Income tax Bangladesh

Income tax Bangladesh

Income tax Bangladesh is maintained under income tax ordinance 1984 and the definition of tax is to charge. Tax is a financial contribution exacted by the country. According to Article 152 (1) of the constitution of Bangladesh, tax includes the imposition of any tax, duty, rate whether general or local. It is the source of revenue of Bangladesh government. As economist, Adam Smith tax is compulsory payment to government by the tax payer.

Character of tax: Tax is payment to government of Bangladesh by tax payer as Section 83 of Bangladesh Constitution. Tax is not the cost of the benefit conferred by government on the public. Tax is not any fine or penalty.

Revenue collection: Income tax Bangladesh government is the main source of revenue collection that is almost 75 percent of total government revenue. Personal tax rate and corporate tax information.

Classification of tax: a) single tax b) multiple tax c) direct tax d) indirect tax that is comes from sales or purchase of goods or services like VAT and custom duty.

Basic structure of income tax Bangladesh

  • Proportionate tax which mean income figure is unlimited but tax rate is remain same, unchangeable.
  • Progressive tax is when income is high tax rate is increased parallel.
  • Regressive tax is income is higher and tax rate is lower as slab.
  • Digressive tax is slowly increase step by step upon policy of government that is changed yearly.

General tax structure of Bangladesh consists of both direct and indirect tax and as so, direct taxes are income tax, registration, gift, stump, immovable property and so on whereas indirect taxes are VAT, TT, foreign travel, excise duty, vehicle tax, electricity duty and so on.

Income tax holiday scheme: According to section 45, 46, 46A, 46B and 47 of income tax Ordinance 1984 any company is registered within specific area is exempted tax for certain period,

Investment allowance: investment allowance is given to purchase new machines to attract the investors.

Head of income of Bangladesh government as 7 (seven) categories:

  • a) Salaries b) Interest on securities. c) Income from house property. d) Agricultural Income. e) Income from business or profession. f) Capital gains. g) Income from other sources 

Female tax payer if age is equal or above 65 years

  • Income up to Taka 300,000 Tax rate NIL
  • Income up to Taka 400,000 Tax rate 10 (percent)
  • Income up to Taka 500,000 Tax rate 15 (percent)
  • Income up to Taka 600,000 Tax rate 20 (percent)
  • Income up to Taka 3,000,000 Tax rate 25 (percent)
  • Rest of balance rate is 30 (percent)

 Tax rebate for business investment in Bangladesh

Tax rebate amount is 15 (percent) of allowance investment. Amount of actual investment is 30 (percent) of total income or Taka 1500000 which is less.

Tax rebate for following types of investment

  • Life insurance up to 10 percent of face value
  • Contribution of provident fund
  • Debenture of stock exchange, shares
  • Donation to charitable fund
  • Donation to listing non-profit organizations

Who will pay tax?

  • Any female, age above 65 years and yearly income exceed 250,000;
  • If war wounded person’s income yearly exceed 425,000
  • Person who lives in city corporation, district, Paurashava, own member of club;
  • Person who runs business and holding trade license and have bank account;
  • Any registered doctor, lawyer, tax practitioner, chartered accountant, engineer, artists etc;
  • Member of chamber of commerce and any commerce association;
  • Any company registered under Company Act 1994 and registered NGO;

Tax holiday Bangladesh

Income tax holiday Bangladesh is permitted for the industry and physical infrastructure if company is opened between 2011 to 2019 and maintain conditions.

As Section 46 B, the following industry is permitted for tax holiday by undertaking:

  • Pharmaceutical industry that is currently active;
  • Automobile manufacture industries;
  • Rubber latex enterprise;
  • Chemical and dying industries;
  • Electronics industries (basic ingredient)
  • Bi-cycle manufacture industries;
  • Fertilizer industries if location inside of Dhaka, Chittagong, Gazipur and Narayangonj)
  • Boilers enterprises;
  • Brick making automatic technology (auto brick) industries;
  • Business of computer hardware;
  • Energy, petro chemical industries;
  • Pharmaceuticals companies;
  • Pesticide enterprises;
  • Any other manufacture industries and any other industries as government gazette;

As Section 46 C, physical infrastructure allows of tax holiday:

  • Deep sea port, elevated, export processing zone;
  • Flyover, gas pipe line, Hi-Teck park;
  • ICT, software technology zone;
  • IT park;
  • Water plant;
  • Gas line, rail, renewal energy;
  • Rapid transit, toll of road or bridge;
  • Any other physical infrastructure if government consider to publish gazette to impose holiday;

Other exemption of income tax Bangladesh

  • Service fees from NGO or micro credit organizations;
  • Income received from provident fund;
  • Income from pension;
  • Income from dividend limitation of 25000 and publicly trading enterprises;
  • Income from ICT, Telecom Transmission Network;
  • Income from agriculture institutes;
  • Income from handicraft exported goods till 2019;
  • Income from any small manufacture companies that annual turnover not more than 35 lac;
  • Any capital gain as foreigner from stock exchange companies;
  • 50% of income exempted from corn, maize or sugar beet production companies;
  • Coal base power sector companies are exempted for 15 years;
  • Private power generator FULL tax exemption for 15 years from 2016;
  • Private power companies and commercial supply is tax exemption as follows:

-1st five years 100 percent tax free

-Next 3 years 50 percent tax free

-Next 2 years 25 percent tax free

Tax exemption for developers in EPZA as undertaking opening

  • According to S.R.O no. 227 developers of EPZA and Hi-Technological park shall enjoy holidays:

-1st 10 years 100 percent

-11th years 70 percent

-12th years 30 percent

  • According to S.R.O no. 226 industry undertaking inside of EPZA and Hi-Tech park shall enjoy following tax exemption:

-1st 3 years 100 percent tax free;

-4th year 80 percent;

-5th year 70 percent;

-6th year 60 percent;

-7th year 50 percent;

-8th year 40 percent;

-9th year 30 percent;

-10th year 20 percent tax exemption facilities;

Double taxation avoidance

UK, Singapore, Sweden, South Korea, Canada, Pakistan, Romania, Sri Lanka, France, Malaysia, Japan, India, Germany, Netherlands, Italy, Denmark, China, Belgium, Thailand, Poland, Philippines, Vietnam, Norway, Turkey, USA, Switzerland, Indonesia, Norway, KSA, UAE, Myanmar, Belarus

Tax incentives Bangladesh

Fiscal tax incentives

  • 10 (ten) years tax exemption is allowed for the enterprises located in Mongla, Ishwardi, Uttara Export Processing Zone areas:
Tax exemption Rate
1st 3 years 100 percent
Next 3 years 50 percent
Next one year 25 percent

 Tax exemption rate if the enterprises are located in the following areas Chittagong, Dhaka, Comilla, Adamjee and Karnafuli Export Processing Zone.

Tax exemption Rate
1st 2 (two) years 100 percent
Next 2 years 50 percent
Next one year 25 percent

Income tax rate Bangladesh

Income tax rate Bangladesh changes yearly basis and government publish  gazette for changing part.

Income tax rate Bangladesh

  • Duty free imported construction goods;
  • Duty free import machines, raw materials and finished goods;
  • No double tax;
  • Free from dividend taxation;
  • GSP facilities;
  • Depreciation on machineries;
  • Consultancy fees, technical and royalty fees are allowed;
  • Duty and quota free access into Europe, Canada and Australia market;

Non-fiscal incentives

  • 100 percent foreign ownership company is allowed;
  • Enjoy MFN facilities;
  • No limitation of local and nonresident investment;
  • Full repatriate facilities of capital and dividend of company;
  • Loan facilities;
  • Foreign Currency Account open;

Other facilities

  • No need IRC, Export and renewal of bond license to do business;
  • Work permit may issue by EPZA;
  • Full secured bond zone;
  • L/C facilities;
  • Export and/ or import on CM basis is allowed;
  • 10 percent sale to DTA;
  • Custom clearance facilities in factory;
  • Relocation of overseas investment is permitted;
  • Apply for resident and citizen;

Company tax rate for 2017-2018

Nonpublic trade company: 35%

Public trade company: 25%

Bank financial institute: 40% to 42%

Cigarette and similar goods: 45%

Mobile phone operators: 45% with other conditions

Director’s/ shareholders of the company tax rate: NIL (zero) if income is less than Taka 2.25 crore, 10% tax if income is more than 2.25 crore and less than 5 crores (1 crore=10,000,000), 15% tax if income is more than 5 crores and less than 10 crores, 20% tax imposed if income is more than 10 crores and less than 15 crores, 25% if income is more than 15 crores and less than 20 crores, 30% if income is more than 30 crores as fixed.

Tax day example of Bangladesh

Enterprises have to pay tax before 7 months of ending the tax day of that income tax return date as follows, specimen, Tax day example of Bangladesh

End date of tax year Tax year Tax day
30 November 2016 2017-2018 15 September 2017
31 December 2016 2017-2018 15 September 2017
31 March 2017 2017-2018 15 October 2017
30 April 2017 2017-2018 15 November 2017
30 June 2017 2017-2018 15 January 2018

Person tax rate for 2018

As income tax Ordinance 1994, Section 2 (46) individual tax rate Bangladesh is as follows:

NIL (zero) tax imposed is income of the year is less than Taka 25,000, 10% tax rate if income is more than Taka 250,000 to Taka 400,000, 15% tax rate if income is more than 400,000 and less than 500,000, 20% tax rate if income is more than 500, 000 to less than 600,000, 25% tax rate if income is above 600,000 to 3,000,000 and rest of income tax rate is 30 percent.

Project company tax free (NIL) for 10 years

SRO no. 208, income tax, 2017 as income tax Ordinance 1984, as Section 44 (4), clause (b), as power of Bangladesh government or non-government Act, 2015, and under Act 22 if any Project Company from starting day to next 10 years 100% (full percent) income tax Bangladesh is exempted as follows:

  • National highways service
  • Flyovers
  • River Bridge
  • Tunnels
  • River port
  • Sea port
  • Airport
  • Subway
  • Railway
  • Bus terminal
  • Bus depot
  • Care home

Foreign employees (technicians) 50% tax free for next 3 years from joining date of above project companies. Moreover, income tax free for next 10 years on above project company’s royalty, technical know-how and technical assistance. Provided that, above mentioning person and company shall submit income tax return with 12-digit income tax number as same Ordinance of Section 35 and 75. This law shall active from date of 1st July 2017.

Withholding tax rate

Applicable for Financial Year 2017-18

  Head Withholding authority Rate
  Interest or profit on securities Person responsible for any security of government 5%
  (1) Advisory or consultancy service (2) Professional service, Technical services fee, Technical assistance fee. (excluding professional services by doctors) (Section 52AA) Specified person as mentioned in section 52 10% if amount does not exceed 25 lac (2500,000) and if amount exceed 25 lac is 12% tax applicable.
  Meeting fees, training fees or honorarium   10% if amount does not exceed 25 lac (2500,000) and if amount exceed 25 lac is 12% tax applicable.
  Mobile network operator, technical support service provider or service delivery agents engaged in mobile banking operations   10% if amount does not exceed 25 lac (2500,000) and if amount exceed 25 lac is 12% tax applicable.
  Shipping agency commission   6% if amount does not exceed 25 lac (2500,000) and if amount exceed 25 lac is 8% tax applicable.
  Transport service, carrying service, vehicle rental service   3% if amount does not exceed 25 lac (2500,000) and if amount exceed 25 lac is 4% tax applicable.
  Rental value of vacant land or machine   5% of rent amount
  Share transfer   5%
  Dividend   20% for foreign or local company and foreign or local person 10% (if TIN holder) and 15% if not TIN.

(2) Any company making a payment in relation to the promotion of the company or its goods to any person engaged in the distribution or marketing of the goods of the company shall, at the time of payment, deduct tax at the rate of one point five percent (1.5%) of the payment.

Tax deduction rate from income of non-residents (foreigners) under section 56

Description Rate of tax deduction (%)
Income Tax Bangladesh deduction from consultancy service 20
Pre-shipment inspection service 20
Professional service, technical services, technical know-how or technical assistance 20
Architecture, interior design or landscape design, fashion design or process design 20
Certification, rating etc. 20
Charge or rent for satellite, airtime or frequency, rent for channel broadcast 20
Legal service 20
Management service including event management 20
Commission 20
Royalty, license fee or payments related to intangibles 20
Interest 20
Advertisement broadcasting 20
Advertisement making or Digital marketing 15
Air transport or water transport 7.5
Contractor or sub-contractor of manufacturing, process or conversion, civil work, construction, engineering or works of similar nature 7.5
Supplier 7.5
Capital gain 15
Insurance premium 10
Rental of machinery, equipment etc. 15
Dividend(a) company-- (b) any other person, not being a company-- 20-30
Salary or remuneration 30
Exploration or drilling in petroleum operations 5.25
Survey for oil or gas exploration 5.25
Any service for making connectivity between oil or gas field and its export point 5.25
Any payments against any services not mentioned above 20
Any other payments 30

Advanced tax rate under Section 68 B

As above section, if person own by any motor car (vehicle) tax shall be deducted in advance as follows rate:

Motor car with engine capacity Advance tax, figure Taka
Up to 1500 CC car 15,000
Up to 2000 CC car 30,000
Up to 2500 CC car 50,000
Up to 3000 CC car 75,000
Up to 3500 CC car 100,000
Up to 3500 CC car 125,000
For micro bus 20,000

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