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Similar to other countries, Bangladesh tax laws apply to personal and business income. Tax systems can play a role in determining whether a country is competitive in an international context for companies seeking to relocate or open a new entity. They are overseen by the National Board of Revenue.
This tax overview will look at the three most important categories of tax laws in Bangladesh: personal taxes, corporate taxes, and value-added taxes.
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Bangladesh tax laws: personal responsibility
Individual Bangladesh tax law is relatively straightforward and easy to understand.
Who is taxed?
In Bangladesh, both residents and non-residents are subject to taxes on all income generated within the country. To be considered a resident, a worker must live in Bangladesh for at least 182 days in a calendar year.
What is the tax rate?
Bangladesh tax rate for individual residents is progressive and based on the following yearly earnings increments. All figures given in Bangladeshi taka (Tk). As of 2023, the exchange rate is 110 taka to the U.S dollar.
- Up to Tk 250,000: 0% tax
- Tk 250,000 to Tk 400,000: 10% tax
- Tk 400,000 to Tk 500,000: 15% tax
- Tk 500,000 to Tk 600,000: 20% tax
- Tk 600,000 to Tk 3,000,000: 25% tax
- Above Tk 3,000,000: 30% tax
Non-residents are taxed at a flat rate of 30% on all income.
A tax surcharge is issued on any net worth exceeding Tk 22.5 million. The surcharge is issued in increments between 10% and 30%, depending on the overall assessed wealth.
National and international income
Bangladesh residents are assessed on both national and worldwide income. However, individuals who pay taxes to foreign countries may claim a tax credit if a double tax treaty exists between Bangladesh and the payor country.
Capital gains, exemptions, and other considerations
Bangladesh tax law takes capital gains into account and they are generally taxed at the personal income tax rate. However, assets held for more than five years are taxed at the lesser personal income tax rate of 15%.
A resident of Bangladesh may credit income tax paid on foreign-source income against their Bangladesh tax liability. The amount of the credit is the lesser of the income tax paid abroad or the Bangladesh tax payable on the foreign-source income.
Bangladesh corporate taxes
Bangladesh tax law that covers businesses is reasonably complex, but this is a general overview. Be aware that there may be field-specific exemptions and rates to take note of, depending on your area of business.
Who is taxed?
Bangladesh tax law is applied to legally resident companies, meaning those that meet one of the following conditions:
- The company is legally incorporated in Bangladesh
- The place of management or control is in Bangladesh
- A permanent establishment of a foreign entity operating in Bangladesh
Resident companies are taxed on worldwide income. If a double taxation treaty exists between Bangladesh and a company resident in a foreign country, generally, only business profits from a permanent establishment in Bangladesh are taxable. Foreign income may be offset.
What is the tax rate?
Business tax rates vary in Bangladesh depending on the type of entity and its operating industry.
- Publicly traded companies are taxed at a rate of 22.5%
- Banks, insurance companies, and financial institutions are taxed at a rate of 40%, unless they are publicly traded, in which case the tax rate is 37.5%
- Listed mobile phone companies are taxed at a rate of 40%
- Non-listed mobile phone companies and cigarette manufacturers are taxed at a rate of 45%
- Private limited companies and branches of foreign companies are taxed at a rate of 30%
Dividends received from resident companies are generally taxed at a rate of 20%.
Capital gains are taxed at a rate of 15%, though there are some exemptions.
What is taxable income?
All income generated from Bangladeshi sources is considered taxable under Bangladesh tax laws. In addition, worldwide income is also taxable unless taxes are paid to a foreign country with which Bangladesh has established a double tax agreement.
Taxable income includes business income, capital gains, and other income.
Tax incentives and deductions
Bangladesh tax law allows for a 10-year 100% corporate income tax holiday for newly established manufacturing companies in the following sectors, providing that certain requirements are met:
- Information and communication technology products
- Manufacture of automobiles
- Agricultural and dairy products
- Home appliances and lighting
- General and specialist hospitals
- Professional or vocational education and training
This incentive was introduced on 1 July 2021.
Bangladesh VAT Taxes
Value-added taxes, better known as VAT or sales taxes, are a common form of consumption tax. Here’s what you need to know about VAT taxes in Bangladesh.
Who is taxed?
VAT taxes are levied on most products and services in Bangladesh. Companies that have a turnover of more than Tk 8,000,000 must register for VAT. Suppliers with a turnover between Tk 2,400,000 and Tk 8,000,000 may voluntarily register for VAT or pay a 3% surcharge.
VAT returns are due monthly and must be filed within 15 calendar days of the following month.
What is the tax rate?
The VAT tax rate in Bangladesh is a flat 15% for most general goods. However, there are reduced VAT rates available for certain goods and services which are considered basic, non-luxury goods. The reduced rates are set at 5%, 7.5%, and 10%, depending on the good or service supplied.
Serviap Global can help you with Bangladesh tax law
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