2020 EDITION

D F D L B A N G L A D ES H T A X GU I D E
1.
CONTENTS

1. OVERVIEW ..................................................................... 1

2. CORPORATE INCOME TAX (“CIT”) ................................... 2

3. PERSONAL INCOME TAX (“PIT”) .................................... 13

4. CAPITAL GAINS TAX (“CGT”) ......................................... 18

5. WITHHOLDING TAX (“WHT”) ........................................ 19

6. TRANSFER PRICING (TP): .............................................. 25

7. VALUE ADDED TAX (“VAT”) .......................................... 27

8. CUSTOMS AND IMPORT DUTIES: .................................. 37

9. DFDL TAX SERVICES...................................................... 39

10. OUR PEOPLE ................................................................ 40

This guide is based on our understanding of publicly known
Bangladesh laws, regulations, and official practices as of
July 2023 and may be affected by laws that are
subsequently passed by Parliament or notifications
adopted by various ministries. There may also be instances
when the unofficial practices applied by government
authorities (including the tax authorities) are not in
accordance with, or may even contradict, Bangladesh law.
More importantly, as the decisions of the courts and tax
authorities are not made publicly available, the courts or
tax authorities may adopt an interpretation of Bangladesh
laws that is not in accordance with our interpretation.
Furthermore, not all laws and regulations are published.

©DFDL, 2023

All rights reserved. No part of this publication may be

reproduced, stored in a retrieval system, or transmitted,
in any form or by any means – electronic, mechanical,
photocopy, recording or otherwise – without prior
permission in writing from the publisher or copyright
holder. This publication, and any form of copy of this
publication, may not be sold, re-sold, hired out, or
otherwise disposed of by trade by any person or entity
without the publisher's or copyright holder's prior written
permission.

The information contained in this book is provided for

information purposes only and is not intended to
constitute legal and tax advice. Legal and tax advice should
be obtained from qualified counsel for all situations.

For more information, please email us at

bangladesh@dfdl.com or www.dfdl.com
1. OVERVIEW
The primary sources of tax legislation in Bangladesh:
Income Tax Act (ITA) of 2023, supplemented by the Tax at Source Rules (TSR)
of 2023, governs:
Corporate income tax (CIT)
Personal income tax (PIT)
Capital gains tax (CGT)
Withholding tax (WHT)
Transfer pricing (TP)

Value Added Tax & Supplementary Duty (VAT & SD) Act (2012), supplemented
by the Value Added Tax & Supplementary Duty (VAT & SD) Rules (2016),
governs:
Withholding VAT
Supplementary duties

Customs Act of 1969, which governs the various import duties.

The National Board of Revenue (NBR) under the Ministry of Finance is the highest
authority for tax administration and is empowered to issue statutory regulatory
orders (SRO) to address specific matters related to taxation.

1 | BANGLADESH TAX GUIDE

2. CORPORATE INCOME TAX (“CIT”)
The following are subject to corporate income tax in Bangladesh:
A company/one-person company incorporated under the Companies Act,
1994 in Bangladesh;
A branch/liaison office of a foreign company that is registered to operate in
Bangladesh and; or
A company registered under foreign laws and “carrying on business” in
Bangladesh through a permanent establishment.
Tax Year:
The taxpayer accounting year starts from 01 July and runs until 30 June of the
following year. However, foreign-owned companies and those with significant
equity holdings may follow a different accounting year, subject to prior approval
from the tax authority.
Classification of Income:
All income that arises in or is deemed to arise in Bangladesh is broadly classified
under the following:
Income from salary;
Income from rental property;
Income from agriculture;
Income from business;
Income from capital gains;
Interest from securities; and
Income from other sources.
Tax Residency:
For tax purposes, any entity incorporated under the laws of Bangladesh is
considered a resident of Bangladesh. Resident companies are subject to corporate
income tax on their worldwide income.

2 | BANGLADESH TAX GUIDE

A. Corporate Income Tax Rates
The effective CIT rates under the ITA are as follows:

Failure to comply
Type of Entity/Company Rate
with conditions *
One-person company 22.5% 25%
Private Limited Company 27.5% 30%
Public Limited Company
20% 22.5%
(Having transferred ≥10% paid-up capital through IPO)
Public Limited Company
22.5% 25%
(Having transferred <10% paid-up capital through IPO)
Branch of a foreign company 27.5% 30%
Export-oriented companies1
12%** -
(Applicable from 1 July 2022 to 30 June 2028)
Yarn production, dyeing, finishing, conning, fabric
making, cloth dyeing, printing, or any such process 15% -
(Applicable from 1 July 2022 to 30 June 2025)2
Non-listed banking and financial institutions, including
mobile financial services (MFS) 40% -

Listed banking and financial institutions, including mobile

financial services (MFS) 37.5% -

Merchant banks 37.5% -

Tobacco company and non-listed mobile phone operator 45% -
Non-listed mobile phone operator 45% -
Listed mobile phone operator with ≥10% paid-up capital
transferred through a stock exchange, of which 5% is 40% -
transferred via pre-initial public offering
Poultry, shrimp, and fish hatcheries/farming3: on taxable See the
profits of BDT table
on the -
next
page

1
SRO no. 158-Law/Income tax/2022; dated: 01 June 2022
2
SRO no. 159-Law/Income tax/2022; dated: 01 June 2022
3
SRO no. 157-Law/Income tax/2022; dated: 01 June 2022

3 | BANGLADESH TAX GUIDE

* There are certain conditions for enjoying lower corporate tax rates. These include the
following that must go through banking channels:
I. All receipts and income
II. All expenses and investments (single transactions >BDT 0.5m; cumulative annual
> BDT 3.6m)
** Exporters with a manufacturing facility holding a LEED Certification are subject to a
corporate tax rate of 10%.

Taxable income range for poultry, shrimp, and fish farms (in Rate
BDT)
0 – 1,000,000 Nil
1,000,001 – 2,000,000 5%
2,000,001 – 3,000,000 10%
On the balance 15%

B. Taxable Income
Taxable income includes profits from business operations and other income,
including dividends, interest, royalties, capital gains, and service fees derived from
domestic and foreign sources.

4 | BANGLADESH TAX GUIDE

C. Deductible Expenses
Ordinary business expenses incurred in connection with the earning of income are
deductible. These include:
Rent paid for premises from which business is conducted;
Repair expenses for business premises;
Interest payments to banks and financial institutions;
Repair and maintenance costs;
Insurance premiums incurred and paid for business purposes;
Depreciation charge subject to the permissible limits and conditions set
out in the Third Schedule of the ITA;
Amortization allowance, research, and development expenses subject to
the permissible limits and conditions set out in the Third Schedule of the
ITA;
Land development tax or rents, local rates or municipal taxes;
Employee salary and bonuses subject to conditions;
Written-off irrecoverable debts;
Royalties, technical fees, head office expenses, subject to limitations;
Expenses in commissions, brokerage, discounts or warranty charges
relating to sales;
Subscriptions to any club or commercial association, including admission
fees, for the use of their facilities;
Any expenditure except capital or personal expenditure incurred wholly
and exclusively for business purposes.
An assessing officer of the NBR has the authority to disallow an expense if they
consider the expense not to be directly related to earning of taxable income or the
applicable tax has not been withheld at source. Head office charges or allocation of
costs may be deducted, provided that the taxpayer can demonstrate that the
services are valid business expenditures of the taxpayer in Bangladesh. Robust
supporting documentation and evidence should be prepared.

5 | BANGLADESH TAX GUIDE

D. Non-Deductible Expenses
There are certain limitations on the deductibility of expenses. These limitations
include:
Payments for any expense without deductions at the source where tax
withholding is mandatory;
Expenditures for providing perquisites (e.g., medical allowances,
conveyance allowance, house rent allowance, mobile phone allowance,
etc.) to each employee beyond BDT 1 million (roughly USD 10,000);
Expenditures on account of entertainment allowances beyond the
allowable limit, which is 4% against the first BDT 1 million (roughly USD
10,000) income and 2% on any balance amount;
Head office or intra-group expenses exceeding 10% of the disclosed profit
before tax
Royalties, technical service fees, technical know-how, or expenses of a
similar nature exceeding 10% of disclosed profit before tax;
Overseas travel expenditures exceeding 0.5% of disclosed turnover;
Promotional expenditures exceeding 0.5% of disclosed turnover;
Salary payments exceeding BDT 50,000 (roughly USD 500) by any means
other than through banking channels;
Rent payments exceeding BDT 50,000 (roughly USD 500) by means other
than through banking channels;
Payments exceeding BDT 0.5 million (roughly USD 5,000) for raw materials
other than through banking channels;
Amortization in accordance with IFRS-16.

6 | BANGLADESH TAX GUIDE

a. Losses
Under the ITA, losses can be carried forward for 6 (six) tax years and set off as
follows:

Type of loss Can be set off with

Capital Only with income from capital gains

Business Only with income from business

Speculation business Only with income from speculation business

Tobacco business Only with income from tobacco business

b. Depreciation
1) Normal depreciation:
Asset class Depreciation rate
General building 5%
Factory building 10%
Furniture and fittings 10%
Office equipment 10%
Machinery and plant (general) 10%
Machinery and plant (specific)
Motor vehicles for hire 20%
Motor vehicles not for hire 10%
Computer and computer equipment 25%
Amortisation of Bangladeshi-made computer software 20%
Amortisation of imported computer software 10%

7 | BANGLADESH TAX GUIDE

2) Initial depreciation: against any newly constructed building, or any newly
installed machinery or plant used by taxpayers for business:
i) Building: 10% of the cost
ii) Machinery or plant: 25% of the cost
As discussed earlier, depreciation is an admissible expense under the Third
Schedule of ITA. However, the Third Schedule does not prescribe any
depreciation/amortisation allowance rate for leased assets. Under such
circumstances, amortisation claimed in a taxpayer's books is considered
inadmissible.
Any residual allowance may be carried forward to the following years until the entire
allowance on this account is adjusted against profits if a taxpayer has insufficient
income to offset the depreciation allowance in the given year.
Gains or losses on asset disposals: The gain will be considered income for the year
when proceeds exceed the written down value (“WDV”), but the gain does not
exceed the difference between the original cost and WDV.

E. Tax holiday:
Physical infrastructure facility: The government of Bangladesh (“GOB”) allows tax
exemptions to physical infrastructure facilities’ concerning income taxes. For
project-based companies specifically incorporated for undertaking an infrastructure
project, the ITA provides tax exemptions on all income, profits, and gains except
capital gain and disallowance in favor of the project company in the specified
infrastructure category.
Qualifying physical infrastructure constructed between 1 July 2019 and 30 June 2024
and entering commercial operation within those dates will be eligible for tax
exemption. Tax exemptions in various amounts shall be awarded for ten years:

1. 90% for the first two years;

2. 75% for 3rd and 4th years,
3. 50% for 5th, 6th, and 7th years;
4. 25% for the 8th, 9th, and 10th years.

8 | BANGLADESH TAX GUIDE

Qualifying physical infrastructure facilities include a deep-sea port, seaport, river
port, elevated expressway, export processing zone, fly-over, toll road or bridge, gas
pipeline, approved water treatment plant, water supply and drainage system, ICT
village or IT park, LNG terminal, and transmission line, railway including mono-rail
and subway, renewable energy, and any other physical infrastructure project
determined by the government through an official gazette.
Public Private Partnership (PPP) project: the GOB has introduced a separate tax
exemption on business income along with certain other tax benefits for Public
Private Partnership work by project companies involved in the following projects:
1. National Highways or Expressways and related Service Roads;
2. Flyovers;
3. Elevated Expressways;
4. River Bridges;
5. Tunnels;
6. River ports;
7. Sea-ports,
8. Airports;
9. Subways;
10. Monorails;
11. Railways;
12. Bus terminals;
13. Bus depots;
14. Elderly care homes.
Information Technology Enabled Service (ITES): The ITA provides tax exemptions on
business income to companies engaged in ITES business until 30 June 2024. The ITES
exemptions apply to income from:
1. Software development;
2. Software or application customization;
3. Nationwide Telecommunication Transmission Network (NTTN);

9 | BANGLADESH TAX GUIDE

4. Digital content development and management;
5. Digital animation development;
6. Website development;
7. Website services;
8. Web listing;
9. IT process outsourcing;
10. Website hosting;
11. Digital graphics design;
12. Digital data entry and processing;
13. Digital data analytics;
14. Geographic Information Services (GIS);
15. IT support and software maintenance service;
16. Software test lab services;
17. Call center service;
18. Overseas medical transcription;
19. Search engine optimisation services;
20. Document conversion, imaging and digital archiving;
21. Robotics process outsourcing;
22. Cloud service;
23. System Integration;
24. e-learning platform;
25. e-book publications;
26. Mobile application development service; and
27. IT freelancing

10 | BANGLADESH TAX GUIDE

Economic zones: Apart from the production and sale of edible oil, sugar, flour,
cement, iron, and iron-related products, companies/industrial units located in
economic zones will receive corporate income tax exemptions/reductions for up to
10 years starting from the commencement of commercial operation at the rates
specified below:
1. 100% - for the first, second, and third year;
2. 80% - for fourth year;
3. 70% - for fifth year;
4. 60% - for sixth year;
5. 50% - for seventh year;
6. 40% - for eighth year;
7. 30% - for ninth year;
8. 20% - for the tenth year.
Power generation: Private power-generating companies (other than coal-fired) that
commence commercial production between 01 January 2023 and 30 June 2024 are
exempt from corporate income tax on business income (i.e., power generation) from
the date of the commercial operation until 30 June 2036.
In addition to tax exemption on business income for power-generation companies,
there is also an exemption of capital gains tax arising from the transfer of shares in
the company, payments of royalties, technical know-how and technical assistance
fees. Foreign nationals employed by such power generations are exempted from
income tax for the first three years of their arrival.
Companies starting commercial operation after 30 June 2024 but before 30 June
2025 are eligible for corporate tax exemptions based on the following rates:

100% exemptions for the first five years of operation;

50% exemption for the next three years; and
25% exemption for the subsequent two years.

11 | BANGLADESH TAX GUIDE

F. Tax return filing:
The taxpayer accounting year is from 1 July to 30 June (although foreign companies
and those with significant equity may have different accounting years). Tax returns
are due each year on 15 January (for 30 June year-end), 15 September (for 31
December year-end), and 15 October (for 31 March year-end). Penalties apply for
late filing, failure to file a return, concealment of income, inability to maintain proper
records, and failure to provide required data.

12 | BANGLADESH TAX GUIDE

3. PERSONAL INCOME TAX (“PIT”)
A. Tax Residence
Under Bangladesh law, an individual is considered a resident for tax purposes if they
are present in Bangladesh for a total of at least 182 days or more in a calendar year
or at least 90 days in that calendar year, having previously been in Bangladesh for a
total of at least 365 days in the preceding four years.
Residents are taxed on their worldwide income, which includes:
Income received or deemed to be received in Bangladesh;
Income accruing or deemed to accrue in Bangladesh;
Income accruing outside Bangladesh.
Non-residents are taxed only on income earned in Bangladesh with income in this
respect including:
Income received or deemed to be received in Bangladesh;
Income accruing or deemed to accrue in Bangladesh;
The tax year for PIT in Bangladesh runs from 01 July to 30 June of the following year,
and tax filing and payment must be completed by 30 November (i.e., “Tax Day”)
following the end of the income year unless the NBR has pushed back the Tax Day.

B. Taxable Income
Assessable income includes most monetary and non-monetary benefits derived
from employment in Bangladesh, property held, business carried out in Bangladesh,
interest income, agriculture income, capital gains, and other income. This is
regardless of the recipient's residence status, where the payments are made (i.e., in
or outside of Bangladesh) or whether the employment is permanent or temporary.
Individuals are taxed at these existing slab rates:
Annual taxable income (BDT) Tax Rate
First 350,000 * Exempt
Next 100,000 5%
Next 300,000 10%
Next 400,000 15%
Next 500,000 20%
Remaining 25%

13 | DFDL BANGLADESH TAX GUIDE

* The first slab for women and taxpayers over 65 starts at BDT 400,000. It is BDT
475,000 for taxpayers with a disability or if they are of a third gender, and BDT
500,000 for documented war-wounded freedom fighters. The tax-free slab is
increased by a further BDT 50,000 for any single parent/legal guardian of disabled
individuals.
Salaried individuals are eligible for further exemptions on the lesser of one-third of
their salary income or BDT 450,000 (roughly USD 4,500).

C. Investment rebate:
A taxpayer making investments in the following sectors during the income year,
shall be eligible for credit at the rate of 15% against their tax liability:
Particulars Limit
Investment in respect of life insurance -
Any sum deducted from salary payable by or on behalf of the
-
government
Contribution to a provident fund -
Employer and employer’s contribution to recognised provident
-
fund (subject to specified limits)
Contributions to a superannuation fund -
Investment in Bangladesh Shanchay Patra or government securities BDT 500,000
Investment in unit certificates, mutual fund -
Investment in deposit pension scheme (DPS) BDT 120,000
Investment in listed shares -
Donations to an NBR approved charitable hospital situated outside
-
the city corporation area
Donations to an NBR and Social Welfare Department-approved
-
organisation set up for the welfare of retarded people
Payment of zakat to a Zakat Fund or donations to charitable fund
-
established under the Zakat Fund Management Act, 2023
Donations to a government approved philanthropic or educational
-
institution
Donations to a national level institute for liberation war -
Donations to a national-level institute setup in memory of the
-
father of the nation

14 | DFDL BANGLADESH TAX GUIDE

The maximum eligible investment amount is the lower of4:
a) 0.03 * total income calculated excluding tax-exempt income, such
income subject to reduced tax rates and such income subject to
minimum tax;
b) 0.15 * total amounts invested in accordance with Part-3 of 6th Schedule
of ITA;
c) BDT 1,000,000.

4
Section 78 of ITA

15 | DFDL BANGLADESH TAX GUIDE

D. Tax surcharge:
A surcharge on top of tax liability will be due in the following manner for every
individual whose cumulative net worth, as reported on their Balance Sheet, exceeds
BDT 40 million:

Net worth Rate of surcharge

Up to BDT 40,000,000 N/A
BDT 40,000,001 to BDT 100,000,000;
Owns more than one motor vehicle in their name; or
10%
owns property of more than 80,000 sq. ft. in any city
corporation area
BDT 100,000,001 to BDT 200,000,000 20%
BDT 200,000,001 to BDT 500,000,000 30%
Above BDT 500,000,000 35%

E. Advance tax for owning motor vehicles:

Every person who owns a private motor vehicle (including a jeep or a microbus) is
required to pay advance income tax in the following manner5:

Amount of tax
Net worth
(BDT)
A car or jeep, not exceeding 1500cc or 75kw 25,000
A car or jeep, exceeding 1500cc or 75kw but not exceeding
50,000
2000cc or 100kw
A car or jeep, exceeding 2000cc or 100kw but not exceeding
75,000
2500cc or 125kw
A car or jeep, exceeding 2500cc or 125kw but not exceeding
125,000
3000cc or 150kw
A car or jeep, exceeding 3000cc or 150kw but not exceeding
150,000
3500cc or 175kw
A car or jeep, exceeding 3500cc or 175kw 200,000
A microbus 30,000

5
Section 153 of ITA

16 | DFDL BANGLADESH TAX GUIDE

F. Minimum tax liability:
An individual whose total taxable income in an income year exceeds the tax-free
level (after any relevant allowances) is subject to the obligation to pay minimum tax
based on their jurisdiction:

BDT 5,000 – In Dhaka or Chattogram City corporation area;

BDT 4,000 – In any other City Corporation area; and
BDT 3,000 – In areas other than City Corporation

G. Income from employment:

An employer is responsible for withholding and remitting personal income tax
from employment income to the NBR when the payment is made to employees at
a rate representing the average of the rates applicable to the estimated total
income of the employee6. A statement of monthly deductions must be provided
to the NBR within 15 days from the end of the month in which the payment is
made7.

H. Tax clearance for expatriates:

Before departing Bangladesh permanently or temporarily, expatriates are required
to obtain a Tax Clearance Certificate from the NBR, which may be required as proof
of tax payment or exemption8

6
Section 86(1) of ITA
7
Sec 177 of ITA
8
Section 243 of ITA

17 | DFDL BANGLADESH TAX GUIDE

4. CAPITAL GAINS TAX (“CGT”)
Capital gains tax applies to both individuals and corporations and is imposed at the
following rates:
For corporations:

- Sale of listed company shares - 10%9;

- All other cases – 15%
For individuals:

- Sale of listed company shares - 15% for non-residents, 5% for sponsor

shareholder, shareholder director, and individuals holding at least 10%
shares; exempt in all other cases;
- All other cases –
a) If the asset is transferred before the period of five years from
acquisition (<5 years), CGT will be imposed at the applicable
slab rates for total taxable income, including capital gains;
b) If the asset is transferred after five years from acquisition (>5
years), the CGT rate will be the lower of 15% or the applicable
slab rate of the individual.
Capital gains are calculated by subtracting the acquisition cost, transport cost, etc.,
from the sale proceeds or fair market value, whichever is higher.
In Bangladesh, foreign investors who derive gains from the alienation of assets in
Bangladesh or from shares and other instruments issued by a resident company are
subject to tax unless a tax treaty between Bangladesh and the investor’s home
country provides an exemption.

9
SRO 196-LAW/Income Tax/2015; dated: 30 June 2015

18 | BANGLADESH TAX GUIDE

5. WITHHOLDING TAX (“WHT”)
Bangladesh is generally considered a withholding tax regime. Companies, branch
offices, liaison offices, banks, and other financial institutions must deduct tax at the
source when making payments. Withholding taxes are usually described as “tax
deducted at source” or “TDS”. The obligation to deduct tax at the source is on the
person making the payment (including payment of salaries, compensation for supply
and services, payment of dividends, payment of interest on a loan, etc.), which must
then be deposited into the Government Treasury.

Most transactions (both local and foreign) are subject to tax deductions at source by
the person making the payment.

WHT applies to the following:

WHT on
payments to
WHT on payments to
Assessable income Section non-resident
resident persons
persons (Rule-
5)

Salary 86 Average rate 30%

Interest or profit on
securities (including Govt. 106 5% -
T-Bill & T-Bond)

Base value up
Execution of contracts; 3%
to BDT 5m;
Supply of goods;
Manufacture, process or
89, From BDT 5m
conversion; 5%
Rule-3 - BDT 20m;
Printing, packaging or
binding;
Above BDT
7%
20m
Below BDT
10%
2.5m
Royalty 91 20%
Above BDT
12%
2.5m

19 | BANGLADESH TAX GUIDE

 WHT on
payments to
WHT on payments to
Assessable income Section non-resident
resident persons
persons (Rule-
5)
Advisory or consultancy 10%
Professional
service/technical 10%
assistance fee, etc.
Catering service/cleaning
service/collection &
recovery service/private
security service/supply of
manpower/
creative media
service/public relations On
service/events commission 10%
management
service/training & On gross 2%
workshop, etc., 90, amount
organisation Rule-4
and management
service/courier
service/packing & shifting
service/any other service
of similar nature
On
commission 10%
Media buying agency
service
On gross 0.65%
amount

Indenting commission 8%

Meeting fees/training
10%
fees/honorarium

20 | BANGLADESH TAX GUIDE

 WHT on
payments to
WHT on payments to
Assessable income Section non-resident
resident persons
persons (Rule-
5)

Mobile network
operator/technical support 12%
service provider

Credit rating service 10%

Motor garage or
workshop/private
container port or 8%
dockyard/shipping agency
commission

Private container port or

8%
dockyard

Shipping agency
8%
commission

On
10%
Stevedoring/berth commission
operation commission On gross
5%
amount

21 | BANGLADESH TAX GUIDE

 WHT on
payments to
WHT on payments to
Assessable income Section non-resident
resident persons
persons (Rule-
5)

Transport services/vehicle
rental service/carrying
service/repair and
maintenance service/ride-
5%
sharing services/coworking
space providing
service/accommodation
providing service

Wheeling charge for

3%
electricity transmission

Internet Service 10%

Service delivery agents

engaged in mobile financial
10%
services or channel partners
of mobile financial services

Any other service (excluding

service provided by a bank,
10%
insurance, or financial
institution)

Payment of freight forwarder

113 15% -
agency commission

22 | BANGLADESH TAX GUIDE

 WHT on
payments to
WHT on payments to
Assessable income Section non-resident
resident persons
persons (Rule-
5)

Rendering
services from
within or
outside
10%
Bangladesh;
Allowing the
use of online
platform
Rendering
manufacturing,
process or
conversion, civil
Receipts from abroad in work, 7.5%
connection with service, 124 construction, -
revenue sharing, etc. engineering or
works of similar
nature
ITES income;
Income of
ocean-going
ships (up to 30
June 2030) and
income earned Exempt
abroad by
individuals and
brought into
Bangladesh as
remittance.

Rent payment for house

109 5% -
property

23 | BANGLADESH TAX GUIDE

 WHT on
payments to
WHT on payments to
Assessable income Section non-resident
resident persons
persons (Rule-
5)

From the collection of export

123 1% -
proceeds

Commissions/di
scounts/etc.
10%
allowed to
distributors

Payment
against
Collection at source from
distribution or
commission, discount, or 94 20%
marketing of a 1.5%
fees, etc.
company’s
goods

Selling to
distributor
under a 0.25%
contract

Collection of tax from the 125 Variable depends on

transfer of property Rule-6 location and deed value

Collection of tax from

transfer of securities or
mutual fund units by 135 5%
sponsor shareholder of a
company, etc.

24 | BANGLADESH TAX GUIDE

 WHT on
payments to
WHT on payments to
Assessable income Section non-resident
resident persons
persons (Rule-
5)

Collection of tax from

transfer of shares of a
136 15%
shareholder of Stock
Exchanges

Companies 20%
20% for
Other than a
company,
company, 10%
Deduction of tax from fund, trust;
117; having a TIN
dividends
Other than a 30% for
company not 15% others
having a TIN

The tax must be withheld at source by the Bangladesh entity and remitted to the
NBR as follows:

Time of deductions Tax to be deposited

From July to May of following year Within two weeks from the end of the month
First twenty days of June Within seven days following the date of
Last ten days of June On the next day of deduction

The tax withheld from non-residents is considered a minimum tax and, therefore,
is not subject to any refunds or adjustable with any demand.

25 | BANGLADESH TAX GUIDE

6. TRANSFER PRICING (TP):
Transfer pricing provisions are broadly in line with the OECD Transfer Pricing
Guidelines and apply to ensure that transactions between Associated Enterprises or
related parties (either or both of whom are non-residents) are conducted at arm’s
length (market) prices – including both subsidiaries and branches.
Common transactions covered by transfer pricing provisions include the exchange
of goods, services, intangible property, and intercompany loans – the latter medium
and long-term loans are subject to approval by the Bangladesh Investment
Development Authority (”BIDA”) provided that the borrower qualifies as an
“Industrial Enterprise” within the ambit of Industrial Policy (2022). Certain transfers
of Bangladesh businesses and offshore assets are subject to a capital gains charge.
A. Associated Enterprises or related parties: are those based on a
parent/subsidiary or common ownership or control relationships or certain
relationships in which one company controls decisions or executive
appointments of another.
B. Transfer Pricing Documentation: a taxpayer who engages in international
transactions of over BDT 30 million in a financial year is required to maintain
documentation to be submitted on request to the National Board of Revenue
(NBR) within 30 days – as well as a certificate from a chartered accountant in
a prescribed format, if requested.
Transfer Pricing Documentation is prepared per company in either English or
the local languages, and while annual benchmarks are preferred, prior-year
data may be used. The five OECD and other methods are acceptable, as is the
use of regional benchmarks. Penalties apply for non-compliance.
C. Annual disclosure requirements: all transactions with associated enterprises
must be reported on an annual statement of international transactions and
filed with an annual income tax return to local tax authorities. Non-compliance
results in a penalty per transaction.

26 | BANGLADESH TAX GUIDE

7. VALUE ADDED TAX (“VAT”)
The VAT system in Bangladesh follows the conventional VAT system under which
input VAT can be adjusted with output VAT (i.e., Input Tax Credit). VAT is generally
imposed on sale or service transactions executed or performed in Bangladesh by an
operator or person selling goods or rendering services during business or
professional activities. VAT is also imposed on the import and export of goods at 15%
and 0%, respectively.

Foreign and local entities planning to operate businesses in Bangladesh must

register as VAT registrants with the NBR. The duties of the VAT registrant include
issuing tax invoices and delivering them to customers when the tax point is reached,
collecting VAT from customers, and remitting the VAT amount collected from
customers to the NBR within a specified time.

An entity is not required to be a VAT registrant if its turnover is less than BDT 30
million (roughly USD 300,000) annually. However, there is scope to register
voluntarily. Once registered voluntarily, there is no scope for deregistration before
the expiration of one year from the registration date. It is mandatory for foreign
entities carrying on business in Bangladesh through a branch/liaison to get
registered for VAT.

If a foreign operator performs business in Bangladesh and temporarily or only

provides services from abroad while the services are used in Bangladesh, they do
not need to register for VAT.

Central VAT registration:

An entity (apart from tobacco-based businesses) may opt for central registration in
a preferred address where all accounts, tax deposits, and records of economic
activity relating to the supply of identical or similar goods or services, or both, from
one or more locations, are maintained in an NBR-approved, software-based
automated system.

Eligibility of central registration will lapse if, despite supplying identical or similar
goods, the accounts and records of economic activity are maintained separately in
separate locations.

27 | BANGLADESH TAX GUIDE

VAT agent:

A non-resident entity that does not conduct business in Bangladesh from a local
fixed base must appoint a VAT agent.

The VAT agent of the non-resident entity shall assume all responsibilities and carry
out all activities of the non-resident, but the non-resident shall be liable for the
payment of all taxes, fines, penalties, and interest thereon.

VAT rates currently in force:

Rate Classification Particulars

Except for those included in the First and Third Schedules

15% Standard rate of the Law, all products and services imported to or
provided in Bangladesh are subject to the Standard Rate.

Below All goods and services included in the Third Schedule are
Reduced rate
15% subject to a Reduced Rate

All exports and deemed exports of goods and services

0% Zero-rated
from Bangladesh are subject to a zero rate

Any goods and services included in the First Schedule or a

Statutory Regulatory Order (“SRO”) issued explicitly to
N/A Exempted
grant exemptions.

VAT is payable by a VAT registrant monthly before the 15th day of the month
following its collection.

VAT levied on the importation of goods into Bangladesh is imposed based on CIF
prices (including import duties and excise taxes) and is collected upon import at the
customs clearance point along with related customs duties. The Customs
Department oversees collecting and remitting import VAT to the NBR.

The VAT system in Bangladesh follows a typical offsetting formula (i.e., Input Tax
Credit, discussed below) whereby an operator computes VAT monthly by netting the

28 | BANGLADESH TAX GUIDE

value of its Output Tax (VAT amount collected from the customers when selling
goods or providing service) against its Input VAT (VAT paid to the seller of goods or
service provider) and allows requests for a VAT refund (when there is a negative
balance) that can be carried forward to the following month (up to a maximum of
six months) in situations when the level of Input Tax is higher than Output Tax. After
six months, the VAT registrant may apply to the authority for a refund.

Input tax credit:

Input VAT is the VAT paid by a VAT registrant on its imports and local purchases.
Here, input means all raw materials, laboratory re-agents, laboratory equipment,
laboratory accessories, any material used as fuel, packaging materials, services,
machines, and parts of machines.

The items below are not considered inputs, and any input VAT paid against them are
not eligible for claiming a credit:

Land, labor, buildings, office equipment and fixtures, infrastructure

construction, maintenance, repair, and renovation;
All furniture, office supplies, stationery, refrigerator, air conditioner, fan,
lighting materials, generator purchases and repair;
Interior design, architecture planning and design;
Lease and rental payments for transportation;
Travelling, entertainment, goods, and services related to employee
welfare associated activities;
Rent for office premises, showrooms
Provided that the VAT registrant’s output VAT rate is the standard rated (15%) or
zero rated (0%), then input tax credit can be claimed through the VAT return within
the current period or subsequent four periods, except for the items listed below:

any expense over BDT 100,000 for which payment is made without a
banking channel or mobile financial service (MFS) platform, except for
intra-company transactions;
expenses for exempted goods or services;

29 | BANGLADESH TAX GUIDE

 expenses for which the VAT invoice does not mention the name, address,
and BIN of both customer and supplier;
expenses related to transportation of goods above 80%;
expenses related to the supply of goods and services for businesses other
than export-oriented, which are subject to Turnover Tax or VAT at a
specified rate or VAT at a rate less than 15%;
expenses that are not mentioned in the Input-Output Coefficient
Declaration;
goods or services that are supplied for less than the purchase price;
if an updated Input-Output Coefficient Declaration is not submitted in case
of any deviation of more than 7.5% of the input amount;
imported services for which output VAT has not been shown in the VAT
Return;
purchase of passenger vehicle or entertainment services, if input VAT
credit may be allowed when such purchases are part of the ordinary
course of economic activities of the person;
VAT paid on inputs that have not been entered in the Purchase-Sale
Register prescribed by the rules;
VAT paid on the goods under the custody or possession or occupancy of
another person, except for contractual goods production
Any credit claimed regarding inputs that went into producing goods rendered
unusable or damaged shall be cancelled. In this respect, the VAT registrant shall file
an application to the authority in the prescribed manner. Once approved, the
cancelled amount of VAT credit will need to be reported in the VAT return for the
relevant month through an increasing adjustment.

30 | BANGLADESH TAX GUIDE

Partial input tax credit:
There also exists a concept of claiming partial input tax credit through the following
formula:

I x T/A, whereby –

I = amount of input VAT about imports or acquisitions in the relevant period;

T = Amount of consideration paid by the VAT registrant against all taxable supplies
in said period; and

A = Amount of consideration paid by the VAT registrant against all supplies in the
same period.

VAT documents/forms:

Sl. Form Details

1 Mushak-2.1
Application of VAT registration and turnover tax enlistment

2 Mushak-2.2 Application of VAT registration for nonresident

3 Mushak-3.1 Registration of VAT agent

4 Mushak-3.2 Registration certificate of VAT agent

5 Mushak-3.4 Delegation of power to VAT agent by a nonresident person

6 Mushak-4.3 Input-output co-efficient

7 Mushak-4.4 Application for the disposal of unused or unusable materials

8 Mushak-4.5 Application for the settlement of accidental damage or

destruction

31 | BANGLADESH TAX GUIDE

Sl. Form Details

Mushak-4.6 Application for the settlement of supply and disposal of waste

9
or by-product

10 Mushak-6.1 Purchase book

11 Mushak-6.2 Sales book

Purchase-sale accounts for registered/enlisted persons not

12 Mushak-6.2.1
engaged in processing goods/ services

13 Mushak-6.3 VAT invoice

14 Mushak-6.5 Good transfer invoice for a centrally registered entity

15 Mushak-6.6 VAT deduction certificate

16 Mushak-6.7 Credit note

17 Mushak-6.8 Debit note

18 Mushak-6.9 Turnover tax challan (document)

19 Mushak-6.10 Information relating to purchase/sale invoices above BDT

200,000

20 Mushak-9.1 VAT return

21 Mushak-9.2 Turnover tax return

22 Mushak-9.3 Application for submitting a late return

23 Mushak-11.1 Late VAT return

24 Mushak-11.2 Assessment order for VAT

32 | BANGLADESH TAX GUIDE

 Sl. Form Details

25 Mushak-18.1 Application for a VAT consultant license

26 Mushak-18.1a VAT consultant license

Withholding VAT:
Withholding entities (see below) are required to withhold VAT from their
procurements and deposit it to the government treasury within the seventh day of
the following month, after which they must provide a VAT deduction certificate to
their suppliers within three days from deposit.

The following are considered withholding entities:

A government entity;
A non-governmental organization approved by the NGO Affairs Bureau or
the Directorate General of Social Welfare;
A bank, insurance company or a similar financial institution;
An education institution of secondary level or above;
A limited company, branch office or liaison office.

VAT rates on services:

Service Withholding
Sl. Particulars Rate
code requirement?
1 S001.1 Hotel: A/C 15.0% ✓
2 S001.1 Hotel: Non -A/C 7.5% ✓
3 S001.2 Restaurant: A/C 5.0% ✓
4 S001.2 Restaurant: Non-A/C 5.0% ✓
5 S002 Decorators and caterers 15.0% ✓
6 S003.1 Motor Garages & Workshop 10.0% ✓
7 S003.2 Dockyard 10.0% ✓
8 S004 Construction Firms 7.5% ✓
9 S005.1 Warehouse 15.0%
10 S005.2 Port 15.0%
11 S006 Cold Storage 0.0%
33 | BANGLADESH TAX GUIDE
12 S007 Advertising Firms 15.0% ✓
13 S008.1 Printing Press 10.0% ✓
14 S008.2 Binding agency 0.0%
15 S009 Auctioneer 10.0% ✓
16 S010.1 Land Development Firms 2.0% ✓
✓
Building Construction Firms (1-1600
17 S010.2 2.0%
sq. ft.)

✓
Building Construction Firms (>1600
18 S010.2 4.5%
sq. ft.)
19 S010.2 Building Construction Firms 2.0% ✓
20 S011.10 (Reregistration)
Video Shop 15.0%
21 S011.2 Video Game Shop 15.0%
22 S011.3 Audio & Video Recording shop 15.0%
23 S011.4 Audio & Video Rental Shop 15.0%
24 S012 Telephone/Tele-printer/Telex/Fax 15.0%
25 S012.14 Internet Service Provider 5.0%
26 S012.2 Sim card supplier 15.0%
27 S013 Automated Laundry 10.0%
28 S014 Indenting Firm 5.0% ✓
29 S015.1 Freight Forwarders 15.0% ✓
30 S015.2 Clearing & Forwarding Agents 15.0%
31 S016 Travel Agency 0.0%
32 S017 Community Center 15.0%
33 S018 Film Studio 10.0%
34 S019 Photo Maker 0.0%
35 S020 Survey Firms 15.0% ✓
36 S021 Rental of plant and capital 15.0% ✓
37 S022 equipment
Sweet Shops 7.5%
38 S023.1 Film producers 10.0%
39 S023.2 Cinema hall 10.0%
40 S024.10 Furniture manufacturer 7.5% ✓
41 S024.20 Furniture distributor 7.5% ✓
42 S025 WASA 15.0%
43 S026 Goldsmith, Silversmith, Jewelers 5.0%
44 S027 Insurance Company 15.0%
45 S028 Courier & Express Mail Service 15.0% ✓
46 S029 Astrologer 15.0%
47 S030 Beauty Parlor 15.0%

34 | BANGLADESH TAX GUIDE

48 S031 Repair & servicing of taxable goods 10.0% ✓
49 S032 Consultancy & Supervisory Firms 15.0% ✓
50 S033 Leaseholder 15.0% ✓
51 S034 Audit & Accounting Firms 15.0% ✓
52 S035 Shipping Agent 15.0%
53 S036.1 AC Bus Service 15.0%
54 S036.2 AC Launch Service 10.0%
55 S036.3 AC Railway Service 15.0%
56 S037 Procurement Providers 7.5% ✓
Arrangement of cultural program in
57 S038 15.0%
coordination with Foreign Artists
58 S039.1 Satellite Cable Operator 15.0%
59 S039.2 Satellite Channel Distributor 15.0%
60 S040 Security Services 10.0% ✓
61 S041 Marriage Media 15.0%
62 S042 Automated Sawmill 10.0%
63 S043 Supplier of Programs to Television 15.0% ✓
64 S044 and Online
Services by Medium
BRTA 15.0%
65 S045 Legal Advisors 15.0% ✓
66 S046 Health and Fitness Centre 15.0%
67 S047 Sports Organizer 10.0%
✓
Transport Contractors: of petroleum
68 S048 5.0%
products
69 S048 Transport Contractors: others 10.0% ✓
70 S049 Rent-a-Car 15.0% ✓
✓
Architect, Interior Designer/
71 S050.1 15.0%
Decorator
72 S050.2 Graphic Designer 15.0% ✓
73 S051 Engineering firm 15.0% ✓
74 S052 Rental of sound and lighting system 15.0% ✓
75 S053 Directors fee for attending Board 10.0% ✓
meeting
✓
Broadcasting advertisements
76 S054 15.0%
through satellite
77 S055 Land seller 0.0%
Banking and non-banking service
78 S056 15.0%
provider
79 S057 Electricity Distributor 5.0%

35 | BANGLADESH TAX GUIDE

 ✓
Rental of chartered plane and
80 S058 15.0%
helicopter
81 S059 Glass-sheet plating company 15.0%
82 S060 Buyer of auctioned goods 7.5% ✓
83 S061 Credit Card Provider 15.0%
84 S062 Money Exchange 15.0%
85 S063 Tailoring Shop & Tailors 10.0%
86 S064.1 Amusement Park and theme park 7.5%
87 S064.2 Picnic Spot, Shooting Spot, and 15.0%
88 S065 tourist spot
Cleaning or Maintenance Service 10.0% ✓
89 S066 Providers of the Building’s Floor and
Seller of Lottery 10.0% ✓
90 S067 Immigration advisor 15.0% ✓
91 S068 Coaching Center 15.0%
92 S069 English Medium School 5.0%
93 S070.1 Private University 0.0%
94 S070.2 Private Medical & Engineering 0.0%
95 S071 College
Event Management 15.0% ✓
96 S072 Human Resource Management 15.0% ✓
97 S073 Manpower Exporter 0.0%
98 S074 Rent of place 15.0%
99 S075 Stock & Security Broker 0.0%
100 S076 Social & sports club 10.0%
101 S077 Tour Operator 0.0%
Sale centre of own-brand
102 S078 7.5%
garments/clothes
Sale centre of brand
103 S078 7.5%
garments/clothes (except its own)
104 S080 Ride Sharing Service 5.0%
105 S099.1 ITES - Information Technology 5.0% ✓
106 S099.2 Enabled services
Other miscellaneous services 15.0% ✓
107 S099.3 Sponsorship services 15.0% ✓
108 S099.4 Meditation service 0.0%
109 S099.5 Credit Rating Agency 7.5% ✓
Sale of Goods through Online/e-
110 S099.6 5.0%
commerce

36 | BANGLADESH TAX GUIDE

8. CUSTOMS AND IMPORT DUTIES:
Customs Duty: under the Customs Act (1964), is regarded as a type of indirect
tax where the real burden of paying duty can be passed on to customers in the
supply chain. The Customs Department of Bangladesh collects customs duty
from importing goods.
Goods imported into Bangladesh are subject to customs duties. The precise
duty rate depends on the nature of the goods. The Bangladesh Custom Tariff
Schedule prescribes the applicable rates, which are reviewed regularly.
Customs duties are collected, regardless of the point of entry, on all goods
crossing the border, at a rate that varies from 0% to 35%, except for those
specially exempted from customs duties by law or relevant regulatory orders.
Customs duty is imposed on assessed value/customs value at the applicable
rate prescribed in the Bangladesh Custom Tariff Schedule.
The assessable value (“AV”) is determined by the actual price, i.e., the price paid
at the time and place of importation, with the addition of (a) freight paid, (b)
landing charge/local cost, and (c) insurance expenditure.
Freight cost should exceed 20% of the Free-on-Board (“FOB”) value and, if it
cannot be determined, should be 20% of the FOB value. Insurance cost should
be 1% of FOB value if it remains undetermined, and the landing charge is 1% of
FOB, freight, and insurance cost.
Calculation of AV:

Particulars
Cost (FOB)
Plus: Freight (20% of FOB)
Plus: Insurance (1% of FOB)
Plus: Landing charge [1% *(cost + freight + insurance)]
Total

37 | BANGLADESH TAX GUIDE

The importer is responsible for arranging for the examination and release of
the imported cargo. Additionally, depending on the nature of the imports and
regardless of value, the importers may need to obtain a permit to facilitate the
clearance of the imports.
Supplementary Duty: Luxury goods, non-essential and socially desirable goods
and certain other goods and services are subject to supplementary duty in
Bangladesh. Supplementary duty at the rates prescribed in the Second
Schedule of the VAT & SD Act (2012) shall be imposed on such goods and
services supplied, imported, or provided in Bangladesh.
Regulatory Duty: is levied at 0% to 5% in addition to the customs duties levied
at such rates as are prescribed in the Customs Tariff Schedule

38 | BANGLADESH TAX GUIDE

9. DFDL TAX SERVICES
Tax Advisory
International tax planning and structuring services
Tax treaty planning and tax treaty relief assistance
Tax due diligence, M&A, and restructuring services
Tax review of contracts and transactions
Assistance in obtaining tax rulings
General tax advisory
Transfer Pricing
Preparation of transfer pricing documentation
Transfer pricing advisory
Transfer Pricing audit support and defense strategies
Transfer Pricing policy implementation, review, and remediation
Advanced Pricing Agreement (“APA”) and MAP applications
Tax Controversy
Assistance in tax audits
Litigation on tax and customs
Public Sector Advocacy
Government consultancy
Tax policy advocacy

39 | BANGLADESH TAX GUIDE

10. OUR PEOPLE
At DFDL, our most valuable assets are our people. We are dedicated
to hiring, developing and retaining experienced and efficient advisers.
Key people who comprise our Bangladesh Team are:

JACK SHEEHAN
Partner and Head of Regional Tax Practice

Jack is a Partner and heads the Regional Tax Practice at

DFDL. He has extensive experience in advising clients on tax
matters in Asia. Jack provides advice on international tax
planning, tax structuring, M&A, and transfer pricing.
Jack is listed as highly regarded by the International Tax
Review and a leading individual for tax by the Legal 500.
Jack is regularly featured as a speaker and writer on tax in
Asia and has given lectures on Asian and international tax at
several leading bodies, including the International Fiscal
Association (“IFA”), the International Bureau of Fiscal
Documentation (“IBFD”), the World Bank, and leading
universities across Europe and Asia.
Jack holds a master’s in Tax Law from the University of
Oxford and is a Fellow of the Association of Chartered
Certified Accountants.
jack.sheehan@dfdl.com

FARHAN KABIR
Senior Tax Adviser

Farhan is a Senior Tax Adviser at DFDL Bangladesh. He is

experienced in advising on corporate and international tax
matters, including mergers and acquisitions, tax due
diligence, transfer pricing, and tax incentives in
Bangladesh.

Farhan has advised multinational clients on international

tax structures for Bangladesh and represented several
clients in tax assessments before the National Board of
Revenue (NBR), the governing body for taxes in
Bangladesh.

He holds a Bachelor’s degree in applied accounting from

Oxford Brookes University and is a member of the
Association of Chartered Certified Accountants (ACCA).

farhan.kabir@dfdl.com
DFDL TAX GUIDE BANGLADESH
Written by experts from DFDL with information on:
Bangladesh Regulatory System • Setting up Business in Bangladesh• Accounting / Financial
Reporting • Foreign Investment Law • Special Economic Zones • Compliance Requirements •
Taxation • and more.
About Us
DFDL is the leading international law firm specialized in emerging markets with pan-regional
legal and tax expertise developed throughout the Mekong region (Cambodia, Lao PDR,
Thailand, Myanmar, Vietnam), Singapore, Bangladesh, Indonesia, and other developing
markets, with a dedicated focus on other Southeast Asian jurisdictions, South Asia and the
Middle East.
With a team of over 170 foreign and local advisers working closely together within a fast-
growing network of 12 offices, including affiliated firms, in Asia, we provide personalized and
cost-effective legal, tax and consulting services and solutions with expertise in:
Employment
Aviation
Energy, Mining, and
Banking, Finance and Technology
Infrastructure
Compliance and Investigations
Real Estate and Construction
Corporate and M&A
Restructuring and Insolvency
Dispute Resolution
Taxation

Founded in 1994, DFDL has acquired an outstanding reputation for providing seamlessly
integrated and solution-oriented legal and tax services to establish, structure and protect
our clients’ business interests. DFDL is also actively involved, in tandem with local
jurisdiction stakeholders, in developing our emerging markets' legal and regulatory
environment.
Our team of local and internationally trained legal advisers offers a full range of services to
local and international clients with activities in Thailand, Southeast Asia and beyond. We
can advise on all aspects of Bangladesh law.

Excellence. Creativity. Trust

Since 1994

BANGLADESH | CAMBODIA* | INDONESIA*| LAO PDR | MALAYSIA* | MYANMAR

PHILIPPINES* | SINGAPORE | THAILAND | VIETNAM
*DFDL collaborating firms