The Bangladesh government has exempted the import of ships of more than 5,000 dead weight tonnage (DWT) from the payment of value added tax (VAT), part of the government’s bid to boost the maritime transport sector.
On the request of the Bangladesh Oceangoing Ship Owners Association (BOSOA), the National Board of Revenue (NBR) issued on March 14 a general order waiving importers’ payment of the 15% VAT upon import of such vessels, a move seen to make the sector more vibrant.
But importers have to meet certain conditions to be eligible for the waiver.
Imported vessels should not be more than 15 years old and should be registered locally as a national flag carrier. Further, 70% of their crew must be Bangladeshi nationals.
Once imported, the vessels must be used to transport sea freight for at least five years, during which time ownership should not be transferred.
Importers will have to pay the applicable VAT if they sell the ship before the five-year rule is up because of a slowdown in business or if they sell it as scrap due to an accident or a natural disaster, according to the order.
Vessel importers are required to provide proof of their foreign currency earnings to the local VAT office in the form of a bank certificate every year. Pre-approval for the VAT exemption from the National Board of Revenue is also required.
Officials said the NBR tagged the conditions for the VAT exemption as BOSOA promised to boost the sector and earn a notable amount of foreign currency if the benefit is given.
Earlier, BOSOA said that per international norms, national flag carriers could carry at least 50% of the total trade volume of a country and earn significant foreign currency, as exporters and importers have to spend on average 10% of trade volume as freight charge.
The volume of the country’s international trade was US$77 billion in the full-year 2016-2017, with traders spending a minimum $7.7 billion as freight charges in the year, it said, adding that local vessels could earn at least half of the amount.
But local ship owners can earn only $150 million on average a year by carrying less than 5% of the total export-import goods due to lack of ships.
The number of national flag-carrying ships declined to 38 (including three state-owned ships) in 2016 from 63 (including 11 state-owned vessels) in 2014 due to the lack of duty benefit, it said.
Photo: NahidSultan
