Simple Tax Guide for Americans in Bangladesh
US Expat Taxes - Bangladesh
At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and green card holders working in Bangladesh for over 4 years. Our clients hail from all parts of the country - Dhaka and Chittagong, Khulna and Rajshahi, Narayanganj and Nasirabad.
As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country.
We offer professional tax services. That means we figure out the best and most optimal way to file your U.S. tax return and avail you of all possible exclusions and deductions. But just as importantly - avoid the errors that would allow IRS to disallow your return and levy fines & penalties on top. You can also do them yourself - not that we recommend it. For more information please see IRS.
The expatriate Foreign Earned Income Exclusion can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost.
We have many clients living in Bangladesh and know how to integrate your U.S. taxes into the local income taxes you pay. Any income tax you already pay in Bangladesh can be claimed as against the tax liability on your U.S. return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the calendar year as is standard in Bangladesh for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these form or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.
Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax; we look forward to working with you.
Bangladesh personal income tax rates
Below we include information on the Bangladesh Tax System for the American Expatriates.
Bangladesh personal income tax rates for assessment year 2018 - 2019 is progressive up to 25%.
|Income tax||Tax Rate|
|Up to BDT 300,000||0%|
|From BDT 300,000 to 600,000||10%|
|From BDT 600,000 to 1,000,000||15%|
|From BDT 1,000,000 to 1,300,000||20%|
|Above BDT 1,300,000||25%|
Income tax is one of the main sources of revenue in Bangladesh. It is a progressive tax system. Bangladesh Income tax is imposed on the basis of ability to pay. The more a taxpayer earns the more tax he should pay. This is the basic principle of charging income tax in Bangladesh. The tax system aims at ensuring equity and social justice. Tax rates in Bangladesh also differs between male and female individuals.
Time to submit income tax return: Unless the date is extended, by the 30th day of September next following the income year.
Who should submit Income Tax Return ?
- If total income of any individual during the income year exceeds BDT 300,000.
- If any person was assessed for tax during any of the 3 years immediately preceding the income year.
- A person who lives in any city corporation/paurashava/divisional HQ/district HQ and owns a building of more than one storied and having plinth area exceeding 1,600 sq. feet/owns motor car/owns membership of a club registered under VAT Law.
- If any person subscribes a telephone.
- If any person runs a business or profession having trade license and operates a bank account.
- Any professional registered as doctor, lawyer, income tax practitioner, Chartered Accountant, Cost & Management Accountant, Engineer, Architect and Surveyor etc.
- Member of a Chamber of Commerce and Industries or a trade Association.
- Any person who participates in a tender.
- A person who has a Taxpayer's Identification Number (TIN).
- Candidate for Union Parishad, Paurashava, City Corporation or Parliament elections.
- Any company registered under Companies Act, 1930 or 1994
- Allowable Deductions and Tax Credits
- Possible deductions for life insurance contributions to a pension fund,donations to charitable foundations and social funds, etc.
- Special Expatriate Tax Regime
- Non-residents are taxed at a flat rate of 25%. Salaries and allowances forexpatriate employees in foreign aid projects based on an agreementbetween the government of Bangladesh and a foreign government areexempt from tax.
Bangladesh Corporate Tax Rates
The standard rate of corporate tax in Bangladesh is 25% in 2018 - 2019 tax year. This is the standard corporate tax rate applicable to publicly traded companies in Bangladesh, a list including tax rates for other corporations are as follows:
Income Tax Authorities in Bangladesh
Income Tax Authorities in Bangladesh are:
- National Board of Revenue,
- Director General of Inspection (Tax),
- Commissioner of Taxes (Appeals),
- Commissioner of Taxes (LTU)
- Director General (Training),
- Director General Central Intelligence Cell (CIC),
- Commissioner of Taxes,
- Additional Commissioner of Taxes (Appeal/Inspecting),
- Joint Commissioner of Taxes(Appeal/Inspecting ),
- Deputy Commissioner of Taxes,
- Assistant Commissioner of Taxes,
- Extra Assistant Commissioner of Taxes,
- Inspectors of Taxes.
Tax Withholding Functions
In Bangladesh withholding taxes are usually termed as Tax deduction and collected at source. Under this system both private and public limited companies or any other organization specified by law are legally authorized and bound to withhold taxes at some point of making payment and deposit the same to the Government Exchequer. The taxpayer receives a certificate from the withholding authority and gets credits of tax against assessed tax on the basis of such certificate.
Tax Rebate for Investment
Rate of Rebate: Amount of allowable investment is either up to 25% of total income or BDT 500,000 whichever is less. Tax rebate amounts to 10% of allowable investment. Types of investment qualified for the tax rebate are:
- Life insurance premium
- Contribution to deferred annuity
- Contribution to Provident Fund to which Provident Fund Act, 1925 applies
- Self contribution and employer's contribution to Recognized Provident Fund
- Contribution to Super Annuation Fund
- Investment in approved debenture or debenture stock, Stocks or Shares
- Contribution to deposit pension scheme
- Contribution to Benevolent Fund and Group Insurance premium
- Contribution to Zakat Fund (Zakat: Islamic Tax)
- Donation to charitable hospital approved by National Board of Revenue
- Donation to philanthropic or educational institution approved by the Government
- Donation to socioeconomic or cultural development institution established in Bangladesh by Aga Khan Development Network
- For a return submitted under normal scheme, assessment is made after hearing.
- For returns submitted under Universal Self Assessment Scheme, the acknowledgment slip is determined to be an assessment order. Universal Self Assessment is of course subject to audit.
Appeal against the order of DCT
A taxpayer can file an appeal against DCT's order to the Commissioner (Appeals) / Additional or Joint Commissioner of Taxes (Appeals) and to the Taxes Appellate Tribunal against an Appeal order.
Major Areas for Final Settlement of Tax Liability in Bangladesh
Tax deducted at source for the following cases is treated as final discharge of tax liabilities. No additional tax is charged or refund is allowed in the following cases:
- Supply or contract work
- Band rolls of hand made cigarettes
- Import of goods
- Transfer of properties
- Export of manpower
- Real Estate Business
- Export value of garments
- Local shipping business
- Royalty, technical know-how fee
- Insurance agent commission.
- Auction purchase
- Payment on account of survey by surveyor of a general insurance company
- Clearing & forwarding agency commission.
- Transaction by a member of a Stock Exchange.
- Courier business
- Export cash subsidy
Tax holiday is allowed for certain industrial undertaking, tourist industry and physical infrastructure facility established between 1st July 2008 to 30th June 2011 in fulfillment of certain conditions.
Tax Rate For Foreign Companies
Tax incentives exist for investors in general, whether or not they are Bangladeshi.
Capital Gains Taxation
- Capital gains arising from the disposal of listed shares are subject to a 10% tax whereas those arising from the transfer of other types securitiesare taxed at 15%. Non-residents are exempt from tax on their capital gains arising from the disposal of listed shares if they enjoy a similar exemption in their country of origin.
Main Allowable Deductions and Tax Credits
- All expenditures incurred to generate taxable income are generally tax deductible. Amortisation of tangible and intangible assets is tax deductible at rates ranging from 2% to 50%. Goodwill cannot be amortised for tax purposes.
- Interest charges, including profit shares distributed to an Islamic bank, as well as bad debts are also tax deductible.
- Service companies exporting at least 50% of their services, scientific research firms, companies investing in strategic sectors (outside the Grand Dhaka region) and suppliers of companies operating in a free trade area (at least 40% of their total sale) may be eligible for the free-trade area regime, benefiting from total or partial tax exemptions (corporation tax, VAT, stamp duty, capital gains) .
- Tax losses can be carried forward in full up to six years. The carryback of losses is not permitted.
Other Corporate Taxes
- No property tax is levied on real estate or land. Nevertheless, real estate transactions (sale, rent, transfer) are subject to stamp duty. Other types of stamp duty apply to most financial transactions.
- Employers are not required to pay social security contributions and no salary tax is payable.
- All enterprises with a gross income above BDT 5 million (with the exception of mobile operators, producers of cigarettes and tobacco products) are subject to an alternative minimum tax of 0.6%, if the amount due is higher than corporation tax. This rate is reduced to 0.1% for manufacturing companies in their first years of operation.
- Entities with an annual turnover below BDT 8 million are subject to an annual turnover tax which replaces VAT and corporation tax.
Bangladesh Value Added Tax (VAT) Rates
The general rate of Value Added Tax (VAT) in Bangladesh is 15%.
- Value Added Tax (VAT) is imposed on goods and services at import stage, manufacturing, wholesale and retails levels;
- A uniform VAT rate of 15% is applicable for both goods and services;
- 15% Value Added Tax (VAT) is applicable for all business or industrial units with an annual turnover of Taka 2 million and above;
- Turnover tax at the rate of 4% is leviable where annual turnover is less than BDT 2 million;
- Value Added Tax is applicable to all domestic products and services with some exemptions;
- Value Added Tax (VAT) is payable at the time of supply of goods and services;
- Tax paid on inputs is creditable / adjustable against output tax;
- Export is VAT exempt;
- Cottage industries (defined as a unit with an annual turnover of less than BDT 2 million and with a capital machinery valued up to BDT 300,000) are exempt from Value Added Tax;
- Tax returns are to be submitted on monthly or quarterly or half yearly basis as notified by the Government.