Excise duty exemption likely on offshore banking deposits

Depositors, who park funds in offshore banking units of banks, may enjoy exemption from excise duty payment on their foreign currency deposits in the coming fiscal year of 2024-25, according to officials.

"We are considering providing the exemption to encourage people to keep their foreign currency in the offshore banking accounts," said a senior official of the finance ministry.

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The government plans to offer the benefit as banks are working to lure foreign currency holders, particularly non-resident Bangladeshis, to make deposits in their offshore banking units (OBUs).

The development comes after Bangladesh Bank relaxed the rules and allowed banks to receive funds from the OBUs amounting to up to 40 percent of their regulatory capital to settle payment obligations.

The central bank allowed Bangladeshis and foreign nationals to avail the benefit and permitted domestic commercial banks' OBUs to offer an interest or profit rate markup over a benchmark rate for term deposits in foreign currencies to eligible customers.

Bankers earlier said the move could play a crucial role in overcoming the foreign currency shortages that the country has been facing for more than two years since outflow started exceeding inflow.

Bankers said depositors can enjoy tax free profits of up to 8.40 percent on fixed deposits in US dollars or euros for terms ranging from three months to five years. Savers can also transfer funds internationally without any restriction along with profit.

Currently, banks deduct excise duty if the debit or credit balance of an account exceeds Tk 1 lakh at any time in a year.

For the next fiscal year, the National Board of Revenue may increase the excise duty in case a bank account's credit or debit balance crosses Tk 50 lakh at any time during the year, officials said.

Officials said the excise duty on bank balances below Tk 50 lakh is expected to remain unchanged.

However, excise duty on debit or credit balances between Tk 1 crore and Tk 2 crore in bank accounts may be reduced.