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Bangladesh

General Information

Country Name: People’s Republic of Bangladesh
Currency: Bangladeshi Taka (BDT)
Primary Tax Authority: National Board of Revenue (NBR)

Key Legislation

  • Constitution of Bangladesh: Provides the framework for the country’s tax system.
  • Income Tax Ordinance (ITO) 1984: Governs personal and corporate income tax.
  • Value Added Tax Act 2012: Establishes the VAT system.
  • Customs Act 1969: Covers customs duties and related procedures.

Fiscal Authority Allocation

Bangladesh operates under a centralized tax system, with the National Board of Revenue (NBR) responsible for most tax collection. Local authorities have limited taxation powers, mainly around property taxes and municipal fees.

Taxes Collected by Central Authorities:

  • Personal income tax
  • Corporate income tax
  • Value-added tax (VAT)
  • Customs duties
  • Excise duties

Taxes Collected by Local Authorities:

  • Property tax
  • Municipal taxes and fees

Revenue Sharing Mechanisms:

There is no formal revenue-sharing system in place between central and local governments, although local governments may receive funding from the central government for specific projects.

Corporate Income Tax (CIT)

  • Standard CIT Rate: 30% for most companies. However, companies listed on the stock exchange enjoy a reduced rate of 22.5%.
  • Banks, Insurance, and Financial Institutions: Taxed at 37.5%.
  • Telecommunications Companies: Subject to a rate of 45%.
  • Incentives and Exemptions: Export-oriented industries and businesses operating in special economic zones (SEZs) or under the Bangladesh Investment Development Authority (BIDA) may benefit from tax holidays or reduced rates.
  • Loss Carryforwards: Tax losses can be carried forward for up to 6 years, but no carrybacks are allowed.

Value-Added Tax (VAT)

  • Standard VAT Rate: 15% applies to most goods and services.
  • Reduced VAT Rates: Certain essential goods and services, including basic foodstuffs, pharmaceuticals, and public transport, are taxed at lower rates or exempted.
  • Exemptions: Healthcare, education, and some agricultural products are exempt from VAT.
  • Refunds: VAT refunds are available for businesses involved in exports.

Personal Income Tax (PIT)

  • Progressive Tax Rates: Income tax rates for individuals range from 10% to 30% depending on income levels.
  • Exemptions and Allowances: There is a tax-free threshold for individuals, currently BDT 300,000, with additional exemptions for senior citizens and female taxpayers.
  • Dividends: Dividend income is taxed at a rate of 20% for non-residents, and 10% for residents.
  • Capital Gains: Gains from the sale of listed securities are taxed at 10% for non-residents and are exempt for resident individuals if held for more than one year.

Additional Mandatory Contributions

Social Security Contributions:

There is no comprehensive social security system in Bangladesh similar to other countries. However, employers contribute to various welfare funds, including gratuity and provident funds, which may act as retirement benefits.

Withholding Taxes

  • Dividends: 10% withholding tax on dividends paid to residents, 20% for non-residents.
  • Interest: 10% withholding tax on interest paid to residents, 20% for non-residents.
  • Royalties: 20% withholding tax on royalties paid to non-residents.
  • Service Fees: Non-residents providing technical or consultancy services are subject to a withholding tax of 20%.

Transfer Pricing Rules

Bangladesh has implemented transfer pricing regulations based on OECD guidelines. The arm’s length principle applies to related-party transactions, and documentation must be maintained to support pricing arrangements.

Special Tax Regimes

  • Export Processing Zones (EPZs): Businesses in EPZs enjoy tax holidays for a period of 5 to 10 years depending on the sector, with further tax reductions available for certain industries.
  • Special Economic Zones (SEZs): Investors in SEZs benefit from tax holidays, duty-free imports of capital machinery, and other incentives.
  • ICT Sector: The government provides tax incentives for businesses involved in information and communication technology (ICT), including a reduced CIT rate of 10% for certain ICT-related companies.

Other Taxes

  • Excise Duties: Levied on specific goods such as tobacco products, alcohol, and luxury goods.
  • Property Tax: Property owners are subject to municipal property taxes, with rates varying by location.
  • Stamp Duty: Applied on legal documents, agreements, and certain transactions at rates depending on the type of document.
  • Customs Duties: Bangladesh imposes customs duties on imports, with rates varying by product type and origin.
  • Supplementary Duty: Applied to luxury goods and services such as tobacco, alcoholic beverages, and mobile phone usage.

Double Taxation Agreements (DTAs)

Bangladesh has signed 38 DTAs with various countries to avoid double taxation and provide reduced withholding tax rates on cross-border payments of dividends, interest, and royalties.

Compliance and Reporting

  • Corporate Tax Filing Deadline: Corporate tax returns must be filed by September 15 of the following fiscal year.
  • VAT Filing: VAT returns are filed monthly.
  • Personal Income Tax Filing: PIT returns are due by November 30 each year.
  • Penalties for Non-Compliance: Late filing or underpayment of taxes can result in penalties, including fines and interest on unpaid taxes.

Recent Developments

  • Introduction of Digital Tax Services: The National Board of Revenue has introduced online tax filing systems to simplify compliance and improve efficiency.
  • Efforts to Widen the Tax Base: Bangladesh has been actively working to bring more individuals and businesses into the formal tax net, especially targeting the growing digital economy.
  • Incentives for the Green Energy Sector: Tax incentives have been introduced to encourage investment in renewable energy and green technologies, with companies receiving tax holidays and import duty exemptions on green energy equipment.

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