Legal Structures
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Doing Business in Bangladesh
This section covers all areas of interest for a potential investor/client looking to set up in Bangladesh. The information provided is brief in nature and it is advised that you get in touch with us for more detailed/specific advice.
Geography
Bangladesh, a country in South Asia, covers an area of approximately 144,000 square kilometres. This area can be divided into two distinct regions: a broad deltaic plain and a smaller hilly region. Bangladesh is bordered by India to the west, north, and east, and by Myanmar to the southeast. To the south, it has an irregular deltaic coastline of about 580 kilometres along the Bay of Bengal. The borders of present-day Bangladesh were established during the British partition of Bengal and India in 1947, when the region became East Pakistan, as part of Pakistan. Due to a desire for political, economic, and linguistic self-determination, popular agitation and civil disobedience grew against the Pakistani state. Bangladesh gained independence following the Bangladesh Liberation War of 1971.
Population
As of 2024, Bangladesh’s population is estimated to be approximately 174.7 million people, making it the 8th most populous country in the world. The population density stands at around 1,342 people per square kilometre. This marks a slight increase from previous years, reflecting a steady growth rate of about 0.99% annually.
Bangladesh continues to have a largely homogenous population, with approximately 98.5% of the population being of the Bengali ethno-linguistic group. The median age in the country is now 27 years, indicating a young population. The majority of the population, around 89%, adheres to Islam, while about 10% follow Hinduism.
The literacy rate has improved significantly over the years, with about 94% of adults being literate. This includes 93% literacy among males and 96% among females.
Economy
Bangladesh continues to be one of the fastest-growing economies in the world, progressing towards its graduation from a Least Developed Country (LDC) to a middle-income country by 2026.
Bangladesh’s economy expanded by 5.5% in the fiscal year 2023 and is projected to grow by 6.5% in 2024, as reported by the IMF. The GDP for 2023 was approximately USD 446.35 billion, showing significant growth from previous years. The GDP per capita stood at around USD 2,790, while the GDP (PPP) per capita was about USD 7,000. The IMF ranked Bangladesh 41st in the world by GDP.
Trade
The total amount of exports was USD 55,558.77 million as of 2022-23 (BB). The export scenario is dominated by RMG, with around 85% share (BGMEA). Major exporting regions for RMG products were Europe (Germany, Spain, Italy, France), the US, and Canada. Pharmaceuticals remain promising because of the existing capacity to meet the global demand in generic drugs and the TRIPS exemption, which the country will enjoy for a few more years. Bangladesh has exported to more than 127 countries.
Bangladesh had a total import of USD 68,234.40 million as of 2022-23 (BB). Major commodities imported were cotton, sugar, refined petroleum, palm oil, wheat, and machines. According to Bangladesh Bank, major import regions in 2022-2023 were China (25.3%), India (16.9%), Singapore (4.8%), USA (4.4%), Japan (3.9%), and Indonesia (3.6%)
Foreign Remittance
As of 2023-24, the total remittance inflow for Bangladesh was USD 23 billion. The major countries contributing to this remittance were Saudi Arabia (22%), USA (16%), UAE (12%), UK (10%), Malaysia (8%), Kuwait (6%), and Oman (5%). Remittance remains a significant source of earnings for Bangladesh and continues to hold a prominent position globally
Infrastructure
Bangladesh has shown improvements in electrification rate and is currently providing electricity to 100% of the population (Dhaka Tribune). In 2024, the country produced a record high amount of electricity at 15,000 MW. Daily load shedding has dropped to almost 0% from July 2021 to June 2023 (CPD). Despite high levels of improvement in access to water supply across the country, the quality of the water supplied remains substandard. The trend, however, according to the Global Competitiveness Report, shows improvement, with the score increasing from 2.9 out of 7 in 2017 to 3.1 in 2019.
Bangladesh has undertaken multiple infrastructure projects to improve the situation. Significant projects nearing completion include the Padma Bridge Rail Link, the Dhaka Elevated Expressway, the Bangabandhu Sheikh Mujibur Rahman Tunnel, and the third terminal of Hazrat Shahjalal International Airport (Press Xpress). Other ongoing projects include the Chattogram-Cox’s Bazar Rail line, Rampal Power Project, Matarbari Coal Power Plant, and Rooppur Nuclear Power Plant (South Asia Monitor). These projects are expected to enhance connectivity and economic growth significantly
Debt
The Bangladesh government is committed to keeping the fiscal deficit below 5% of GDP and has so far been successful (IMF). The total central government’s debt levels were at 41.4% of GDP in 2021 and 42.5% in 2022. As of 2023, the debt level remained sustainable at 35% of GDP. Bangladesh remains at low risk of debt distress with public and publicly guaranteed external debt at about 15% of GDP, and external debt at 12.15% of GDP. Foreign reserve levels were maintained at USD 33 billion. The current account deficit has generally been low, averaging 0.086% of GDP over the past five years. According to the IMF, over the medium term, the CAD will remain broadly stable at around 2% of GDP with lower remittances to GDP, imports of capital, and imports of liquefied natural gas counteracting strong export performance
Legal Structures
A private limited company is the most common form of business entity for foreign investors.
Other than that, they can setup branch or liaison offices.
Foreign Investment Overview
- There is no general restriction on equity participation or acquisition of property for a foreign
entity. - There is no limitation on equity participation for foreign companies in Bangladesh; wholly
owned investment is allowed in all industries except reserved ones. - Foreign investors may invest in shares and securities quoted on local stock exchanges with
foreign currency sent or brought into Bangladesh
Limited Liability Company
- Foreign investors will have to incorporate a “Private Limited Company” in Bangladesh.
- There is no limitation on equity participation for foreign companies in Bangladesh; wholly owned investment is allowed in all industries except the following reserved ones**:
- Arms, ammunitions and other defence equipment and machinery.
- Production of nuclear energy.
- Forest plantation and mechanized extraction within bounds of reserved forests.
- Security printing (currency notes) and minting.
- Air transportation(includingGSA services)and railways.
- The Foreign Private Investment (Promotion and Protection) Act of 1980 guarantees protection against expropriation. If a foreign investor becomes subject to a legal measure that has the effect of expropriation, adequate compensation will be paid, and it will be freely repatriable. The amount of the compensation will be determined in accordance with the market value of the investment immediately before the measure went into effect. Since the passing of this Act, there has been NO instance of expropriation in Bangladesh.
- Companies are regulated by The Companies Act 1994 and The Registrar of Joint Stock Companies & Firms (RJSC).
- The company law restricts the maximum number of shareholders to 50 and the minimum number to 2 for a private limited company
Maximum Shareholders: 50
Minimum Shareholders: 2
- Institutions (local and foreign) and associations are eligible to subscribe to shares of private limited companies.
- Invitation to public to subscribe to shares or debentures is prohibited unless public limited conversion is affected.
- Must have registered office in Bangladesh.
- Must have a minimum of 2 (two) directors. Directors can be both resident and non-resident. Directors mustbe individuals.
- No minimum paid up or authorized capital requirement. Investors are free to choose their desired authorized capital limit and paid up capital amounts and the government fees payable on incorporation will be calculated accordingly.
Branch/Liaison Office
Overview
- Foreign entities not registered (with no legal presence) in Bangladesh can setup in the form of a Branch or Liaison Office.
- Regulated by Bangladesh Investment Development Authority (BIDA) of Bangladesh and by Bangladesh Bank
- Activities of Branch and Liaison offices are restricted to those stated in the Bangladesh Investment Development Authority permission.
- Such offices can carry out principal business activities of the parent entity.
- Inward remittance of minimum US$ 50,000 must be brought in within 2 months to meet operational expenses.
- Permission given for 3 years and subject to renewal.
- Security clearance is required from the Ministry of Home Affairs for a liaison office working on government projects.
- Needs to inform Bangladesh Bank for opening a bank account.
- Allowed to maintain a foreign currency account.
- Local revenue earning is prohibited. However branch offices can apply for a special waiver and earn local revenue.
- Outward remittance is prohibited.
- No separate legal status from parent company which will be the legal representative of BO/LO. All responsibilities will lie with the Parent Company for the operations of the branch/liaison office
- For industrial undertakings, the ratio of local and foreign employee should not be less than 20:1 respectively. For commercial offices, the ratio of local to foreign employee is 5:1.
Incorporation Procedures
Private limited companies must register with:
- The Registrar of Joint Stock Companies & Firms (Company House)
- The National Board of Revenue (Income Tax, VAT & Customs Authority)
- A City Corporation (Trade Licensing Authority)
Branch/liaison offices must register with:
- Bangladesh Investment Development Authority (BIDA)
- The National Board of Revenue (Income Tax, VAT & Customs Authority)
- A City Corporation (Trade Licensing Authority)
- Bangladesh Bank (notification only)
Private Limited Company
| # | Procedure | Comments | |
|---|---|---|---|
| 1. | Obtain Name Clearance | The proposed name of the company must be cleared from the RJSC. Certain words in a name are restricted and require prior approval such as “bank”, “investments”, “telecommunication” etc. Name clearance is valid for 30 days during which company must be incorporated or extension sought. | |
| 2. | Address | A valid “commercial address” must be provided as a registered address. A commercial address is a purchased or rented space in a building which has commercial approval. Virtual offices are allowed. | |
| 3. | Decide shareholders | If institution, the following information/documents will be required: | If individual: |
|
| ||
| 4. | Decide authorized and paid up capital | No minimum paid up or authorized capital requirement. Investors are free to choose their desired authorized capital limit and paid up capital amounts and the government fees payable on incorporation will be calculated accordingly. | |
| 5. | Form IX –Consent to Act as Director | The first directors must be decided at the time of incorporation through this form. | |
| 6. | Form XII –Particulars of Directors | Director particulars need to be provided in this form, specifically:
| |
| 7. | Opening of bank account | A bank account must be opened with any scheduled bank in Bangladesh. At this point in time this account can only be used for remittance of paid up capital. Documents to be submitted:
| |
| 8. | Remittance of paid up capital | Each shareholder must remit exact or more than the amount of paid up capital he/she is subscribing for in Bangladesh Taka to above bank account opened in name of the Company. | |
| 9. | Obtain encashment certificate | Bank will provide encashment certificate as proof of remittance of paid up capital | |
| 10. | Filing with the Registrar of Joint Stock Companies & Firms for incorporation | ||
Branch/Liaison Office
| # | Procedure | Required Info/Documents |
|---|---|---|
| 1. | Prescribed application form duly filled in | |
| 2. | Proposed organizational set-up | |
| 3. | Details of activities performed through the proposed office in Bangladesh | |
| 4. | Registered Address | A valid “commercial address” must be provided as a registered address. A commercial address is a purchased or rented space in a building which has commercial approval. |
| 5. | Necessary submission from parent company |
|
Aforementioned documents will be submitted to BIDA along with the application for incorporation. BIDA’s permission for setting up a BO/LO will include a condition to remit at least USD 50,000 to the BO/LO’s Bank account from Parent within 2 (two) months as establishment cost and operational expenses for six months. Failing to remit the amount within the deadline will result in the company having to remit 5% (five percent) additional amount for each month.
Mandatory Registrations (all entities)
| Name | Comments | Required Info/Documents |
|---|---|---|
| Electronic Tax Identification Number (e-TIN) | All entities are required to register with the National Board of Revenue and obtain a TIN number. |
|
| VAT/BIN Registration | All entities are required to register with the National Board of Revenue and obtain a BIN number/VAT Registration. |
|
| Trade License |
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|
On-going Obligations
All private limited companies (regardless of turnover or size) are required to prepared financial statements as per International Financial Reporting Standards(IFRS) on an annual basis and have them audited. All branch/liaison offices are required to prepare annual audited financial statements on a cash
Accounting & Reporting
Payroll Management (all entities)
| Activity | Relevant Authority | Frequency | Comments |
|---|---|---|---|
| Employer must ensure all employees have an e-TIN number | |||
| Employer must ensure all employees file their annual tax return by 30 November | |||
| Employer must ensure monthly deduction of tax from salary as per applicable laws | National Board of Revenue (NBR) | Monthly | Within two weeks from the end of the month of deduction |
| Salary Return Under Section 50 (Rule 21) | NBR | Monthly | Within 20 days of next calendar month |
| Salary Return Under Section 108 | NBR | Annually | 31 August of each year |
| Salary Return Under Section 108A | NBR | Annually | 30 April of each year |
Tax Compliance-Direct Tax (all entities)
| Activity | Relevant Authority | Frequency | Due date | |
|---|---|---|---|---|
| Tax Deduction at Source from Payments | National Board of Revenue (NBR) | Regular | Deduction in July to May | Within two weeks from the end of the month of deduction |
| Deduction in the first twenty days of June | Within seven days from the day of deduction | |||
| Deduction in any other days of June except last 2 working days | On the next following day | |||
| Deduction made on last 2 working days of June | On the same day | |||
| Monthly Withholding Tax Return | NBR | Monthly | Within 20 days of next calendar month | |
| Return of Withholding Income Tax u/s 75A | NBR | Half yearly | Within 31 January and 31 July of each year. | |
| Corporate Income Tax Return | NBR | Annual | Within the fifteenth day of the seventh month following the end of the income year or the fifteen day of September following the end of the income year where the said fifteenth day falls before the fifteenth day of September. | |
Tax Compliance-Indirect Tax (all entities)
| Activity | Relevant Authority | Frequency | Due date |
|---|---|---|---|
| VAT Deduction at Source from Payments | National Board of Revenue (NBR) | Regular | Within 15 days of payment of Consideration to vendor. |
| VAT Deduction Certificate | NBR | Regular | Within 3 days of VAT submission |
| VAT Return | NBR | Monthly | Within 15 days of next calendar month |
Secretarial Compliance
There are other internal compliances such as maintenance of registers etc.
Foreign Exchange Implications
Bangladesh has restrictive foreign exchange policies and it it important for an entity to set up their business operations in compliance with the regulations set out in Foreign Exchange Regulations Act, 1947 and subsequent guidelines issued by Bangladesh Bank
FOREX Overview
- On March 24, 1994 the Bangladesh Taka was declared convertible for current account transactions in terms of Article VIII of the IMF Articles of Agreement.
- Other than a few reserved sectors foreign investors are free to make investments in Bangladesh in industrial enterprises either wholly owned or in collaboration with local investors.
- Non-residents (individual & institutions) are free to invest in shares listed on local stock exchanges with foreign exchange brought into Bangladesh.
- Shares in private limited companies may also be allotted to foreign investors.
- Non-resident shareholders can freely transfer shares to other non-residents.
- There are strict controls on outward remittance from Bangladesh and most outward remittance is restricted other than a few routes as listed below.
Dividends/Profits
- Companies can freely remit post-tax dividends to non-resident (foreign) shareholders subject to application to be made to local bank with all documents/information as stipulated by Bangladesh Bank.
- Branches of foreign firms and companies can also freely remit profits to the parent company subject to application to be made to local bank with all documents/information as stipulated by Bangladesh Bank and the BIDA.
- Dividend income and capital gains on shares listed on a stock exchange can be freely remitted if such investment was made through a Non-Resident Investors Taka Account.
- Remittance of sale proceeds of private limited companies require prior central bank approval. Dividend remittance to foreign shareholder does not require prior approval.
Royalty/Technical Knowledge/Technical Assistance/Franchise Fees
- Such fees can be remitted abroad by applying to BIDA.
- Companies wishing to affect such remittances will need to first be registered with BIDA.
- Local banks will allow payment upon furnishing BIDA approval on specific terms.
Training & Consultancy Costs
- Such fees may be remitted without prior approval of Bangladesh Bank
- The amount of remittance is restricted to 1% of annual sales as declared in the income tax return of the previous year.
Remittance Facilities for IT/Software Firms
- IT/software firms can remit upto USD 40,000 in any calendar year for international alliance/software registration fee, domain registration/hosting fee, server maintenance fee, account verification/remittance test fee, etc. without prior approval.
Shipping Lines/Airlines/Courier Companies
- Such entities may remit funds collected in Bangladesh towards freight and passage after adjustment of local costs.
Expatriate Employees
- Foreigners employed in Bangladesh may freely remit on a monthly basis, 75% of their salary and actual savings and admissible retirement benefits without prior approval to their country of domicile. Salary on which remittance entitlement is calculated would exclude monetary value of various facilities, such as free house, transport, servants, boarding, cash payments towards conveyance, entertainment, house rent etc. The term ‘net income’ would in this context signify gross income of the applicant less all compulsory deductions such as income tax, provident fund and pension fund, house rent and other deductions which are of a fixed nature.
- Foreigners employed in Bangladesh can remit up to 75% of their bonus after deduction of applicable taxes and payment thereof at one-go without spreading over the subsequent 12 months.
Basis
- Resident entities are taxed on their worldwide business income.
- Non-residents are taxed only on Bangladesh-source income.
- Income arising directly or indirectly through or from a Permanent Establishment (PE) in Bangladesh will be deemed to accrue or arise in Bangladesh.
Permanent Establishment
The definition of a “Permanent Establishment” in relation to income from business or profession includes:
- a place of management
- a branch
- an agency
- an office
- a warehouse
- a factory
- a workshop
- a mine, oil or gas well, quarry or any other place of exploration, exploitation or extraction of natural resources
- a farm or plantation
- a building site, a construction, assembly or installation project or supervisory activities in connection therewith
- the furnishing of services, including consultancy services, by a person through employees or other personnel engaged by the person for such purpose, if activities of that nature continue (for the same or a connected project) in Bangladesh; and
- any associated entity or person (hereinafter referred to as “Person A”) that is commercially dependent on a non-resident person where the associated entity or Person A carries out any activity in Bangladesh in connection with any sale made in Bangladesh by the non-resident person
Income Year
Income year is as follows:
- Newly set up business –date of incorporation to the following 30 June.
- Banks, insurance or financial institutions –from 1 January to 31 December.
- Other companies –1 July to 30 June
Provided that the authorities may allow a different financial year for a company which is a Subsidiary/Branch Office/Liaison Office of a company incorporated outside Bangladesh if such company is required to follow a different financial year for the purpose of consolidation of its accounts with its parent
Rates of Corporate Tax
The applicable rates of tax for companies are as follows:
| Type | Rate | Applicable tax rate if fails to meet the condition |
|---|---|---|
| Publicly traded companies i.e. companies listed with any stock exchanges in Bangladesh other than banks, insurance and other financial institutions, merchant banks, mobile phone operating companies and cigarette manufacturing companies. If such a company transfers more than 10% shares through IPO. | 20% | 22.50% |
| Publicly traded companies i.e. companies listed with any stock exchanges in Bangladesh other than banks, insurance and other financial institutions, merchant banks, mobile phone operating companies and cigarette manufacturing companies. If such a company transfers equal to 10% or less than 10% shares through IPO | 22.50% | 25% |
| Non-listed companies | 27.50% | 30% |
| One-person companies | 22.50% | 25% |
| Banks, insurance, mobile financial services (MFS) and other financial institutions (except merchant banks) if not publicly listed. | 40% | Condition not applicable |
| Banks, insurance, mobile financial services (MFS) and other financial institutions (except merchant banks) if publicly listed. | 40% | Condition not applicable |
| Merchant banks | 37.50% | Condition not applicable |
| Cigarette, bidi, zarda, gul and all tobacco manufacturers (companies, firms and individuals) irrespective of listing | 45% | Condition not applicable |
| Mobile phone operating companies if not publicly listed as below. | 45% | Condition not applicable |
| Listed Mobile phone operating companies (subject to certain conditions) | 40% | Condition not applicable |
| Jute Industries (up to 30 June 2023) | 10% | Condition not applicable |
| Knit wear and woven garments manufacturers and exporters | 12% | Condition not applicable |
| Knit wear and woven garments manufacturers and exporters with “green building certification” | 10% | Condition not applicable |
| Private university/medical college/dental college/engineering college/college involved in IT education | 15% | Condition not applicable |
| Co-operative societies registered under Co-operative Societies Act, 2001 | 15% | Condition not applicable |
| Dividend Income | 20% | Condition not applicable |
| Association of persons | 27.50% | 30% |
| Artificial juridical person and other taxable entity | 27.50% | 30% |
Income Tax Return Filing
All companies/Branch & Liaison Offices in Bangladesh are required to obtain an e-TIN from the authorities. Companies are required to file their tax returns on the later date of the following:
- 15th day of the seventh month following the end of the income year
- Following 15 September
Such tax returns must be accompanied by:
- Audited financial statements prepared in accordance with International Financial Reporting Standards.
- Computation of total income with supporting schedules
- Other supporting documents
Withholding Income Tax Requirements
Bangladesh has extensive withholding tax requirements on all local payments. Please contact us for exhaustive listing of such requirements. The withholding tax requirements from payments to non-residents (unless reduced under a Double Taxation Avoidance Agreement) are as follows
| Nature of Payment | Rate |
|---|---|
| Advisory or 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% |
| 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 except in certain circumstances. | 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:
| 20% 30% |
| Artist, singer or player | 30% |
| Salary or remuneration | 30% |
| Exploration or drilling in petroleum operations | 5.25% |
| Survey for coal, 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% |
| Fees, etc. of surveyors of general insurance company | 20% |
| Dividend:
| 20% 10% |
Value Added Tax (VAT)
VAT is levied on the supply of goods and the provisions of services, and on the import of goods and services. Supplies of goods and services without consideration are valued at their fair market price.
- The standard rate of VAT is 15% with certain exemptions for certain services.
- Reduced rates of 5%, 7.5% and 10% apply to certain goods and services.
- Local trader including commercial importers pay 5% VAT.
- Exports are zero rated for VAT.
Registration
- VAT registration is mandatory for suppliers having a turnover of more than BDT 30 million.
- Suppliers with turnover between BDT 5 million and BDT 30 million may opt for voluntary registration or pay turnover tax at 4%.
- Suppliers with turnover of less than BDT 5 million are not required to register.
- VAT registration is mandatory for:
Importers
Exporters
All withholding entities
Suppliers dealing in goods subject to supplementary duty
Branch, liaison or project
office of foreign companies
VAT agent
- Centralized registration process can be applied where supplies of similar goods and services are made from multiple business locations.
- Companies with no physical presence in Bangladesh but subject to VAT-able supplies need to appoint a VAT agent.
Filing and Payment
- VAT returns must be filed within 15 calendar days from the end of the month.
- VAT deducted at source has to be deposited to government treasury within seven (7) days from the end of VAT period (the month of deduction)
- Entities exceeding turnover limit of BDT 50 million are required to use NBR designated VAT software(s).
- Registered limited companies need to submit Financial Statements to NBR within 6 (six) months from the end of the income year. Upon application, commissioner may further extend the period of submission up to additional 6 (six) months.
Double Taxation Avoidance Agreements
other countries for avoiding double taxation. This treaty includes provision for relief from tax on
income such as dividend, royalty, technical fees, business profits, etc. Bangladesh currently holds
agreements on avoidance of double taxation with 34 countries:
Transfer Pricing
OECD type transfer pricing provisions apply. The definition of “associated enterprise” extends beyond a shareholding or management relationship, as it includes some deeming clauses.
Every person/company who has entered into an international transaction shall furnish a statement of international transactions in the prescribed form along with their annual income tax return.
A taxpayer that engages in cross-border transactions exceeding BDT 30 million is required to maintain documentation and to provide a certificate (in a prescribed format) from a chartered accountant that sets out the details of related party transactions, as well as the methods used to determine an arm’s length price, provided a notice for filing the certificate is received from the tax authorities.
Labour Environment
- Employment of workers are governed by the Bangladesh Labour Law 2006 and Bangladesh
Labour Rules 2015. - Employment of staff engaged in a managerial, administrative or supervisory capacity is
governed by contract.
Labour Law
Bangladesh Labour Law 2006 (Amended 2013) and Bangladesh Labour Rules 2015 are the prevailing labour relation regulations currently. However, the Labour Law 2006 is mainly used to govern the relationship between employers and workers. Workers are defined in the law as:
Considering this, there is ambiguity on whether management staff and employees in the service sector fall under this Act or that relationship can be simply governed through employment contracts. This area is being reviewed by the Bangladesh Courts and a new law is expected soon.
Personal Income Tax
ResidencyIn Bangladesh an individual is treated as a resident if they have been in Bangladesh for:
- An aggregate period of 182 days or more in that tax year, or
- 90 days or more in that tax year provided he/she has previously been in Bangladesh for
an aggregate period of 365 days or more during the 4 years preceding that tax year. - Any company which is managed or controlled wholly in Bangladesh during that tax year.
- Any trusts, funds or entity controlled or managed from Bangladesh.
Short term visitors and dependents of expatriates not earning any income in Bangladesh are
not taxable locally and do not have to file a tax return. Nationality has no impact on taxability.
Taxpayer’s Identification Number (e-TIN)
All individual taxpayers are required to obtain an e-TIN in order to file a tax return. This is
relatively easy and can be obtained from http://secure.incometax.gov.bd/TINHome.
Deadline for Tax Return Filing
The last date for filing tax returns is 30 November following the end of the income year which
is now termed Tax Day.
Employers are responsible for deducting taxes at source after providing for allowances from
monthly salary. However, all employees are responsible for filing of their own returns at the
end of the tax year. If, however, an individual has other sources of income such as house rent,
interest income etc., he/she is responsible for filing accordingly and paying taxes at the time
of filing. Income from salary includes the following:
- Basic Salary
- Festival Bonus
- Incentive Bonus
- Arrear Salary
- Advance Salary
- Wages or any other payment
- Overtime
- Contribution to PF
- Pension Fund
- Gratuity Fund
- Superannuation Fund
- Project Pay
- Leave Encashment
- Compensation Pay
- Leave Fare Assistance
Individuals enjoying salary income are subject to tax on salary and all other benefits. A
summary of taxability and allowances are as below:
| Income Head | Taxability |
|---|---|
| Basic Salary | Fully taxed |
| House Rent Allowance (in cash/with salary) | Tk. 25,000 per month or 50% of basic salary, whichever is lower is exempt from tax. |
| Rent free accommodation | Actual rent paid by employer or 25% of basic salary, whichever is lower shall be added to total income and taxed. |
| Conveyance Allowance (in cash/with salary) | Tk. 30,000 per annum is exempt from tax where no conveyance facility is provided by employer. |
| Conveyance provided for personal/private use | If employer provides conveyance for personal or private use, 5% of the employee’s basic salary or Tk. 60,000 whichever is higher, is added to total income and taxed. |
| Medical Expenses | Tk. 120,000 per annum or 10% of basic salary, whichever is lower is exempt from tax. |
Medical expenses up to Tk. 1,000,000 paid to a disabled | |
Medical expenses paid to an employee (other than a | |
| Travel (local & foreign) | Amounts paid at actual against bills/receipts are tax free. Any benefit paid in addition in cash is taxable. |
| Festival Bonus | Fully taxable |
| Performance Bonus | Fully taxable |
| Utility expenses | Fully taxable |
| Telephone/Mobile allowance | Tax free as long as it is for official use. |
| Entertainment allowance | Fully taxable |
| Other allowances | Fully taxable |
| Any reimbursements | Tax free as long as it was incurred for official purposes. |
Employers usually deduct taxes at source after providing for allowances from monthly salary. However, all employees are responsible for filing of their own returns at the end of the tax year. If, however, an individual has other sources of income such as house rent, interest income etc., he/she is responsible for filing accordingly and paying taxes at the time of filing.
Rates of Personal Tax
Income tax is charged to individuals on fixed slabs. The slabs of total income and
corresponding tax rates are given below:
| Amount of Taxable Income | Rate |
|---|---|
| First Tk. 300,000 | Nil |
| First Tk. 350,000 (in case of female, senior taxpayers over the age of 65 and people of third gender) | Nil |
| First Tk. 450,000 (in case of disabled taxpayers) | Nil |
| First Tk. 475,000 (in case of Gazetted War-Founded Freedom Fighter Taxpayer) | Nil |
| Tk. 50,000 above their applicable total income floor (in case of any one parent/legal guardian of Disabled Individuals) | Nil |
| On the next Tk. 100,000 | 5% |
| On the next Tk. 300,000 | 10% |
| On the next Tk. 400,000 | 15% |
| On the next Tk. 500,000 | 20% |
| On the balance | 25% |
| The tax rate for non-residents | Flat 30% |
Employment of Foreigners & Work Permit
Work permit is mandatory for every foreign national seeking employment in Bangladesh. Three
government authorities issue work permit in Bangladesh.
- For private sector industrial enterprise, branch office and liaison office, outside of Export Processing Zone (EPZ) – Bangladesh Investment Development Authority (BIDA).
- For employment of foreign national in the EPZ – Bangladesh Export Processing Zones Authority (BEPZA).
- For employment of foreign national in any NGO – NGO Affairs Bureau.
- Private sector industrial enterprises, branch office, liaison/representative office desiring to employ foreign nationals are required to apply to BIDA in their prescribed from. While issuing work permit, BIDA usually follows the following guidelines:
- Only nationals of countries recognized by Bangladesh are considered for employment.
- Employment of expatriate personnel is considered only in industrial/commercial establishments which are sanctioned/registered by the appropriate authority.
- Employment of foreign nationals is normally considered for the job for which local experts/technicians are not available.
- Persons below 18 years of age are not eligible for employment.
- The number of foreign employees should not exceed 5% in the industrial sector and 20% in commercial sector of the total employees, including top management personnel.
- Initially, employment of any foreign national is considered for a term of one year, which may be extended on the basis of merit of the case.
- Security clearance will be required from Ministry of Home Affairs.
Working Hours & Holidays
- There are 14 public and religious holiday days in Bangladesh.
- Bangladesh has a five-day working week. Weekdays are Sunday to Thursday. Friday and
Saturday are weekends. - Standard working hours are 40 hours a week. Government offices run from 9:00 a.m. to 5:00
p.m. and private sector businesses operate from 10:00 a.m. to 6:00 p.m. Banks and financial
institutions also work from 10:00 a.m. to 6:00 p.m.
Social Security System
Bangladesh does not have a mandatory social security system for private sector employees and employers are not required to setup or deduct any social security contributions.