Employers have several tax responsibilities, including income tax withholding, provident fund contributions, and other potential responsibilities such as the Skills Development Levy and reporting.

Income Tax Withholding (Pay-As-You-Earn or PAYE)

Employers are required to deduct income tax from employee salaries each month and remit it to the National Board of Revenue (NBR). The tax rates are progressive, with different tax brackets based on income. Tax-free allowances for individuals also apply. These deductions are typically due by the 15th of the following month.

Employer Provident Fund Contributions

In certain industries and for businesses above a certain size, employers may be required to contribute to a Provident Fund for their employees. These are retirement savings plans. The contribution rates vary depending on the industry and specific regulations. These contributions are usually paid on a monthly basis alongside salary disbursements.

Other Potential Responsibilities

Some employers may be subject to a Skills Development Levy, which funds skills training programs. Additionally, employers are expected to maintain accurate payroll records and submit periodic reports on employee details and tax deductions to the NBR.

In Bangladesh, employers are required to deduct income tax at the source (TDS) from their employees' salaries. This is based on the income tax rates provided by the National Board of Revenue (NBR). The amount of salary subject to tax after considering applicable deductions and allowances constitutes the taxable income. Income tax is calculated based on a progressive tax slab system outlined by the NBR. The tax rates increase as the taxable income level increases. Employees can avail of tax rebates by making qualifying investments, such as life insurance premiums, contributions to provident funds, purchase of government saving certificates, and more. The maximum limit for an investment tax rebate is stipulated by the NBR.

Calculating Taxable Income

The general steps used by employers to calculate income tax deductions are as follows:

1. Determine Gross Salary: This includes basic salary, allowances (house rent, travel, medical, etc.), bonuses, and any other benefits offered by the employer.
2. Allowable Deductions: Deduct eligible expenses from the gross salary as permitted under the Income Tax Ordinance 1984. These deductions might include contributions to certain pension funds and investments.
3. Taxable Income: The remaining amount after deductions is the employee's taxable income.
4. Apply Tax Slabs: Calculate the income tax due based on the applicable tax slabs and rates issued by the NBR.
5. Investment Tax Rebate (if applicable): Reduce the tax liability by any eligible investment tax rebates.
6. Finalize TDS Amount: The final amount is the TDS that the employer must deduct from the employee's salary and remit to the NBR.

Other Deductions

Besides income tax, employers may also make other mandatory deductions from employee salaries:

• Provident Fund: Contributions to an employee's provident fund as per the company policy or applicable labor laws.
• Worker's Welfare Fund: Contributions, if applicable, as stipulated by related regulations.

Important Considerations

• Timely Payments: Employers have a responsibility to deduct the correct amount of TDS and deposit it with the NBR within stipulated timelines. Non-compliance can result in penalties.
• Record Maintenance: Employers must maintain accurate records of employee salaries, deductions, and tax calculations for auditing purposes.

Value-Added Tax (VAT) is a consumption tax in Bangladesh that is levied on the supply of goods and services. The tax is governed by the Value Added Tax and Supplementary Duty Act 2012 and is administered by the National Board of Revenue (NBR).

VAT Registration

Businesses providing taxable services with an annual turnover exceeding a specific threshold (currently BDT 30 lakhs) are required by law to register for VAT. However, businesses with lower turnovers have the option to voluntarily register for VAT.

Standard VAT Rate

The standard VAT rate applicable to most services in Bangladesh is currently 15%.

Exempted and Zero-Rated Services

Certain categories of services are either exempted from VAT or zero-rated. Services like basic healthcare, education, and specific financial services are exempt from VAT. Zero-rated services, primarily export-oriented services, are not subject to VAT, but the supplier can claim input tax credits. A comprehensive list of exempted and zero-rated services can be found in the First Schedule of the VAT Act on the NBR website.

VAT Calculation on Services

The tax point for services is usually the time of supply or when the invoice is issued, whichever is earlier. VAT is calculated by multiplying the taxable value of the service with the applicable VAT rate (usually 15%).

Input Tax Credit

Businesses providing taxable services can claim input tax credits for the VAT paid on business-related purchases. This helps avoid the cascading effect of taxes.

VAT Filing and Payment

Registered businesses are required to file VAT returns on a monthly basis, typically by the 15th of the following month. VAT payments must be made along with the return submission.

Record Keeping

VAT-registered businesses must maintain accurate records of sales, purchases, VAT invoices, and other relevant documentation for auditing purposes.

Newly established businesses in certain industries and locations may be eligible for tax holidays, which offer a full exemption from corporate income tax for a specified number of years. Businesses can also claim tax rebates for eligible investments like life insurance, contributions to provident funds, purchase of government bonds, and more. Additionally, businesses may claim accelerated depreciation allowances on machinery and equipment, reducing taxable income in the initial years. Import duties may be fully or partially exempted on capital machinery, raw materials, and other inputs for certain eligible industries.

Industry-Specific Incentives

Companies with significant export earnings enjoy various incentives, including bonded warehouse facilities, back-to-back letters of credit (L/C) facilities, and cash incentives. To encourage investment in the power sector, tax holidays (up to 15 years) are available for power generation projects. IT and IT-enabled services (ITES) enjoy tax holidays and various other benefits to promote the sector's growth. Businesses operating in sectors designated as "thrust sectors" by the government may receive special tax incentives and other benefits.

Location-Based Incentives

Investments in specific economic zones or less-developed regions of Bangladesh may qualify for additional tax benefits. Businesses operating within designated Economic Zones (EZs) enjoy various tax holidays, import duty exemptions, and other fiscal incentives. Industries in Export Processing Zones (EPZs) receive tax holidays, duty-free imports, and various other incentives to promote export-oriented manufacturing.

Other Incentives

Bangladesh has Double Taxation Avoidance Agreements (DTAs) with several countries, preventing businesses from being taxed twice on the same income. Foreign investors can freely repatriate profits and dividends after paying applicable taxes.