Venture firms seek 10-year tax holiday

Dhaka,  Wed,  20 September 2017
Published : 12 Jun 2017, 00:58:30
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Venture firms seek 10-year tax holiday

Hail budget provision for alternative funds
FE Report


Venture capital firms have called for a-10-year tax holiday for the fund managers given their importance in nurturing startups and the long-term nature of their investments.

"The budget has made the Alternative Investment Funds tax-free, which is a welcome move," president of Venture Capital and Private Equity Association of Bangladesh Shameem Ahsan said.

His comments came at a press briefing in the city on Sunday.

"However, such tax exemption should also be applicable to fund managers or the entities who are actually managing those funds," he added, highlighting the importance of fund managers in nurturing the startups and shouldering the risks.

"The usual tenure of venture capital funds is 10 years while it takes seven to eight years to get the return on this type of investment," said Shameem Ahsan, who is the General Partner of Silicon Valley-based Fenox Venture Capital.

Speakers at the event noted that globally, venture capital firms or fund managers have played a crucial role in supporting and financing world famous hi-tech companies including many Silicon Valley giants in their early stage of development.  

"Given the crucial role of fund managers in financing highly potential startups and also the long-term nature of their investment, we call for a 10 year tax holiday on the profit made by fund managers," Shameem said.   

"Each year, around two million people are joining the workforce in Bangladesh, many of whom have entrepreneurial potentials," said Wali-ur-Maruf Matin, co-founder and managing director of Maslin Capital, one of the leading venture capital firms in Bangladesh.

"However, it is difficult for them to get necessary financing from banks as the conventional banks provide funds to those who have a proven track record", he said.

"In such a case, venture capital firms can provide necessary funding to many of those who have innovative business ideas," he added.

Noting that many of the entities funded by the venture capital firms including the e-commerce firms are subject to high corporate tax in Bangladesh, Shameem said that venture capital firms are sometimes subject to double taxation.

Although a relatively new idea in Bangladesh, venture capital entered the formal era in the country back in 2015 when the Securities and Exchange Commission formulated an Alternative Investment Rule.

Since then, a total of six companies have been registered as alternative fund manager under the rule. The firms include BD Venture Limited, Venture Investment Partner, Athena Investment Partner, Maslin Capital, Strategic Equity Management and Lanka Bangla Asset Management.

"Since then, around US$300 million has been invested through venture capital in Bangladesh, while at least two startups funded by such venture capital will soon go for Initial Public Offering," Shameem said.  

"We are expecting to generate another US$500 million investment through venture capital in the next two years," he added.  

General secretary of VCPEAB and managing director of BD Venture Limited Shawkat Hossain said that there are usually three types of alternative funds--one is venture capital, which is for old entrepreneurs of less than two years; another is private equity which is for entrepreneurs older than two years and finally, there is also impact fund which can have an impact on socio-economic development rather than economic profit.

"With the support and financing from the venture capital firms, it would be possible to catalyse multibillion dollar hi-tech companies from Bangladesh within the next eight to ten years," Shamim said.  

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