Bangladesh Tax Treaties with Other Countries

Bangladesh Tax Treaties with Other Countries

Bangladesh has signed Double Taxation Agreements (DTA) with 36 countries.
Generally, where a DTA has been executed, credit is allowed against Bangladesh income tax charged under the Ordinance for foreign tax paid on any income.
The amount of the credit allowed for foreign tax against Bangladesh tax cannot exceed the average rate of such tax.
The average rate of tax means the rate arrived at by dividing the amount of tax calculated on the total income by such income.
Prior to concluding any contract where payment will be made to a nonresident by a resident, the nonresident should carefully consider the withholding tax provisions and rates, as well as any tax benefit available under a relevant DTA.
A certificate from National Board of Revenue (NBR) must be obtained to avail the tax benefit in Bangladesh under DTAA.
If no such benefit is available, the nonresident entity may consider incorporating a “tax gross up” clause into the contract.
Please see China Section and Taiwan Section.

Bangladesh Tax Treaties with China <click me
Bangladesh Tax Treaties with Taiwan <click me

Email: dac4ww@evershinecpa.com
A-16, 1st Floor, Aruna Asaf Ali Marg, Qutub Institutional Area, Dhaka, 110067, Bangladesh
Manager Punit Singh Negi, speak in Bangladesh and English.
Skype: cspunitnegi

We set up below judgment criteria on Treaty application:

Scenario:
If you are not a Bangladesh legal resident, and if your resident country has DTA with Bangladesh, and if you are without PE (Permanent Establishment), please go to Section A.
If you are not a Bangladesh legal resident, and if your resident country has DTA with Bangladesh, and if you are with PE (Permanent Establishment) please go to Section B.
If you are not a Bangladesh legal resident, and if your resident country has no DTA with Bangladesh, please go to Section C.

Section :
Scenario:
If you are not a Bangladesh legal resident, and if your resident country has DTA with Bangladesh, and if you are without PE (Permanent Establishment), it will be deemed as “non-Bangladesh Domestic Sourced Income”.
That means Bangladesh will levy zero-tax.
However, your still need to send zero-tax application to Bangladesh Tax Bureau for being approved.
Below, we will let you understand through Q&A.

DTA-Q-10:

孟加拉的哪些外國法律居民公司可以依DTA申請沒有常設機構(PE)下零稅率?
In Bangladesh, which foreign legal resident company can apply for zero tax rate without PE under DTA?

DTA-A-10:
Bangladesh has signed DTAs with the following 36 countries:

Bahrain India Nepal Sri Lanka
Belarus Indonesia Netherlands Sweden
Belgium Italy Norway Switzerland
Bhutan Japan Pakistan Thailand
Canada Korea Philippines Turkey
China Kuwait Poland UAE
Denmark Malaysia Romania UK
France Mauritius Saudi Arabia USA
Germany Myanmar Singapore Vietnam

DTA-Q-20:

為什麼在DTA下該國外資沒有常設機構 (PE)之外資所得,可以享受零稅率?
Why does the Country’s foreign capital without a permanent establishment (PE) in Bangladesh, under the DTA enjoy zero tax rate?

DTA-A-20:

It follows Article 5 and Articles 7 in the DTA Treaty. Article define if foreign entity having PE in Bangladesh.
Article 7 regulate if no PE, non-Bangladesh domestic sourced income will not be levied tax in Bangladesh.

DTA-Q-30:

哪些情況被視為沒有PE,外資在該國設立子公司會被視為外資的在該國的子公司嗎?
Under what circumstances are deemed to have no PE, and will the establishment of a foreign-funded subsidiary in Bangladesh be regarded as a foreign-funded subsidiary in Bangladesh?

DTA-A-30:

According DTA Article 5 item 7, A Wholly Foreign Owned subsidiary in Bangladesh will not be treated as PE because it is a separate legal entity.

That means if a Bangladesh Subsidiary pay service fee to non- Bangladesh Parent Company through service contract signed between subsidiary and non – Bangladesh Parent company as an investor, non- Bangladesh Parent Company can apply zero tax.
As for if paid amount being reasonable, it will get involved TP (Transfer Pricing) judgement by Bangladesh Tax Bureau.
Please see Bangladesh Transfer Pricing webpage.

DTA-Q-40:
外資在孟加拉設立分公司或辦事處,可否適用沒有PE下的零稅率?
If foreign company establishes a branch or office in Bangladesh, can the zero-tax rate without PE be applied?

DTA-A-40:

According DTA Article 5 item 2, If foreign company set up a branch or Office in Bangladesh, then will be considered as Bangladesh domestic Income.
But According DTA Article 5 item 4, if an Office is only doing preparatory or auxiliary activity, will apply zero-tax rate.

DTA-Q-50:

孟加拉依DTA沒有PE下零稅率申請的程序為何?
What is the procedure for Bangladesh to apply for zero tax rate under DTA without PE?

DTA-A-50:

In the event the DTA provides for exemption from Bangladesh tax on any income which is otherwise subject to withholding tax under the Ordinance, the Bangladesh-resident taxpayer must pay that income to the resident of the other country without any deduction of tax, subject to notification or direction by the NBR.
The NBR will issue a certificate, on application by the nonresident recipient of that income, within 30 days to verify that the nonresident recipient is exempt from taxation or subject to a reduced rate in Bangladesh under the relevant DTA.
Form for application for a certificate to deduct tax at a lesser rate is “Application for a Certificate under section 51(2) of the Income Tax Ordinance, 1984 (XXXVI of 1984)”.

Section :

Scenario:

If you are not a Bangladesh legal resident, and if your resident country has DTA with Bangladesh, and if you are with PE (Permanent Establishment), your income will be considered as Bangladesh domestic sourced income.
As for levying Tax Rate, please be aware:
if Bangladesh Tax rate > DTA Rate, adopt DTA Rate; if Bangladesh Tax rate < DTA Rate, adopt Bangladesh Rate.
Below, we will let you understand through Q&A

DTA-Q-60:

被視為孟加拉來源所得的判定要素?
What are the factors that deemed to be the country’s domestic source income?

DTA-A-60:

In relation to a person who is a resident, all income, from whatever source derived, which-

  1. Is received or deemed to be received in Bangladesh by or on behalf of such person in such year
  2. Accrues or arises, or is deemed to accrue or arise to him in Bangladesh during that year
  3. Accrues or arises to him outside Bangladesh during that year

In relation to a person who is a non-resident, all income from whatever source derived, which-

  1. Is received or deemed to be received in Bangladesh by or on behalf of such person in such year
  2. Accrues or arises, or is deemed to accrued or arise, to him in Bangladesh during that year.

Income deemed to accrue or arise in Bangladesh:

  1. Salaries – It is earned in Bangladesh or paid by the Government or a local authority in Bangladesh to a citizen of Bangladesh in the service of such Government or authority.
  2. Any business connection in Bangladesh
  3. Any property, asset, right or other source of income in Bangladesh
  4. Transfer of capital assets in Bangladesh

DTA-Q-70:

DTA第五條及第七條優先於孟加拉來源所得的判定要素?
Does Article 5 and Article 7 in the DTA take precedence over the Bangladesh determination factors on Bangladesh domestic sourced income?

DTA-A-70:

When DTA is applied, in the event of a different PE definition between Bangladesh domestic tax laws and Article 5 in the DTA, the definition under the DTA shall prevail the domestic regulations.
When DTA is applied, if foreign company being defined as without PE (Permanent Establishment) in Bangladesh, then will be considered non-Bangladesh domestic sourced income, in the event business profit is relevant to this issue, the clause in Article 7 in the DTA zero-rate tax can be applied accordingly.
In this scenario, please see section A.

DTA-Q-80:
當非孟加拉稅務居民有孟加拉來源所得,不考慮DTA 情況下,孟加拉稅法扣繳稅率多少?
When non-tax residents of Bangladesh having Bangladesh domestic sourced income, what is the withholding tax rate according to Bangladesh tax regulations excluding DTA?

DTA-A-80:

The withholding tax rates under domestic law are:
Business Profits – 20% (Note 1)
Dividend – 20% (Note 2)
Interest (General loan) – 20% (Note 3)
Royalties fee – 20%
Technical services – 20% (Note 1)
Professional services – 20% (Note 1)

Note:

  1. Salary payments or remuneration paid to nonresident individuals for employment services or for services as an artist or athlete, and for business services not specifically listed, are subject to a withholding tax of 30%.
    Payments for advertising and digital marketing services rendered by nonresidents are 15%. Manufacturing contractor or subcontractor services and suppliers are 7.5%.
  2. The withholding tax rate on dividends paid to nonresidents other than companies is 30%.
  3. 0% Exemptions may be granted on specific instruments by the Bangladesh tax authority.

DTA-Q-90:

If DTA Tax Rate is higher than Bangladesh tax rate, apply which tax rate?

DTA-A-90

As for levying Tax Rate, please be aware:
if Bangladesh Tax rate > DTA Rate, adopt DTA Rate; if Bangladesh Tax rate < DTA Rate, adopt Bangladesh Rate.

DTA-Q-A0:        

當非孟加拉稅務居民有孟加拉來源所得,依DTA優惠稅率申請的程序為何?
When non-tax residents of Bangladesh having Bangladesh domestic sourced income, what is Bangladesh’s application procedure based on the DTA preferential tax rate?

DTA-A-A0:

In the event the DTA provides for exemption from Bangladesh tax on any income which is otherwise subject to withholding tax under the Ordinance, the Bangladesh-resident taxpayer must pay that income to the resident of the other country without any deduction of tax, subject to notification or direction by the NBR.

The NBR will issue a certificate, on application by the nonresident recipient of that income, within 30 days to verify that the nonresident recipient is exempt from taxation or subject to a reduced rate in Bangladesh under the relevant DTA.

Form for application for a certificate to deduct tax at a lesser rate is “Application for a Certificate under section 51(2) of the Income Tax Ordinance, 1984 (XXXVI of 1984)”.

Section :

DTA-Q-B0:

As an investor, if your country has not signed DTA with Bangladesh, what kinds of tax rates when you have Bangladesh relevant income?

DTA-A-Q0:

The withholding tax rates under domestic law are:
Business Profits – 20% (Note 1)
Dividend – 20% (Note 2)
Interest (General loan) – 20% (Note 3)
Royalties fee – 20%
Technical services – 20% (Note 1)
Professional services – 20% (Note 1)

Note:

  1. Salary payments or remuneration paid to nonresident individuals for employment services or for services as an artist or athlete, and for business services not specifically listed, are subject to a withholding tax of 30%.
    Payments for advertising and digital marketing services rendered by nonresidents are 15%.
    Manufacturing contractor or subcontractor services and suppliers are 7.5%.
  2. The withholding tax rate on dividends paid to nonresidents other than companies is 30%.
  3. 0% Exemptions may be granted on specific instruments by the Bangladesh tax authority.

Please be aware below Warning:
The above contents are digested by Evershine R&D and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us
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Email: dac4ww@evershinecpa.com
A-16, 1st Floor, Aruna Asaf Ali Marg, Qutub Institutional Area, Dhaka, 110067, Bangladesh
Manager Punit Singh Negi , speak in Bangladeshn and English.
Skype: cspunitnegi
or
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