioned Circular.)

I hereby undertake that the application for subsidy is made against the export of Software/ITES/Hardware manufactured/produced in our own factory/establishment. All information/declarations provided in this application are complete and correct. If any error/false information/fraud/forgery is discovered later, the entire amount of the subsidy taken or a part thereof shall be recovered from me/us and/or from my/our bank account.

Date: --------------------- ---------------------------------- Signature and Designation of Owner/Authorized Officer of Applicant Establishment.

(g) To be filled by the Subsidy Providing Bank Branch:

Repatriated Export Proceeds	Amount of Ship Hire (if applicable)	Commission, Insurance etc. Payable in Foreign Currency (if any)	Net FOB Export Proceeds
1	2	3	4

(1-(2+3))

(Legible copy of Freight Surcharge Certificate mentioning ship hire, if applicable, must be submitted)

Value of Services/Goods Used in Production of Exported Services/Goods	Local Value Addition Rate
[(4-6)/4] * 100

Amount of Payable Subsidy (in Taka)*
(4) * 10%

Domestic Services/Goods (Foreign Currency)	Imported Services/Goods (Foreign Currency)
5	6

(*Subsidy shall be payable if the rate in column 7 is consistent with Paragraph 4 of the aforementioned Circular.)

Amount of Subsidy --------------- Taka (In Words: -----------------). Date of Payment: --------------------

Signature, Name and Designation of Authorized Bank Officer for Subsidy Approval

(Date of Export Proceeds Repatriation)

(Paragraph 06(c), FEPD Circular No. 03/2018 Reference) Form - 'B' Certificate of Endorsement Issued by BASIS/BCS/BSCC

Certificate of Endorsement for Receiving Export Subsidy against Export of Software, ITES (Information Technology Enabled Services) and Hardware from Bangladesh

1. Name, ERC Number and Address of Applicant:
2. Export Letter of Credit/Contract Number: Date: Value:
3. Name and Address of Foreign Buyer:
4. Name and Address of Foreign Buyer's Bank:
5. (a) Invoice Number: Date: (b) Quantity and Value of Services/Goods Mentioned in Invoice:
6. Source of Local Services/Materials Used in Production of Exported Software/ITES/Hardware (Name and Address of Supplier): Quantity: Value:
7. Source of Imported Ancillary Services/Materials Used in Production of Exported Software/ITES/Hardware (Name and Address of Supplier): Quantity: Value:
8. Details of Exported Services/Goods: Quantity: Value:
9. Date of Shipment: Destination Port:
10. EXPI Number (for visible goods export): Value: Date:
11. Total Repatriated Export Proceeds (Foreign Currency): Net FOB Export Proceeds (Foreign Currency):
12. Certificate Number of Repatriated Export Proceeds: Date:

Signature and Date of Exporter

Hereby it is certified that the information mentioned in the aforementioned paragraphs is correct and reliable regarding the procurement of services/materials from the sources mentioned in serial numbers 6 and 7 for the export of Software/ITES/Hardware manufactured/produced in our own factory/establishment. The authenticity/reliability of the purchase order of the foreign buyer/importer has also been ensured.

Signature and Date of Exporter

It is verified that the declaration mentioned in serial number 8 is correct. The declared export proceeds in serial number 8 are found to be reasonable and consistent with the current domestic market price, and the authenticity/reliability of the foreign buyer has also been ensured. It is recommended to pay the export subsidy on the repatriated export proceeds (Net FOB Value).

Signature, Date and Seal of Two Appropriate Officers of the .................... Association

[If any erasure, cutting or correction is made, this endorsement shall be considered void.]

Form-'G' (Paragraph 6(g), FEPD Circular No. 03/2018 Reference)

Proposal for Claim of Amount Payable against Export Subsidy in the Export Sector of Software, ITES (Information Technology Enabled Services) and Hardware from Bangladesh in accordance with FEPD Circular No. 03/2018

.............................................. Bank, Head Office, Dhaka.

Name and Address of Subsidy Applicant Establishment	Date of Receipt of Application by Export Related Information Branch	Amount of Application	Amount of Claim Payable	Details of Service/Goods	Date of Shipment and Destination	EXPI Number (for visible goods export)	Total Repatriated Export Proceeds (Foreign Currency)	Net FOB Value (Foreign Currency)	Date of Value Repatriation
1	2	3	4	5	6	6	7	8	9

Official Seal, Signature, Date, Name and Designation of Authorized Bank Officer

Form-'H' (Paragraph 06(g), FEPD Circular No. 03/2018 Reference)

Statement of Account of Subsidy Paid in the Export Sector of Software, ITES (Information Technology Enabled Services) and Hardware from Bangladesh in accordance with FEPD Circular No. 03/2018 for the Month of.......... Year.........

Name of Approved Dealer Bank Branch:..............................................................................

Name and Address of Subsidy Applicant Establishment	Unresolved Applications at Branch	Details of Service/Goods	Date of Shipment and Destination	EXPI Number (for visible goods export)	Total Repatriated Export Proceeds (Foreign Currency)	Net FOB Value (Foreign Currency)	Number	Claimed Amount (Taka)	Paid Subsidy (Taka)	Date of Payment
1	2	3	4	5	6	7	8	9	10
--------	-------------------------------

Official Seal, Signature, Name, Designation and Date of Authorized Officer

RD-2-A Export of Software, ITES and Hardware from Bangladesh Certificate of Endorsement for Receiving Export Subsidy

1. Name, ERC Number and Address of Applicant:
2. Export Letter of Credit/Contract Number: Date: Value:
3. Name and Address of Foreign Buyer:
4. Name and Address of Foreign Buyer's Bank:
5. (a) Invoice Number: Date: (b) Quantity and Value of Services/Goods Mentioned in Invoice:
6. Source of Local Services/Materials Used in Production of Exported Software/ITES/Hardware (Name and Address of Supplier): Quantity: Value:
7. Source of Imported Ancillary Services/Materials Used in Production of Exported Software/ITES/Hardware (Name and Address of Supplier): Quantity: Value:
8. Details of Exported Services/Goods: Quantity: Value:
9. Date of Shipment: Destination Port:
10. EXPI Number (for visible goods export): Value: Date:
11. Total Repatriated Export Proceeds (Foreign Currency): Net FOB Export Proceeds (Foreign Currency):
12. Certificate Number of Repatriated Export Proceeds: Date:

Signature and Date of Exporter

Hereby it is certified that the information mentioned in the aforementioned paragraphs is correct and reliable regarding the procurement of services/materials from the sources mentioned in serial numbers 6 and 7 for the export of Software/ITES/Hardware manufactured/produced in our own factory/establishment. The authenticity/reliability of the purchase order of the foreign buyer/importer has also been ensured.

Signature and Date of Exporter

It is verified that the declaration mentioned in serial number 8 is correct. The declared export proceeds in serial number 8 are found to be reasonable and consistent with the current domestic market price, and the authenticity/reliability of the foreign buyer has also been ensured. It is recommended to pay the export subsidy on the repatriated export proceeds (Net FOB Value).

Signature, Date and Seal of Two Appropriate Officers of the .................... Association

[If any erasure, cutting or correction is made, this endorsement shall be considered void.]