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Project Description

TAX MANAGEMENT IN BANGLADESH

IF you are an individual:

Individuals are required to pay income tax on their whole income from all sources, minus exempt income. However, taxation changes based on the individual’s residency status during the tax year. For tax purposes, individuals might be categorized as residents or non-residents.

Residents must pay tax on their international income. In general, however, foreign nationals who are tax residents are taxed only on income generated from working in Bangladesh and on foreign income received from Bangladesh sources.

Non-residents are only taxed on income received, accumulated, or presumed to have accrued or been received in Bangladesh. Therefore, their non-Bangladesh-related income earned outside of Bangladesh is not taxable in Bangladesh.

Key message for tax management in Bangladesh

Expats are taxed on money obtained for working in Bangladesh, regardless of how that income was acquired, as well as on foreign income received from Bangladesh sources.

Revenue tax:

Residence standing
A person is considered a resident of Bangladesh if he or she stays in the country for at least 182 days in any given income year, or 90 days in an income year if he or she previously resided in Bangladesh for more than 365 days in the four preceding years.

In Bangladesh, residency is defined only by the length of time spent in the country, regardless of residency in other nations/jurisdictions. In Bangladesh, short-term tourists and foreign nationals’ dependents who earn no money are not taxed and are not required to file a tax return.

Source of funds:

The tax code specifies seven kinds of income: wages, interest on securities, rental income, income from a business or profession, agricultural income, and capital gain and other issues.

Forms of taxable compensation
All compensation and benefits received by a Bangladeshi resident employee, or for services performed in Bangladesh, are taxable. Salary, bonuses, commissions, housing allowances, transportation perks, education allowances for children, employer-provided domestic assistance, and medical allowances are taxable compensation and benefits.

Tax levels:

Residents are subject to progressive income tax rates ranging from 10% to 30%, while non-residents (with the exception of Bangladeshi non-residents) are taxed at a single rate of 30%.

Social security:
responsibilities for social security
In Bangladesh, there is no idea of social security. Nonetheless, businesses of a particular size are required to contribute 5% of their revenues to a Workers Profit Participation Fund. No employee contribution is necessary in this scenario.

Compliance responsibilities:

Employee compliance responsibilities
Every taxpayer must file a tax return each year. Individuals must file their tax returns by November 30 following the end of the tax year on June 30. Upon application by an assessed individual, the Deputy Commissioner of Taxes may extend the due date by up to two months, and by a further two months upon application by the Inspecting Joint Commissioner of Taxes.

The return subject to delay interest at the rate of 2% per month on the difference between the tax assessed on total income for the assessment year and the tax paid in advance (including tax deduction) for that assessment year.

Reporting and withholding obligations for employers:

Employers are obligated to withhold income tax from employee payments and submit monthly tax deduction statements to tax authorities. Employers are also obliged to file an annual return detailing salary and tax withheld for each employee throughout the fiscal year by September 1st of each year, as well as another annual return containing information about employees’ filing of tax returns by April 30th of each year.

Immigration
Work permit/visa requirements

An individual must apply for a visa prior to entering Bangladesh. The type of visa required depends on the individual’s reason for entering Bangladesh. Foreigners who work in Bangladesh are required to obtain a work permit. The Bangladesh Investment Development Authority issues these (BIDA).

Other concerns
Double taxation conventions
36 countries/jurisdictions have entered into double taxation treaties with Bangladesh.

Implications for permanent residence
There is a possibility that an employee’s extended business travel could result in the creation of a permanent establishment (PE), although this would rely on the nature of services rendered and the employee’s level of authority. The concept of a PE exists primarily in tax treaties.

Implicit taxes
VAT is imposed on the importation of goods and the making of taxable supply in the course of conducting a taxable activity. The standard interest rate is 15%. Depending on the type of the taxable supply, reduced rates are available, ranging from 0% to 15%. In Bangladesh, VAT functions in part as a sales tax.

Transfer costs
Transfer pricing was implemented in Bangladesh by the Finance Act of 2012, which took effect on July 1, 2014.

Local data privacy requirements
Bangladesh in particular lacks data privacy rules at present. However, Bangladesh’s tax rules provide some security for the information they receive.

Exchange management
After receiving the relevant licenses from the central bank, expatriates may open foreign currency bank accounts in Bangladesh and repatriate a percentage of their post-tax earnings through proper banking channels. When permanently departing the country/jurisdiction, the remaining balance can be withdrawn.

Entities in Business Formation in Bangladesh

*However, if you want to hire a foreign employee, you need to make an inward remittance of US$ 50,000 beforehand.