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Bangladesh - Income Tax

Bangladesh - Income Tax

Taxation of international executives.

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

30th November.

What is the tax year-end?

30 June.

What are the compliance requirements for tax returns in Bangladesh?

Residents

After 30 June, within 30 November, of every year, every resident and non-resident Bangladeshi assignee has to submit Income Tax Return in Bangladesh for the income earned during the period from 1 July to 30 June, if the income exceeds certain amount (250,000 Bangladeshi taka (BDT) per year, in general, BDT300,000 per year for woman and the assignee aged more than 65) or the assignee was assessed any of the previous 3 years. Before submitting Income Tax Return in Bangladesh, an assignee has to obtain e-TIN (electronic tax identification number) in Bangladesh. Tax authority by its own discretion may extend the deadline for 2 to 3 months.

Non-residents

In terms of non-resident (except non-resident Bangladeshi), compliance requirement for tax return in Bangladesh is same as like as resident. Additionally, non-resident foreigner has to obtain work permit and SB & NSI clearance certificate for extension of work permit (if the assignee comes through A3 or E1 visa then work permit will not be required. Then visa copy itself will be considered work permit). The person has to obtain e-TIN in Bangladesh for submission of Tax return.

Penalty for non-submission of Income Tax Return on due time

If the assignee fails to submit Income Tax Return on due time, the penalty will be 10 percent of tax imposed on the last assessed income (subject to a minimum of BDT1,000). In case of a continuing default further penalty of BDT50 for every day during which default continues.

Provide that such penalty shall not exceed:

  • In case of an individual assesse whose income was not assessed previously BDT5,000.
  • In case of an individual assesse whose income was assessed previously, 50 percent of the tax payable on the last assessed income or BDT1,000, whichever is higher.

Tax rates

What are the current income tax rates for residents and non-residents in Bangladesh?

Residents

For every resident and non-resident Bangladeshi, tax liability is calculated on average rate as follows;

Income tax table for Income Year 2018-2019

Taxable income bracket Tax rate on income in bracket
First 250,000
0%
Next 400,000 10%
Next
500,000
15%
Next
600,000
20%
Next 3,000,000 25%
Rest of the amount   30%

 

For women and senior persons aged 65 or over, tax slab starts from BDT300,000. For physically challenged persons, it is BDT400,000 and for gazetted war-wounded freedom fighters, it is BDT425,000. In case of parent/legal guardian of a physically challenged person, they will get a further initial exemption of BDT50,000 in addition to above limit.

Non-residents

For non-residents other than Bangladeshi non-residents, the tax rate is 30 percent (flat rate) on total taxable income.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Bangladesh?

Under section 2(55) of income tax ordinance 1984, ‘resident’ in respect of any income year means, an individual who has been in Bangladesh-

  • For a period of, or for periods amounting in all to, 182 days or more in that year; or
  • For a period of, or period amounting in all to, 90 days or more in that year having previously been in Bangladesh for a period of, or periods amounting in all to 365 days or more during 4 years preceding that year.

Is there a minimum number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/territory for more than 10 days after their assignment is over and they repatriate.

No.

What if the assignee enters the country/territory before their assignment begins?

Residential law in Bangladesh does not depend on particular assignment. It rather depends on how many days the assignee stays in Bangladesh. It might be with assignment or without any assignment.

Termination of residence

Are there any tax compliance requirements when entering or leaving the country/territory?

When entering into the country/territory, Bangladesh, the assignee has to obtain their work permit/A3 Visa/E1 Visa followed by obtaining tax registration number (which is known as e-TIN in) in Bangladesh. Security Clearance Certificate is also required to be obtained from NSI/SB under Home Ministry of Bangladesh.

Departure tax

If any assignee leaves Bangladesh with the intension of not coming back to Bangladesh again, the assignee has to submit an Income Tax Return and obtain tax clearance certificate before leaving the country/territory permanently. In such cases the period of the tax return should be the period from the beginning of the income year (1 July) to the date of departure. Such final tax return can be submitted before departure by incorporating the assignee’s estimated income in the return up to the departure so that tax clearance certificate can be obtained at the time of departure.

If the assignee departs from Bangladesh in the middle of an income year with the intention of returning to Bangladesh, an exemption certificate which shall be issued for the period they would not be in Bangladesh only if Deputy Commissioner of Taxes is satisfied that such person has such intention and such exemption certificate may be either for a single journey and for all journeys within the period specified in the certificate.

What if the assignee comes back for a trip after residency has terminated?

In such case if they come back for a trip but not for work, then they are not required submit any tax return. But if they come with valid work visa, they are required submit any tax return.  

Communication between immigration and taxation authorities

Do the immigration authorities in Bangladesh provide information to the local taxation authorities regarding when a person enters or leaves Bangladesh?

Our tax environment and immigration department have not yet been fully digitalized and synchronized each other. In general, immigration authorities do not proactively send information regarding entry and departure of foreign nationals to local taxation authorities. Beside, international airport sets an Income tax booth to check Income tax clearance certificate (TCC) at the time of departure.

Filing requirements

Will an assignee have a filing requirement in the host country/territory after they leave the country/territory and repatriate?

As per our tax law the assignee has to submit tax return and obtain tax clearance certificate before leaving the country permanently. Also after leaving the country/territory permanently the assignee cannot remit the money from Bangladesh as their bank account is normally closed at the time of their departure permanently. This is because of the fact that their work permit normally cancelled at the time of departure permanently.  

Economic employer approach

Do the taxation authorities in Bangladesh adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in Bangladesh considering the adoption of this interpretation of economic employer in the future?

Not applicable in Bangladesh.

Minimus number of days

Are there a minimum number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimum number of days?

Not applicable in Bangladesh

Types of taxable compensation

What categories are subject to income tax in general situations?

Below are the elements of an assignee compensation, which are subject to income tax in general situation:

  • Basic Salary
  • House Rent 
  • Dearness Allowance (cost of living adjustment)
  • Conveyance allowance
  • Medical allowance
  • Festival allowance
  • Leave encashment
  • Performance bonus
  • Car benefits (5 percent of basic salary) 
  • Other benefits

Intra-group statutory directors
Will a non-resident of Bangladesh who, as part of their employment within a group company, is also appointed as a statutory director (i.e., member of the Board of Directors in a group company situated in (Bangladesh) trigger a personal tax liability in (Bangladesh), even though no separate director's fee/remuneration is paid for their duties as a board member?

a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in (Bangladesh)?

Yes, any kind of benefit will be taxable

b)Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in (Bangladesh) (i.e. as a general management fee where the duties rendered as a board member is included)? 

No, any kind of benefit will be taxable.

c) In the case that a tax liability is triggered, how will the taxable income be determined?

At the time of submission of the tax return total income will be taxable.

Tax-exempt income

Are there any areas of income that are exempted from taxation in your country/territory? If so, please provide a general definition of these areas.

Yes, the assignee will avail the following exemptions from their income:

  • House rent (50 percent of basic salary or monthly BDT25,000 whichever is lower)
  • Conveyance paid in cash (maximum BDT30,000). In case of car facility for office and personal purpose (higher of 5 percent of basic salary or BDT60,000).
  • Medical allowance (10 percent of basic salary or BDT120,000 whichever is lower)
     

Expatriate concessions

Are there any concessions made for expatriates in your country/territory?

There are no concessions for expatriates in Bangladesh.

Salary earned from working abroad

Is salary earned from working abroad taxed in Bangladesh? If so, how?

Yes, a person who is a non-resident, all income from whatever source derived, which-accrues or arises to them in Bangladesh during that year is taxable. For residents (regardless of local or foreign nationals) all income from all sources of income regardless of location is required to be declared in Bangladesh. However in reality resident foreigner declares all sources of income earned in Bangladesh only and the tax authority has accepted this so far.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in your country/territory? If so, how?

Yes, capital gain tax for non-resident shareholder is 10 percent in Bangladesh (capital gains on sale of shares of listed companies). Tax rate from capital gain received from selling capital asset (other than securities of listed companies) is 15 percent. Capital gain tax arising from sale of shares of listed entity in the hands of non-resident is exempt from tax provided that the non-resident has similar tax exemption in their home country/territory, however any income which is exempted in other countries/territories, will be exempted in Bangladesh.

Dividends, interest, and rental income

Dividend income:

Dividend income is tax free up to BDT25,000 and excess over BDT25,000 is taxable.

A company paying dividend shall withhold tax at the rate of 10 percent on dividend payable to a resident individual (subject to having 12 digit TIN) or 15 percent (if the individual doesn’t have 12 digit TIN). In case of non-resident foreigner, 30 percent tax rate will be applicable.

Interest income:

In Bangladesh interest income means- Interest on securities, Bank Interest on Fixed Deposits Receipts (FDR) and Bank Interest on savings account. These sorts of income are chargeable to tax and tax will be deducted at source as follows:

  • interest on securities at the rate of 5 percent
  • interest on saving instruments at the rate of 5 percent
  • interest on saving deposits and fixed deposits at the rate of 10 percent (subject to having 12 digit TIN) otherwise 15 percent
  • interest on deposit of post office & saving bank account at the rate of 10 percent.

For non-residents 20 percent tax rate is applicable on interest and royalty income.

Rental Income:

In Bangladesh rental income means- income from house property and rental value of vacant land or plant or machinery. These income are chargeable to tax and tax will be deducted at source as follows:

  • Deduction at source from house property income at the rate of 5 percent.
  • Deduction at source from rental value of vacant land or plant or machinery at the rate of 5 percent.

Gains from employee stock option exercises

No specific guideline mentioned in the tax law of Bangladesh for employee stock option. However stock option will be taxable in Bangladesh and part of salary income in the period when it has been vested. Gain on stock option will be taxable if the gain arises in Bangladesh.

Foreign exchange gains and losses

No specific guideline mentioned in the tax law of Bangladesh for foreign exchange gain/loss. However it will be considered as ‘other income’, and will be taxed at an average rate.

Principal residence gains and losses

In practice resident foreign national declares only all sources of income earned in Bangladesh.

Capital losses

Capital loss suffered in Bangladesh can be carried forwarded in excess of BDT5,000 to the following years for setting off with any capital gain.

Personal use items

Not addressed in tax law of Bangladesh.

Gifts

Every person who had made taxable gift during any financial year of an amount as to render them liable to gift tax under the Gift Tax Act shall before the 15th day of September of the corresponding assessment year furnish a return to the Deputy Commissioner of Taxes in the prescribed form and in the prescribed manner. Tax on the basis of the return is payable on or before the date on which such return is furnished. Gift Tax Rate as follows from the schedule of the Gift Tax Act 1990.

Particulars

(Slab Amount of Taxable Gifts) Rate (%)
On the first BDT 500,000 of the value of all taxable gifts 5
On the next BDT 1,000,000 of the value of all taxable gifts 10
On the next BDT 2,000,000 of the value of all taxable gifts 15
On the balance amount of above 20

Gifts received from any source by an individual exceeding BDT500, 000 without crossed cheque or bank transfer shall be treated as income under the head ‘income from other sources’.

Foreign property reporting

Not applicable in Bangladesh.

Non-resident trusts

Our tax law does not specifically address this.

Additional capital gains tax (CGT) issues and exceptions

Are there capital gains tax exceptions in your country/territory? If so, please discuss.

None, except those mentioned above

General deductions from income

What are the general deductions from income allowed in your country/territory?

Followings are the general deductions from income of a foreign executives:

  • Any special allowance, benefits or perquisite specifically granted to meet expenses wholly and necessarily incurred in the performance of the duties of an office or employment of profit.
  • Any income up to BDT25,000,000 received by an assessee as gratuity.

Also referred to the section of tax exempt income.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in your country/territory?

Normally in Bangladesh cash tax refund is not possible even though there is a provision of cash tax refund in our law. Excess tax payment is generally adjusted with next year’s tax liability.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in your country/territory? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

Withholding of tax in Bangladesh is handled through Pay-As-You-Earn (PAYE)

Relief for foreign taxes

Is there any Relief for Foreign Taxes in your country/territory? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

In Bangladesh there is Double Taxation Avoidance Agreement (DTAA) with other countries/territories to have the tax relief. Subject to certain conditions and obtaining tax exemption certificate from NBR.

General tax credits

What are the general tax credits that may be claimed in your country/territory? Please list below.

Assignee (only resident and non-resident Bangladeshi) can get investment tax credit through investing in government specified area. Amount of investment tax credit is lower of 25 percent of total taxable income or actual investment or BDT15,000,000.

Expatriates are not allowed to tax credit or investment allowance even though they become a tax resident in Bangladesh. Double taxation treaties are not applicable in Bangladesh. If income accrues or arises in Bangladesh to the assignee is taxable.

The investment tax rebate is calculated as follows:

Total
 Taxable Income
Amount
of Credit
  • If the total income does not exceed BDT 1,000,000
15% of the eligible amount;
  • If the total income exceeds BDT1,000,000 but does not exceed BDT3,000,000
  1. 15% of the first BDT250,000 of the eligible amount; and
  2. 12% on the rest of the eligible amount;
  • If the total income exceeds BDT3,000,000
  1. 15% of the first BDT250,000 of the eligible amount;and
  2. 12% of the next BDT500,000 of the eligible amount ;and
  3. 10% on the rest of the eligible amount**;

**Eligible amount is higher of 25percent of taxable income or 15 million or Actual investment.

Sample tax calculation

Particulars

Gross Amount

(A)

Exempted Amount

(B)

Taxable Amount

(C=A-B)

Basic salary
5,000,000 - 5,000,000
Bonus 2,500,000

300,000

50% of basic salary or monthly BDT 25,000 which one is lower

2,200,000
Cost-of-living allowance 400,000

120,000

10% of basic salary or BDT 120,000 which one is lower

280,000
Conveyance allowance
200,000

30,000

* If conveyance paid in cash 

170,000
Full time car facility
250,000 5% of basic salary or BDT 60,000 which one is higher 
250,000
Festival bonus
450,000 - 450,000
Performance bonus
150,000 - 150,000
Leave encashment
325,000 - 325,000
Education allowance
150,000 - 150,000
Employer’s contribution to recognized provident fund
410,000   410,000

Other assumptions

Calculation of tax liability

  Slab (BDT)
Tax rate
Tax in BDT
Up to 250,000 0% Nil
On next
400,000 10% 40,000
On next
500,000 15% 75,000
On next
600,000 20% 120,000
On next 3,000,000 25% 750,000
On remaining
4,635,000 30% 1,390,500
Gross tax liability
2,375,500

Bangladesh - Special considerations for short-term assignments

For the purposes of this publication, a short-term assignment is defined as an assignment that lasts for less than one year (365 days).

Residency rules

Are there special residency considerations for short-term assignments?

No special consideration.

Payroll considerations

Are there special payroll considerations for short-term assignments?

No special consideration.

Taxable income

What income will be taxed during short-term assignments?

All the income mentioned in the sample tax calculation will be taxed during short term assignment.

Additional considerations

Are there any additional considerations that should be considered before initiating a short-term assignment in your country?

If the person works in Bangladesh without prior approval of Bangladesh Investment Development Authority (BIDA) or any other Government Authority, as the case may be, in an income year; he/she shall be charged additional tax at the rate of 50% tax payable of his income or BDT 500,000 whichever is higher.

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