ey.com/GlobalTaxGuides
Kolkata, India GMT +5 1/2
EY +91 (33) 6615-3400 22 Camac Street, Block “C,” 3rd Floor
Fax: +91 (33) 2281-7750 Kolkata 700 016 India
Principal Tax Contact
Dinesh Agarwal +91 (33) 6615-3470
Mobile: +91 98310-14513 Email: dinesh.agarwal@in.ey.com
A. At a glance
Domestic Company Income Tax Rate (%) (a)
General Rate (b)
Publicly Traded 22.5
Non-Publicly Traded 30 Banks, Insurance Companies and Financial Institutions
Publicly Traded 37.5
Non-Publicly Traded 40
Capital Gains Tax Rate (%) 15
Branch Tax Rate (%) 30
Withholding Tax Rate (%) (c)
Dividends
Paid to Domestic and Nonresident Companies 20 (d) Paid to Residents Other than Domestic Companies 10/15 Paid to Nonresident Funds and Trusts 20 (d) Paid to Nonresidents Other than Companies, Funds and Trusts 20 (d)
Interest
Paid to Residents 10 Paid to Nonresidents 20 (d)
Royalties from Patents, Know-how, etc. and Technical Services Fees
Paid to Residents 10/12 (e) Paid to Nonresidents 20 (d) Branch Remittance Tax 20
Net Operating Losses (Years)
Carryback 0
Carryforward 6 (f)
(a) For other corporate income tax rates, see Rates of corporate tax in Section B. (b) A surcharge of 2.5% is imposed on the business income of manufacturers of cigarettes, bidi, zarda, gul and other tobacco products. (c) A Tax Identification Number (TIN) is a unique number assigned to a tax payer in Bangladesh on registration with the Bangladesh tax authorities. The TIN is a unique 12-digit code allotted to each person. The TIN is a manda tory requirement for filing a tax return in Bangladesh. If an income recipient fails to furnish its TIN, tax must be withheld at a rate of 50% higher of the rate specified in the relevant provision of the Income Tax Ordinance, 1984 (the Tax Ordinance).
(d) Taxes withheld from dividends, interest, royalties and technical services fees paid to nonresidents are treated as a minimum discharge of tax liability on such income under the domestic tax laws and no refunds, adjustments or set-offs of such taxes are permitted. The Tax Ordinance provides that in determining corporate income tax liability in Bangladesh, a nonresident company may apply the tax treaty rate if it is more beneficial to the nonresi dent, subject to receiving a specific tax withholding order from Bangladesh tax authorities.
(e) For residents, the withholding tax rate on royalties and technical services fees is 10% if the base amount does not exceed BDT2,500,000 and 12% if the base amount exceeds BDT2,500,000. For this purpose, the base amount is the higher of the contract value, the bill or invoice amount, or the payment amount.
(f) Only business losses may be carried forward. Unabsorbed depreciation may be carried forward indefinitely to offset taxable profits in subsequent years.
B. Taxes on corporate income and gains
Corporate income tax. For corporate income tax purposes, a “company” means a company as defined in the Companies Act.
For Bangladesh income tax purposes, company income comprises the following:
• Income from house property
• Income from a business or profession
• Capital gains
• Agricultural income
• Income from other sources
A company is considered to be resident for tax purposes if it is a Bangladeshi company (that is, the company registered in Bangladesh or if a company’s control and management of its af fairs is situated wholly in Bangladesh in that year).
A company resident in Bangladesh is subject to tax on its world wide income, unless the income is specifically exempt. A com pany not resident in Bangladesh is subject to Bangladesh tax on Bangladesh-source income and on income received in Bangladesh.
Rates of corporate tax. The following are the corporate income tax rates in Bangladesh.
Nature of company Rate (%)
Resident companies
Publicly traded companies
General rate 22.5
Banks, insurance companies and financial institutions 37.5
Cigarette manufacturing companies 45
Non-publicly traded companies (private limited companies)
General rate 30
Banks, insurance companies and financial institutions 40 Mobile phone operator companies 45 Nonresident companies 30*
* A branch profit tax is imposed on profit remittances of nonresident companies.
The Tax Ordinance provides that in determining corporate tax liability in Bangladesh, a nonresident company may apply the tax treaty rate if it is beneficial to the nonresident, subject to
receiving a specific tax withholding order from Bangladesh tax authorities.
Tax incentives. Tax incentives available in Bangladesh are de scribed below.
Tax holidays or exemptions are available for the following:
Newly set up industrial undertakings
Identifiable expansion units
Physical infrastructure facilities (for example, water treatment plants, solar energy plants and compressed natural gas and liq uefied national gas transmission and terminal lines)
Computer data entry and software development
Tourist industries, depending on location
Independent private sector power companies
Agricultural machinery
Furniture
Home appliances (for example, rice cookers, blenders and washing machines)
Mobile handsets
Toys
Leather and leather goods
LED televisions
Plastic recycling
Mobile phone towers or tower-sharing infrastructure
Electrical transformers
Artificial fiber or manmade fiber manufacturing
Automobile parts and components manufacturing
Automation and robotics design manufacturing, including parts and components thereof
Artificial intelligence-based system design and/or manufactur ing
Nanotechnology-based products manufacturing
Aircraft heavy maintenance services, including parts manufac turing
Fifty percent of the income of a taxpayer (other than a company not registered in Bangladesh) attributable to export sales is exempt from tax. This exemption does not apply to a taxpayer enjoying a tax exemption or rate reduction by a notification made under the Tax Ordinance.
A reduced tax rate of 12% applies to the business income of a company engaged in the business of the manufacturing of knit wear or woven garments for the purpose of export. If the com pany has obtained a green building certification, the tax rate is 10%.
A company registered under the Companies Act that is engaged in garment production, including thread production, dyeing, fin ishing, coning, cloth making and printing, may qualify for a reduced tax rate of 15% on the income earned by them from these activities.
Capital gains arising from the sale of government securities are exempt from tax.
Capital gains arising from the transfer of land or buildings to a new company registered under the Companies Act for setting up
an industry are exempt from tax if the whole amount is invested in the equity of the company.
Income from the export of handicraft, as well as income derived by cinema halls or cineplexes or by industrial undertakings engaged in the production of rice bran oil that begin commercial exhibition or production before June 2024, are entitled to tax exemption at various rates for various time periods, depending on the location of the business.
Income from the business of certain information technology services, such as software development, information technology process outsourcing, information technology support and soft ware maintenance services, and cybersecurity services, is exempt from tax until June 2024.
Tax exemptions. The following types of income are exempt from tax:
• Dividend income from a listed company up to BDT25,000 (annually; BDT50,000 if received by an individual)
• Dividend income received by a company resident or nonresi dent in Bangladesh if the company distributing such taxed dividend has maintained a separate account for the taxed divi dend
• Income from a mutual fund or unit fund up to BDT25,000 (annually)
• Interest on tax-free government securities
Minimum tax. The tax deducted or collected under specified sec tions of the Tax Ordinance is considered minimum tax.
The minimum tax for companies with annual gross receipts of more than BDT5 million are calculated by applying the following percentages to the annual gross receipts.
Type of company Percentage
Manufacturers of cigarettes, bidi, chewing tobacco, smokeless tobacco or other tobacco products 1% Mobile phone operators 2% All other companies 0.6%
The rate of minimum tax for industrial undertakings engaged in the manufacturing of goods is 0.1% of gross receipts for the first three years of production.
If the taxpayer has income that is exempt from tax or is subject to a reduced rate, special rules apply.
If the regular tax is higher than the minimum tax, the regular tax is payable.
No refunds, adjustments or setoffs of minimum tax is allowed.
Capital gains. Capital gains derived from the transfer of capital assets is taxable at a rate of 15%.
Capital assets include property of any kind held by a taxpayer, regardless of whether the asset is connected to a taxpayer’s busi ness or profession, with the exception of the following:
• Any stock in trade (not stocks and shares)
• Personal effects
The transfer of a share in a company that is not a resident of Bangladesh is deemed to be the transfer of an asset located in Bangladesh to the extent that the value of the share transferred is directly or indirectly attributable to the value of any assets in Bangladesh.
In computing capital gains, deductions are made from the sales proceeds or the fair market price (whichever is higher) of the capital assets.
A capital gain may be exempt if it is derived from the transfer of a capital asset that immediately before the date on which the transfer took place was being used for the purposes of business and if the taxpayer has, within a period of one year before or after that date, purchases a new capital asset for its business. In these cases, if the amount of the capital gain is equal to or less than the acquisition cost of the new asset, no tax is imposed on the capital gain. The term “capital asset” for this provision now refers to specified assets, such as plant, machinery, equipment, motor vehicles, furniture, fixtures and computers.
Capital gains arising on shares listed in the stock exchange are taxable at a rate of 15% for nonresidents. However, no tax is pay able by nonresidents with respect to profits and gains arising from transfers of stock or shares of public limited companies that are listed, as defined in the Companies Act, if such nonresidents are entitled to a similar exemption in the nonresident’s home country.
The transfer of shares of a company may not take place unless the relevant tax on capital gains, if any, arising on such transaction is paid.
Capital losses in excess of BDT5,000 can be carried forward and set off against income from capital gains derived during the next six successive tax years.
The tax deducted by the local custodian (at a rate of 15%) from capital gains of nonresident investors is generally deemed to be the minimum tax applicable to such nonresidents in Bangladesh. Consequently, such nonresidents are not subject to any other compliance obligations, such as tax registration and filing of an income tax return, if they do not have a permanent establishment in Bangladesh.
Withholding tax. Payment to resident companies are subject to the following withholding taxes.
Payment Rate (%)
Dividends 20
Interest 10
Royalties and fees for technical services 10/12 (a) Payments on the supply of goods and the execution of contracts 3 to 7 (b) Other miscellaneous services not specifically mentioned in the Tax Ordinance 10/12 (a)
(a) The 10% rate applies if the amount of the payment does not exceed BDT2,500,000. The 12% rate applies to other payments. (b) The applicable rate depends on the amount of the payments.
Payments to nonresident companies are subject to the following withholding taxes.
Payment Rate (%)
Dividends 20
Interest 20
Royalties and fees for technical services 20 Supply of goods and execution of contract 7.5 Payments for services not mentioned above 20 Any other payments 30
Taxes withheld from the income of nonresidents is the minimum tax liability for such payments, and no refunds, adjustment or setoffs of such taxes are allowed.
If a nonresident believes that because of a tax treaty or any other reason, the nonresident is not liable to pay any tax in Bangladesh, or is liable to pay tax at a reduced rate, the Bangladeshi tax authorities may issue a certificate to the effect that the payments to the nonresident shall be made without any deduction or, in applicable cases, with a deduction at reduced rate as mentioned in the certificate.
A recommended timeline of 30 days is prescribed for the issu ance of a nil or lower withholding certificate with respect to an application filed by a nonresident for obtaining treaty benefits or for any other reason.
Administration
Tax year. Under the Tax Ordinance, the mandatory income year is the 12-month period commencing from the first day of July of the relevant year. However, for the purpose of consolidation of accounts, if a subsidiary company or a liaison or branch office in Bangladesh desires to follow the financial year of its parent com pany, the approval of the Jurisdictional Tax Officer is required.
Income tax filing and payment process. The Tax Ordinance re quires that the income tax return be filed by the 15th day of the 7th month following end of income year (or 15 September fol lowing the end of the income year if such 15th day falls before 15 September). Consequently, companies with an income year running from 1 July through 30 June must file the income tax return by 15 January of the subsequent year.
On request, the return filing date may be extended up to four months with the approval of the tax authority.
A nonresident company without a permanent establishment in Bangladesh is exempt from the obligation of filing an annual income tax return in Bangladesh.
Advance payment of tax. Every taxpayer is required to pay ad vance tax in four equal installments on 15 September, 15 December, 15 March and 15 June of each year if the most recently assessed income exceeded BDT600,000. A penalty and interest are imposed for default in payment of an installment of advance tax.
Foreign tax relief. Foreign tax relief for the avoidance of double taxation is governed by tax treaties with several countries. If no
such treaties apply, resident companies may claim a foreign tax credit for the foreign tax paid under domestic law provisions.
The amount of the credit allowed for foreign tax against Bangladesh tax with respect to any type of income may not exceed the amount calculated by applying the average rate of such tax to the doubly taxed income.
A claim for a foreign tax credit must be made to the Deputy Commissioner of Tax of the district in which the claimant is subject to income tax.
The average rate of tax is the rate arrived at by dividing the amount of tax calculated on total income by such income.
C. Determination of trading income
General. All income classifiable under the head “Income from business or profession” is computed in accordance with the method of accounting regularly employed by the business or pro fession.
The company determines the income from business or profession and resulting tax liability based on its financial result reported in statutory profit and loss account, and after applying adjustments (upward and downward) as provided by the Tax Ordinance.
The tax under the head “Income from house property” is payable with respect to the annual value of any property, whether used for commercial or residential purposes, consisting of any buildings, furniture, fixtures, fittings and similar items, and lands appurte nant thereto, of which the taxpayer is the owner, other than such portions of the property as the taxpayer may occupy for the pur poses of any business or profession carried on by the taxpayer, the income from which is assessable to tax under the Tax Ordinance.
Business-related expenses are deductible; capital expenditures and personal expenses are not deductible.
Expenses from which taxes are required to be withheld are not allowable as deductions until the required taxes have been with held and paid to the government.
Salary and remuneration, other than by crossed check or bank transfer, paid to an employee having gross monthly salary of BDT15,000 or more are disallowed in determining the taxable income of the employer.
An expenditure exceeding BDT550,000 by an employer on the provision of perquisites, as defined in the domestic tax law, to an employee is disallowed in determining the taxable income of the employer.
An expenditure exceeding 10% of the net profits disclosed in the statement of accounts as “head office expenses” or “intra-group expenses,” or under another name, by a company not incorporated in Bangladesh under the Companies Act is disallowed.
The payment of an incentive bonus exceeding 10% of the net profit disclosed in the statement of accounts is disallowed.
Any “promotional expenditure” exceeding 0.5% of business turn over is disallowed. “Promotional expenditure” is defined to mean any expense incurred by way of giving any benefit in kind or cash or in any other form to any person for the promotion of a business or profession.
An expenditure for overseas traveling exceeding 0.5% of the turnover disclosed in the statement of accounts is disallowed.
Payments of royalties, technical service fees and certain other payments exceeding 10% of the “net profit” disclosed in the state ment of accounts for the first three income years from the date of commencement of business or profession and 8% of the “net profit” disclosed in the statement of accounts for subsequent income years are disallowed. For this purpose, the term “net profit” has been clarified to mean net profit from a business or profession, excluding any profit or income of a subsidiary, associ ate or joint venture.
Depreciation allowances. Business fixed assets that are deprecia ble for financial accounting purposes are also depreciable for corporate income tax purposes, subject to the tax rules discussed below.
A depreciation allowance may be claimed for any asset owned by a taxpayer and used for the purpose of the business or profession carried on by the taxpayer.
For building, machinery, plant or furniture not wholly used for the purpose of the business or profession, the depreciation allowance is restricted to the proportional part of the amount that could be claimed if such building, machinery, plant or furniture were wholly so used for such purpose.
A depreciation allowance may not be claimed for assets unless the particulars substantiating such claim are filed with the tax author ity at the time of the filing of the income tax return and if such assets are used during the year.
Depreciation is calculated using the declining-balance method and is allowed on classes of assets. Depreciation rates vary according to the class of assets. The following are the general rates.
Class of asset Rate (%)
Plant and machinery* 20 Office equipment 10 Buildings* General 5 Factory
Furniture and fittings
Computer and computer equipment
Imported computer software
* Subject to the fulfillment of prescribed conditions, initial depreciation equal to 10% of the actual cost is allowed in the first year with respect to buildings and 25% with respect to plant and machinery (other than ships and motor vehicles) if they are not used for hire and if they are acquired or installed after 30 June 2002.
For passenger motor vehicles or sedan cars not used for hire, the actual cost to the taxpayer is deemed not to exceed BDT2,500,000.
Relief for losses. Business losses, excluding losses resulting from unabsorbed depreciation of business assets (see below), may be carried forward to be set off against taxable income derived from business in the following six years.
Unabsorbed depreciation may be carried forward indefinitely to be set off against taxable income of subsequent years.
Losses under the heading “Capital Gains” (that is, resulting from transfers of capital assets) may not be set off against other income, but may be carried forward for six years to be set off against capital gains.
Taxability of the disallowances made under specified sections of the Income Tax Ordinance are deemed as business income, regardless of whether the entity has incurred an overall business loss or has business profits and regardless of the minimum tax paid by the entity. Consequently, in the case of a loss-making entity, tax is separately payable on the amount of the disallow ances made under specified sections of the Income Tax Ordinance.
Loss sustained by an Association of Person (AOP) under any head of income is permitted to be set off only against the income of the AOP under any other head and may not be set off against the income of the members of the AOP. In addition, any member of AOP is not entitled to carry forward and set off his or her income against any loss sustained by the AOP.
D. Tax for owners of private motor cars
The tax authorities collect advance tax on the registration or renewal of fitness of cars (in the case of vehicles, the transport authorities issue a certificate mentioning the duration for which the vehicles are legally permitted to be used) in the following amounts.
The following are the amounts of the tax for cars and jeeps, which are based on engine capacity.
Engine capacity Amount of tax (BDT)
Not exceeding 1,500 cc 25,000
More than 1,500 cc but not more than 2,000 cc 50,000
More than 2,000 cc but not more than 2,500 cc 75,000
More than 2,500 cc but not more than 3,000 cc 125,000
More than 3,000 cc but not more than 3,500 cc 150,000 More than 3,500 cc 200,000
The amount of the tax for a microbus is BDT30,000.
The tax is 50% higher for persons who own more than one car in their name or in a joint name. The minimum tax liability for such persons subject to regular income tax is at least equal to the tax collected for the motor car. Tax collected above that amount is not refunded. Cars owned by specific persons are exempt from this tax.
E. Miscellaneous matters
Foreign-exchange controls. All cross-border transactions with nonresidents are subject to foreign-exchange controls contained in the Foreign Exchange Regulation Act.
Transfer pricing. Under the transfer-pricing rules, the amount of any income or expenditure arising from an international transaction must be determined based on the arm’s-length price.
For this purpose, an international transaction is a transaction between associated enterprises, either or both of which are non residents, in any nature of purchase, sale or lease of tangible or intangible assets, provision of service, lending or borrowing of money, or any other transaction having a bearing on the profits, income, losses, assets, financial position or economic value of the enterprise.
Under the transfer-pricing rules, companies having international transactions with associated enterprises must determine the arm’slength price and maintain certain documents if the value of the transactions exceeds BDT30 million in a year. Such companies also need to submit statements of international transactions to the tax authority with the annual income tax return, regardless of the volume of the international transactions. If any transaction is determined not to be at an arm’s-length price, the tax authority may determine the price.
A report of chartered accountants or chartered cost and manage ment accountants may be required on notice of the Deputy Commissioner of Taxes in writing if the value of international transactions exceeds BDT30 million in the books during the income year.
F. Treaty withholding tax rates
The table below contains the withholding tax rates that apply to dividends, interest and royalties paid from Bangladesh to non residents under the tax treaties in force as of the time of writing. If the treaty provides for a rate lower than the domestic rate, the reduced treaty rate may be applied at source.
Dividends
A B Interest (a) Royalties % % % %
Belgium 15 15 15 10
Canada 15 15 15 10
China Mainland 10 10 10 10
Czech Republic (n) 15 10 (c) 10 10
Denmark 15 10 (b) 10 10
France 15 10 (b) 10 10
Germany 15 15 10 10
India 15 10 (c) 10 10
Indonesia 15 10 (b) 10 10
Italy 15 10 (b) 10/15 (d) 10
Japan 15 10 (e) 10 10
Korea (South) 15 10 (a) 0/10 (f) 10
Malaysia 15 15 15 15
Mauritius 10 (g) 10 (g) (h) (h)
Netherlands 15 10 (b) 0/7.5/10 (i) 10
Norway 15 10 (b) 10 10
Dividends
A B Interest (a) Royalties % % % %
Pakistan 15 15 15 15
Philippines 15 10 (c) 15 15
Poland 15 10 (b) 10 10
Romania 15 10 (b) 10 10
Saudi Arabia 10 10 7.5 10
Singapore 15 15 10 10
Sri Lanka 15 15 15 15
Sweden 15 10 (b) 10/15 (d) 10
Switzerland 15 10 (j) 10 10 (k)
Thailand 15 10 (b) 10/15 (d) 15
Turkey 10 10 10 10
United Arab
Emirates 10 5 (l) 10 10
United Kingdom 15 10 (b) 10 10
United States 15 10 (b) 5/10 (m) 10
Vietnam 15 15 15 15
Non-treaty jurisdictions
Companies 20 20 20 20
Individuals 10/30 N.A. 0/20/30 20
A Individuals and companies
B Qualifying companies
(a) Some of the treaties provide for an exemption or a reduced rate for certain types of interest, such as interest paid to public bodies and financial institu tions, including specified financial institutions, or interest with respect to sales on credit or approved transactions. Such exemptions are not reflected in this column.
(b) The rate applies to dividends paid to a beneficial owner that is a company holding directly at least 10% of the capital of the payer.
(c) The rate applies to dividends paid to a beneficial owner that is a company holding directly at least 25% of the capital of the payer.
(d) The lower rate applies to interest derived by a bank or other financial institu tion (including an insurance company).
(e) The rate applies to dividends paid to a beneficial owner that is a company owning at least 25% of the voting shares of the payer during the period of six months immediately before the end of the accounting period for which the distribution of profits takes place.
(f) The lower rate applies if interest is paid with respect to a sale on credit of industrial, commercial or scientific equipment.
(g) A most-favored-nation clause applies. Under this clause, if Bangladesh enters into a tax treaty with another country subsequent to entering into the treaty with Mauritius and if this treaty provides for a lower rate for dividends than the 10% rate specified under the treaty with Mauritius, such lower rate applies under the Mauritius treaty.
(h) The domestic rate applies. The treaty does not provide a reduced rate.
(i) Interest related to the construction of industrial, commercial or scientific installations or public works is exempt. The 7.5% rate applies to interest received by a bank or other financial institution (including an insurance company), as long as the Netherlands does not levy a withholding tax on interest.
(j) The rate applies to dividends paid to a beneficial owner that is a company holding directly at least 20% of the capital of the payer.
(k) A most-favored-nation clause may apply with respect to royalties.
(l) The rate applies to dividends paid to a beneficial owner that is a company owning at least 3% of the shares of the payer.
(m) The lower rate applies to interest derived by a bank or other financial institu tion (including an insurance company) and interest paid with respect to a sale on credit of industrial, commercial or scientific equipment or merchandise.
(n) On 15 January 2021, a double tax treaty between Bangladesh and the Czech Republic entered into force. The treaty is effective from 1 July 2021 in the case of Bangladesh and 1 January 2022 in the case of the Czech Republic.