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The garments and textiles sector is the largest export-earning industry in Bangladesh, contributing significantly to GDP and employment. Recognizing its importance, the Income Tax Act 2023 includes specific tax policies for businesses operating in this sector. These policies aim to promote growth while ensuring transparency and compliance.

Special Tax Rates for Garments and Textiles

Under the Income Tax Act 2023:

Export-oriented readymade garments (RMG) industries enjoy a reduced corporate tax rate of 12%.
If the factory has an internationally recognized green building certification (such as LEED), the tax rate is even lower at 10%.

This preferential tax treatment encourages sustainable practices and supports the competitiveness of Bangladesh's RMG products in the global market.

Conditions for Availing Reduced Tax Rates

To enjoy the reduced tax rates, garments and textile businesses must:

Export at least 80% of their total production.
Ensure salary payments to workers are made through a bank transfer or mobile financial services.
Comply with labor laws, including minimum wage requirements and workplace safety standards.
Obtain a valid Export Registration Certificate (ERC) and maintain proper export documentation.

Non-compliance with these conditions may result in the loss of preferential tax rates and could expose the business to higher standard corporate tax rates.

Tax Deducted at Source (TDS) Obligations

Garments and textiles companies must comply with various withholding tax obligations:

Deduct tax on payments made to suppliers, contractors, and service providers.
Deduct tax from export proceeds at prescribed rates before repatriating earnings.
Deduct tax at source from salaries paid to employees where applicable.

Proper documentation and timely deposit of TDS are essential to avoid penalties and legal actions.

Tax Incentives and Exemptions

Apart from reduced tax rates, the government offers additional incentives to promote the sector:

Tax exemptions for specific periods for newly established industrial undertakings in underdeveloped areas.
Investment tax credits for industries adopting green technologies and environmental compliance.
VAT exemptions on certain imported raw materials and machinery.

Conclusion

The Income Tax Act 2023 continues to offer strong support to the garments and textiles sector through reduced tax rates, incentives, and compliance frameworks. Businesses must, however, stay vigilant in fulfilling their tax obligations to maintain these benefits. Compliance not only strengthens their operations but also helps Bangladesh uphold its position as a global leader in textile and garment exports.

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