Tax Brief: FMCIBD
TAX AND CUSTOMS REGULATIONS
The taxation in Bangladesh can be differentiated into three, namely, income tax, value added tax (VAT) and customs duties. Income Tax Ordinance 1984 and Income Tax Rules 1984 regulate the income tax of Bangladesh. VAT is governed by the VAT Act 1991 Customs duties are governed by the Customs Act 1969.
Tax year in Bangladesh for companies other than financial institutions is from July to June. With regards to income tax, a private company limited by shares has to pay corporate tax at 35%. Branch office is given the same status as a private limited company and taxed at the same rate. Liaison office cannot undertake commercial activity and tax rate is nil, although tax return is to be submitted. On an individual capacity, non-resident is taxed at maximum rate of 30% while residents have to pay tax on a lower slab based progressive tax rates. Non-residents are those people who spend less than 182 days in an income year but there are some provisions for person who spends at least 90 days in Bangladesh. Upon application, each person or company has to obtain a taxation identification number which allocates him to specific taxation authority. Company has to obtain permission from competent authority before employing a foreign employee. An entity also has the responsibility to deduct taxes at source before making any payments.
With regards to VAT, there is VAT at several rates with truncated rates. Generally the rates are around 15% which has to be paid generally on a monthly basis. Besides, the entities also have a responsibility to deduct VAT at source while making payments pertaining to certain sectors. However, VAT as well as taxes has been exempted in a number of sectors for companies entering into Production Sharing Contract (PSC) with the government.
The customs duties in Bangladesh vary from product to product which is determined by the Finance Act promulgated each year. The largest customs station in the country is Chittagong which runs on automation process system call the ASyCuDa++.