Tax laws Bangladesh
The tax laws in Bangladesh are primarily regulated by the National Board of Revenue (NBR). The country's tax system includes a range of taxes, including income tax, VAT, customs duties, and property taxes. Below is an overview of tax laws in Bangladesh:
1. Personal Income Tax
Bangladesh imposes a personal income tax on individuals based on their income level. The tax rates are progressive, meaning that individuals with higher incomes pay a higher percentage of tax.
Tax Rates for Individuals (for the assessment year 2023-2024):
For Male and Female (Except Senior Citizens and Women):
- Income up to BDT 3,00,000: 0%
- Income from BDT 3,00,001 to BDT 6,00,000: 10%
- Income from BDT 6,00,001 to BDT 12,00,000: 15%
- Income from BDT 12,00,001 to BDT 30,00,000: 20%
- Income above BDT 30,00,000: 25%
For Senior Citizens (Aged 65 years and above):
- Income up to BDT 4,00,000: 0%
- Income from BDT 4,00,001 to BDT 6,00,000: 10%
- Income from BDT 6,00,001 to BDT 12,00,000: 15%
- Income from BDT 12,00,001 to BDT 30,00,000: 20%
- Income above BDT 30,00,000: 25%
For Women:
- Income up to BDT 4,00,000: 0%
- Income from BDT 4,00,001 to BDT 6,00,000: 10%
- Income from BDT 6,00,001 to BDT 12,00,000: 15%
- Income from BDT 12,00,001 to BDT 30,00,000: 20%
- Income above BDT 30,00,000: 25%
There are also various exemptions and deductions available under the tax laws, such as for investment in specified government bonds, insurance, and retirement savings.
2. Corporate Income Tax
Corporate tax rates in Bangladesh depend on the type of business entity.
- For Listed Companies:
- 25% tax on profits.
- For Unlisted Companies:
- 32.5% tax on profits.
- For Banks and Financial Institutions:
- 37.5% tax on profits.
- For Insurance Companies:
- 30% tax on profits.
- For Export-Oriented Companies:
- 10% tax on profits (with some exceptions).
There are also various tax incentives available for specific sectors, such as export-oriented businesses, information technology companies, and businesses operating in economic zones.
3. Value-Added Tax (VAT)
Bangladesh imposes a Value-Added Tax (VAT) on the sale of goods and services.
- Standard VAT Rate: 15% on most goods and services.
- Reduced VAT Rate: Certain goods and services, such as basic food items, healthcare, and educational services, may be subject to a 0% or 10% VAT rate.
Businesses with annual sales above BDT 3 million are required to register for VAT, file regular returns, and pay VAT on their sales.
4. Customs Duties
Bangladesh imposes customs duties on goods imported into the country. The rates vary depending on the type of product:
- Standard Customs Duty: Ranges from 0% to 60%, depending on the nature of the goods.
- Exemptions: Certain goods, such as basic foodstuffs, agricultural products, and medicines, may be exempt from customs duties or subject to lower rates.
Bangladesh is also a member of the South Asian Free Trade Area (SAFTA), which allows for preferential duty rates on certain goods traded between SAFTA member countries.
5. Property Tax
In Bangladesh, property taxes are levied by the local government authorities, rather than the central government. The tax is typically based on the value of the property, and the rates vary by location.
- Municipal Tax: Property owners must pay an annual tax to the municipal corporation or city corporation where their property is located.
- Land and Building Tax: The tax rate depends on the location and the size of the property, and the rates may vary across different municipalities.
6. Stamp Duty
Stamp duty is applied to various legal documents, including contracts, property transfers, and share transactions. The rates depend on the value of the transaction or document:
- Property Transfer: 3% to 4% stamp duty.
- Share Transactions: Stamp duty of 0.1% is applied to share transactions.
- Other Documents: The stamp duty for other documents (e.g., contracts, agreements) varies depending on the nature of the transaction.
7. Excise Duty
Bangladesh imposes excise duties on certain goods, especially luxury items, such as alcohol, tobacco, and motor vehicles.
- Tobacco Products: Subject to excise duty at varying rates.
- Alcohol: Alcoholic beverages are subject to an excise duty ranging from 20% to 60%.
- Motor Vehicles: New vehicles are subject to an excise duty based on engine capacity and type.
8. Withholding Taxes
Bangladesh imposes withholding taxes on payments made to non-residents and residents for various types of income. These include:
- Interest: 10% withholding tax on interest payments made to non-residents.
- Dividends: 10% withholding tax on dividends.
- Royalties: 15% withholding tax on royalty payments.
Domestic companies must also withhold taxes on salary payments, contractors, and other services.
9. Inheritance and Estate Tax
Bangladesh does not have an inheritance tax or estate tax. However, property transfers may be subject to stamp duty, as mentioned above.
10. Tax Incentives and Exemptions
The government of Bangladesh provides several tax incentives for businesses to encourage investment in key sectors:
- Export-Oriented Industries: Lower tax rates for companies engaged in export-oriented activities.
- IT Sector: Tax exemptions for IT companies for a specified period.
- Economic Zones: Businesses operating in special economic zones may be eligible for tax holidays or exemptions.
- Agricultural Sector: Various exemptions for agricultural income and certain agricultural products.
11. Tax Filing and Compliance
- Personal Tax Filing: Individuals must file their income tax returns by November 30th of the following year.
- Corporate Tax Filing: Companies must file their tax returns within 6 months from the end of their financial year.
- VAT Returns: VAT-registered businesses must file monthly VAT returns, and the VAT payment is due within 15 days after the end of the month.
Taxpayers are required to maintain proper records and comply with the country's tax laws to avoid penalties and interest.
12. Double Taxation Treaties (DTAs)
Bangladesh has entered into Double Taxation Treaties (DTAs) with several countries to avoid double taxation and reduce withholding tax rates on income such as dividends, interest, and royalties. These treaties help facilitate cross-border trade and investment.
Conclusion
Bangladesh has a progressive tax system with relatively low rates on personal income. The absence of corporate income tax for most sectors, combined with favorable tax incentives for export-oriented industries and IT businesses, makes the country an attractive destination for investment. The introduction of VAT, excise duties on certain goods, and customs duties on imports also contribute to the overall tax landscape. Withholding taxes on interest, dividends, and royalties, as well as tax exemptions in sectors like agriculture, further enhance the tax environment. The absence of inheritance taxes and relatively simple tax filing procedures also contribute to the ease of doing business in the country.
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