Owners of listed companies have to pay more gain tax
This new tax rate was announced in the proposed budget for the next financial year, presented at the Jatiya Sangsad yesterday. The new budget will take effect from 1 July
To increase revenue collection from the stock market, the government has decided to raise the tax deducted at source (TDS) on capital gains from the existing 5% to 10% for sponsor-director shareholders and placement shareholders of listed companies or funds.
This new tax rate was announced in the proposed budget for the next financial year, presented at the Jatiya Sangsad on Thursday (6 June). The new budget will take effect from 1 July.
For instance, if the acquisition value of shares held by a sponsor-director shareholder, or placement shareholder in a company or fund is set at Tk10 and the market value of that share rises to Tk100, then the capital gain from the transfer of shares would be Tk90. Consequently, a 10% tax will now be applied to this gain.
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Market insiders said typical sponsor-directors do not frequently trade shares. Founders or owners of some companies often retain a minimum shareholding after the company is listed and sell the remaining shares to the public. The increased tax rate may reduce the volume of share sales by these entrepreneurs.
According to the finance bill for the upcoming fiscal year, the transfer of shares will only be approved by the concerned stock exchange officers after this gain tax has been paid.
According to the rules, owners of listed companies or funds must pay this tax via pay order before selling or transferring shares. The stock exchange will only approve the transfer or sale after proof of tax payment is submitted.
It should be noted that there is a requirement for prior notice before the sale or transfer of shares by owners of listed companies or funds.
Dhaka Stock Exchange (DSE) sources said most shares of listed companies are held by their sponsor-directors.
Owners of companies transfer or sell their shares to boost free-float shares in the secondary market or for personal needs.
Sponsor-directors of listed companies are mandated to hold a minimum of 30% shares and offload at least 10% of their shares.
According to the DSE, the government generated revenue of Tk84.9 crore from the transfer or sale of shares by sponsor-directors of listed companies in this fiscal year to date.
Currently, approximately 400 companies are listed in the capital market. Around two dozen companies are listed on both the main platform of the stock exchange and the SME platform for small-cap companies.
