The government has offered tax exemption on production of Active Pharmaceutical Ingredients (API) to further support the expansion of the country's booming pharmaceutical sector.
The NBR issued a Statutory Regulatory Order (SRO) on Monday offering the tax benefit under certain conditions. The SRO will be considered effective from July 1 in 2016, and remain valid until June 30 in 2032 in line with the government policy support to the pharma sector, sources said.
"We've conditionally exempted domestic and joint venture-based API molecule and laboratory reagent manufacturers registered in Bangladesh from income tax", said an NBR official.
The production of raw material of pharmaceutical products in the country is almost entirely dependent on imports. The facility is aimed at diversifying exports and encouraging domestic and foreign investment through sustainable industrialization in the API sector, the official added.
According to the NBR, companies registered in Bangladesh (domestic and joint venture) producing API molecules and laboratory reagents have been given conditional exemption from income tax.
To enjoy the full tax exemption, manufacturers have to produce API molecules and laboratory reagents in their own factories locally.
However, manufacturers who will produce at least five new API molecule and laboratory reagents in a year in their own factories will be able to enjoy a full tax waiver from July 1, 2022 to June 30, 2032.
Manufacturers will be able to pay tax at a concessionary rate of 7.5 per cent if they produce at least three new API molecules and laboratory reagents locally in a year to get the full tax-free benefit.
All of the API manufactures will have to spend at least 1.0 per cent of their annual turnover on a mandatory basis on research and development purposes and increase such investment gradually every year, the NBR said. They have to submit certification of Directorate General of Drug Administration every year to the taxmen.
As per the rules, fines will be imposed for producing substandard drugs and the tax benefits for that year will be cancelled.
In 2018, the National API and Laboratory Reagent Production-Export Policy was formulated to benefit investors in the pharmaceutical sector in Bangladesh. The policy mentioned tax benefits will be offered for all API and laboratory reagent manufacturers registered in the country.
Bangladesh is exporting medicines to more than 100 countries. About 95 percent of the API used in drug production has to be imported. In view of the fact that the pharmaceutical industry is not sustainable on the basis of import-dependent raw materials, the government has taken initiative to provide various benefits including tax exemption for the production of raw materials in the domestic pharmaceutical industry.