Taxes are deducted from the income earned by individuals from all sources in the country, except tax-exempt incomes. The taxation system currently practiced is governed by the tax act and based on the residential status of persons and registered corporations in a tax year. Citizens are categorized into residents and non-residents for tax purposes. While residents pay tax for global income, income sourced within the territory, and foreign income earned from Bangladesh sources. Non-residents, however, are levied on income made, obtained, accrued, or considered to be from local sources.
If you are interested in learning about the tax system in this nation and how it operates; this is a tax guide with detailed information on the taxation system of Bangladesh and the various types of taxes.
Tax eligibility
A person is deemed to be a resident of the state if he or she resides for 182 days or more in a tax year. Alternatively, if such a person stays for 90 days, having lived there for more than 365 days previously. Residency status is determined by how long a person stays in Bangladesh. Short-term residents such as tourists and dependents of ex-pats who do not earn any form of income are not subject to tax, thus, they do not file tax returns.
Types of Tax
Several taxes exist within the nation. The principal taxes are customs duties, Value-Added-Tax (VAT), supplementary duty, income tax, and corporation income tax. Expats pay taxes on income received under employment, regardless of the place of payment.
Income tax
This tax is charged from the income earned by residents at progressive rates ranging from 10% to 30%, while, non-residents are subject to a flat rate of 30 percent.
Social security
There is no social security in the nation. However, corporations depending on their sizes are required to pay 5 percent of their revenues generated into a workers’ profit participation fund. No payments are required from employees.
Value Added Tax (VAT)
Value-added tax shortens as VAT is taxed on the sales of imported goods and the making of taxable supplies. The fixed rate of 15 percent applies to certain goods imported into the nation. Although the rate is fixed, reduced rates are made available to consumers depending on the nature of the taxable supply. Reduced rates vary from 0% to 15%. VAT functions partially as a sales tax.
Employer withholding tax
It is mandatory by the tax act for employers to withhold income tax when making payments to their employees, and present monthly statements of the tax deduction to the tax body. They are required to file a tax return annually. This has to reflect the pay and tax deducted for every employee during the fiscal year and has to be present by September 1st of every year.
Filing Tax Returns
A taxpayer has to file a tax return annually. The tax return has to be submitted by November 30th, after the end of the tax year on June 30th. The delayed return is subject to a delayed interest at the rate of 2 percent a month on the difference between the tax assessed on the total income for the assessment year and the tax paid in advance (including tax deduction) for that assessment year.
Double taxation treaties
It has double taxation treaties with 36 countries/jurisdictions.
Note
Expats are permitted to open foreign currency bank accounts within the territory and pay a part of their after-tax earnings through proper banking channels after meeting the requirements and getting permission from the central bank. The income left may be withdrawn when such taxpayer intends to exit the country/jurisdiction permanently.
