BangladeshTax Obligations Detailed

In Bangladesh, employers face various tax obligations related to employee income tax, corporate tax, and VAT, but do not have mandatory social insurance contributions.

Employer Tax Obligations in Bangladesh for 2025

As of February 5, 2025, the following employer tax obligations are in effect in Bangladesh. Keep in mind that tax laws and regulations are subject to change, and it's important to stay updated on the latest information.

Corporate Income Tax

• Standard Rate: The standard corporate income tax rate is 22.5% for publicly traded companies. However, publicly traded companies issuing shares worth over 10% of paid-up capital through an initial public offering are taxed at 20%.
• Banks and Financial Institutions: Banks, insurance companies, and financial institutions (excluding merchant banks) face a 40% rate. A reduced rate of 37.5% applies if publicly traded or with specific government approval from 2013.
• Minimum Tax: A minimum tax of 0.6% on gross receipts applies to companies with gross receipts exceeding BDT 5 million, regardless of profit or loss, if the minimum tax exceeds the corporate tax liability. This rate is lowered to 0.1% for manufacturing companies during their first three years and stands at 1% for tobacco product manufacturers and 2% for mobile phone operators.
• Filing and Payment: Annual income tax returns are due by the 15th day of the seventh month following the income year's end, or by September 15th if the seventh month's 15th day falls before September 15th. Companies with fiscal years ending between October 1st and December 31st make two installments by December 15th and March 15th. From January 1, 2024, some companies must prepay corporate income tax monthly by the 15th of each month, equal to one-twelfth of the tax due for the income year preceding the last income year. The deadline for companies to submit tax returns was extended to March 16, 2025.
• Withholding Tax: Employers are responsible for withholding income tax from employee salaries and remitting it to the tax authorities. Half-yearly withholding tax returns and monthly withholding tax statements, reporting payments to vendors and employees, must be filed. Information regarding employee tax return filings needs to be submitted to the tax authorities by April 30th each year. Failure to provide this information may result in non-deductibility of salary expenses.

Value Added Tax (VAT)

• Standard Rate: The standard VAT rate is 15%.
• Turnover Tax: Businesses with turnovers between BDT 3 million and BDT 5 million are required to enlist for VAT and pay a 4% turnover tax. Registration is mandatory for businesses exceeding BDT 5 million in turnover.
• VAT Registration and Enlistment: Businesses with annual turnovers exceeding BDT 5 million must register for VAT. Businesses with turnovers between BDT 3 million and BDT 5 million must enlist for VAT.

Employee Income Tax (Withheld by Employer)

• Progressive Rates: Employee income tax rates are progressive, ranging from 0% to 25%. Specific rates apply to different income brackets:
  • 0% up to Tk 350,000
  • 5% for Tk 350,001 to Tk 450,000
  • 10% for Tk 450,001 to Tk 750,000
  • 15% for Tk 750,001 to Tk 1,150,000
  • 20% for Tk 1,150,001 to Tk 1,650,000
• Deadline: The deadline for individual tax return submission is September 30th, following an extension.

Other Taxes and Obligations

• Employing Non-Bangladeshi Individuals: Employing non-Bangladeshi individuals without prior government approval results in an additional tax of 50% of the tax due on their total annual income or BDT 500,000, whichever is higher.
• Provident Fund: Companies may need to establish a provident fund if at least 75% of employees request it in writing. Employees contribute 7% to 8% of their salary, and the employer makes a matching contribution, depositing both into the employee's provident fund monthly.
• Gratuity: Gratuity is payable upon termination of employment, in addition to any other compensation.

This information is current as of February 5, 2025, and may be subject to change. Consulting with a tax professional is always recommended for personalized advice.

In Bangladesh, employers are responsible for deducting income tax from employee salaries and remitting it to the National Board of Revenue (NBR).

Employee Tax Deductions

A portion of income from employment, up to BDT 450,000 or one-third of the total employment income, whichever is less, is tax-exempt. Income from employee share schemes (the fair market value at the time of receipt less the acquisition cost) is taxable in the year it's received. Gifts from a spouse, parent, or child are tax-exempt if declared on both the donor's and recipient's tax returns; other gifts are taxable.

Tax Rates and Slabs (as of January 1, 2025)

• Up to BDT 350,000: 0%
• BDT 350,001 – 450,000: 5%
• BDT 450,001 – 750,000: 10%
• BDT 750,001 – 1,150,000: 15%
• BDT 1,150,001 – 1,650,000: 20%
• BDT 1,650,001 and above: 25%

Tax-Free Limits for Specific Categories

• Female taxpayers: BDT 400,000
• Senior male taxpayers (65 years and above): BDT 400,000
• Individuals with disabilities: BDT 475,000
• Gazetted freedom fighters: BDT 500,000

Tax Deduction at Source (TDS)

Employers are responsible for deducting tax at source from employee salaries according to the applicable tax slabs. This requires calculating the estimated annual taxable income, determining the applicable average tax rate, and deducting the tax amount each pay period. The withheld tax must be deposited to the NBR by the employer. Specific rates and limitations exist for other TDS categories, such as payments to contractors, fees for professionals, royalties, and others.

Investment Allowance

An investment allowance is available, providing a tax rebate equal to 15% of the investment amount, capped at BDT 1,000,000. Qualifying investments include life insurance premiums (up to 10% of face value), provident fund contributions, certain approved debentures or shares, and donations to specific organizations.

Allowances and Benefits

Medical expenses are generally taxable. An exception applies to medical expenses paid by an employer (excluding shareholder-directors) for heart, kidney, eye, liver or cancer surgery, which are exempt. Various allowances and benefits may be provided by employers and are subject to taxation based on their nature and specific regulations.

Filing and Deadlines

Employers must deduct TDS and deposit it with the NBR. Annual income tax returns for individuals are also required, with deadlines and procedures outlined by the NBR. Further, companies may also have a corporate tax rate of 22.5% for publicly traded companies. Those dealing with coal-based power generation or other energy sectors have varying and progressively decreasing exemptions.

Information is current as of February 5, 2025, and may be subject to change based on updates to tax laws and regulations by the NBR.

Value Added Tax (VAT) is a consumption tax levied on most goods and services in Bangladesh.

VAT Rates and Thresholds

• Standard VAT Rate: 15% (applicable to most goods and services).
• Reduced VAT Rates: While the standard rate is 15%, there have been instances of reduced rates (5%, 7.5%, 10%) for specific goods and services. It's crucial to verify the current applicable rate for specific items. Reduced rates may change, so it's important to consult official sources regularly.
• Turnover Tax: Applicable to businesses with annual turnover between BDT 3 million and BDT 8 million (3%).
• VAT Registration Threshold: Mandatory for businesses exceeding BDT 8 million in annual turnover. Businesses with turnover between BDT 3 million and BDT 8 Million are required to enlist for turnover tax. Recent amendments might have altered these thresholds, therefore, it's essential to verify with updated government publications or consult a tax professional.
• Supplementary Duty (SD): Ranges from 0% to 65.5%, applied to specific goods (listed in the Second Schedule of the VAT Act) and services. SD is usually levied at the first stage of supply.

Registration and Filing

• Registration Process: Businesses can register online through the NBR website (www.nbr.gov.bd). The process involves creating a user ID and password, filling out the VAT-2.1 form, and submitting it online. It's recommended to review practical guides on the NBR website for detailed instructions.
• Filing Frequency and Deadline: Monthly VAT returns (using form Mushak 9.1) are due by the 15th of the following month. It should be noted that recent changes have extended deadlines for specific cases, so checking for updates is always advisable. Returns can be filed both manually and online.
• Required Documents: For VAT registration, businesses typically need a trade license, Taxpayer Identification Number (TIN) certificate, import/export registration certificate (if applicable), details of sales locations, product information, invoice samples, passport-sized photos, bank solvency certificate, and other relevant documents (such as the deed of agreement and BIDA Registration). Contacting the NBR directly for specific requirements is recommended.

Exempt Goods and Services

• Exempt Supplies: Goods and services listed in the First Schedule of the VAT Act are exempt (e.g., essential food items, medicines, educational services, and certain agricultural products). Specific services rendered outside Bangladesh or related to international transport might also be exempt or zero-rated. Always refer to the latest version of the First Schedule for a comprehensive list.
• Zero-Rated Supplies: These include exports, certain international services, and specific supplies related to temporarily imported goods.

Additional Information

• Reverse Charge Mechanism: Applies to imported services; the recipient of the service is liable to pay VAT.
• Penalties: Late registration, incorrect filings, and late payments can lead to penalties such as fines and interest.

Keeping Up-to-Date

VAT regulations in Bangladesh are subject to change. Always refer to official government sources (National Board of Revenue - NBR) or consult a tax advisor in Bangladesh for the latest information and to ensure compliance.

Bangladesh offers various tax incentives to promote investment and specific sectors.

Corporate Tax Incentives

• Tax Holidays: Newly established manufacturing companies in sectors like ICT products, automobiles, agricultural and dairy products, home appliances and lighting, hospitals, and vocational education may qualify for a 10-year 100% corporate income tax holiday. This does not apply to reinvestment or expanded industries.
• Information Technology Services and ITES: A 100% corporate income tax exemption is available for income from IT services and ITES such as cloud services, e-learning, and mobile app development.
• Power Generation: Tax incentives are available for power generation projects, particularly those using renewable energy sources. Companies commencing operations between July 1, 2025 and June 30, 2030 are eligible for a 15-year exemption, with varying percentages based on the years in operation. This requires a No Objection Certificate (NOC) from the Power Division. Coal-based power generation companies have specific, separate tax incentives.
• Export-Oriented Industries: Incentives exist for export-oriented industries and those located in Export Processing Zones (EPZs) and Economic Zones.
• Other Incentives: Incentives are also available for infrastructure projects and certain investments in specified regions.

Personal Income Tax Incentives

• Basic Exemptions: Varying basic exemptions exist based on age, gender, disability, and veteran status. Men under 65 have a lower exemption than women and men over 65.
• Investment Allowance: An investment allowance is available, capped at a certain amount, for eligible investments.
• Salary Exemption: A consolidated exemption exists for salary income, considering medical, house rent, and conveyance allowances.
• Other Allowances and Deductions: Various other personal allowances and deductions are available for eligible expenses.

Application Procedures

Specific application procedures vary based on the incentive. It's crucial to consult the relevant authorities, such as the National Board of Revenue (NBR) or the Bangladesh Investment Development Authority (BIDA), for detailed requirements.

General Information

As of February 5, 2025, this information is current but might change due to policy revisions. Double taxation can often be avoided due to bilateral agreements. Expatriate employees in specific industries may benefit from income tax exemptions for up to three years. Foreign investors can fully repatriate capital, profits, and dividends. Foreign investment is possible through wholly owned subsidiaries, joint ventures, or purchasing shares in existing companies.