Merchant banks will now have to pay 42.5 per cent in corporate tax instead of 37.5 per cent as the revenue board has decided to treat them as 'financial institutions', officials have said.

The officials of the National Board of Revenue (NBR) recently started issuing letters to different merchant banks instructing them to comply with its directive.

Among others, Benco Finance Investment has also got the letter from the NBR.

"We have been mistakenly treating those as private firms. But merchant banks fall under the category of financial institutions," a senior official at large tax payers unit (LTU) under the board's income tax wing told the FE Wednesday.

Former NBR chairman Muhammad Abdul Mazid said the central bank recently has come up with the definition of financial institutions (FIs) and as per the latest definition, merchant banks will be treated as 'financial institutions'.

"Lately, merchant banks are being upgraded due to their extended functions. That's why merchant banks will be treated as financial institutions," Mr. Mazid told the FE.

As private firms, merchant banks used to pay 37.5 per cent corporate tax under Section 82 of the income tax law.

"Both the NBR and the merchant banks did not look into the said Section of the income tax law, under which these banks will have to pay 42.5 per cent corporate tax," an NBR official told the FE.

He said the revenue board was contacting the merchant banks one after one to inform them that they would be treated as 'financial institutions' as per the law.

"We have given them a reminder that the law is being applied to them. They have also agreed to comply with the existing law in paying the corporate tax," the NBR official said.

Presently, a total of 50 merchant banks are running their business in the country's stock market.

When asked, different merchant banks have expressed their 'dissatisfaction' over the letter the NBR has sent to them.Merchant banks will now have to pay 42.5 per cent in corporate tax instead of 37.5 per cent as the revenue board has decided to treat them as 'financial institutions', officials have said.

The officials of the National Board of Revenue (NBR) recently started issuing letters to different merchant banks instructing them to comply with its directive.

Among others, Benco Finance Investment has also got the letter from the NBR.

"We have been mistakenly treating those as private firms. But merchant banks fall under the category of financial institutions," a senior official at large tax payers unit (LTU) under the board's income tax wing told the FE Wednesday.

Former NBR chairman Muhammad Abdul Mazid said the central bank recently has come up with the definition of financial institutions (FIs) and as per the latest definition, merchant banks will be treated as 'financial institutions'.

"Lately, merchant banks are being upgraded due to their extended functions. That's why merchant banks will be treated as financial institutions," Mr. Mazid told the FE.

As private firms, merchant banks used to pay 37.5 per cent corporate tax under Section 82 of the income tax law.

"Both the NBR and the merchant banks did not look into the said Section of the income tax law, under which these banks will have to pay 42.5 per cent corporate tax," an NBR official told the FE.

He said the revenue board was contacting the merchant banks one after one to inform them that they would be treated as 'financial institutions' as per the law.

"We have given them a reminder that the law is being applied to them. They have also agreed to comply with the existing law in paying the corporate tax," the NBR official said.

Presently, a total of 50 merchant banks are running their business in the country's stock market.

When asked, different merchant banks have expressed their 'dissatisfaction' over the letter the NBR has sent to them.

Financial Express/Bangladesh/ 22th March 2012