Expatriates are taxed on income earned for working in Bangladesh, wherever that may be paid, and on foreign income received from Bangladesh sources.
An individual is treated as a resident of Bangladesh if that person stays in Bangladesh for 182 days or more in any income year; or 90 days or more in an income year if that person has previously resided in Bangladesh for a period of more than 365 days during the 4 preceding years. Residence is determined in Bangladesh purely on the period of presence in Bangladesh, irrespective of residency in other countries. Short-term visitors and dependents of foreign nationals not earning any income in Bangladesh are not taxed and are not required to file a tax return in Bangladesh.
Tax laws list seven sources of income: salaries, interest on securities, income from house property, agricultural income, income from business or profession, and capital and other gains.
Types of taxable remuneration
In general, all remuneration and benefits received by an employee who is resident in Bangladesh, or for services rendered in Bangladesh, are taxable. Taxable remuneration and benefits include salary, bonuses, commissions, accommodation allowances, transport benefits, education allowances for children, employer-provided domestic assistance and medical allowances.
Income tax is levied on residents based on progressive tax rates, which range from 10 percent to 25 percent, while non-residents (except Bangladeshi non-residents) are taxed at the flat rate of 25 percent.
Liability for social security
There is no concept of social security in Bangladesh. However, companies of a certain size need to pay 5 percent of their profits into a Workers Profit Participation Fund. No contribution from employees is required in this case.
Employee compliance obligations
Every taxpayer is required to file an annual tax return. An individual’s tax return must be filed by 30 September, following the end of the tax year, which is on 30 June. The filing date may be extended up to 3 months by the Deputy Commissioner of Taxes upon application by an individual being assessed, and by another 3 months upon application by the Inspecting Joint Commissioner of Taxes.
Employer reporting and withholding requirements
Employers are required to withhold income tax when making payments to employees. Employers are also required to file an annual return showing pay and tax deducted for each employee to be submitted by 31st August each year.
Double taxation treaties
Bangladesh has entered into double taxation treaties with 31 countries.
Permanent establishment implications
There is the potential that a permanent establishment (PE) could be created as a result of extended business travel, but this would be dependent on the type of services performed and the level of authority the employee has. The concept of PE primarily exists in tax treaties.
Value-added tax (VAT) is levied on the importation of goods and the making of taxable supplies in the course of carrying out a taxable activity. The standard rate is 15 percent. Reduced rates are available depending on the nature of the taxable supply, which ranges from 0 percent to15 percent. VAT operates in Bangladesh partly as a sales tax.
Transfer pricing was introduced into Bangladesh tax laws as of the year 2012. However this is not yet effective. The earliest time by which such regulation may become effective is 1 July 2015.
Work permit/visa requirements
A visa must be applied for before the individual enters Bangladesh. The type of visa required will depend on the purpose of the individual’s entry into Bangladesh. Foreigners working in Bangladesh must have a work permit. These are issued by the Board of Investment.
Local data privacy requirements
Bangladesh in particular does not currently have data privacy laws. However Bangladesh tax laws provide certain protection of information submitted to them.
Expatriates are allowed to open foreign currency bank accounts in Bangladesh and remit a portion of their post-tax earnings through proper banking channels after obtaining necessary permissions from the central bank. The balance can be taken out when leaving the country permanently.