INCOME TAX FOR FOREIGN WORKERS IN BANGLADESH: MUST PAY

There are more than 250,000 foreigners are working in Bangladesh from 44 countries in 32 sectors. According to TIB, foreigners working in Bangladesh are illegally sending around $3.1 billion to their countries a year. In addition, the estimated amount of related annual tax evasion was at least $1.3 billion. Hence, Therefore, the government has taken proactive steps to resolve this matter. As an expatriate, it's crucial to be fully informed about your Work Permit & Visa status for compliance. If you're currently working without a valid visa, its high time to obtain one to avoid any unnecessary complications. Stay compliant and hassle-free!

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1. What are the compliance requirements for tax returns in Bangladesh?

• ?RESIDENT: Resident assignees in Bangladesh must submit their tax return for the income year by the due date. They need an e-TIN (12-digit electronic tax identification number) before filing. Returns are filed under universal self-assessment, but the tax authority may scrutinize them. The submission deadline can be extended by the tax authority's discretion, typically for 2-4 months upon application.
• NON-RESIDENTS: For non-resident international executives, tax return compliance is similar to residents, with the additional requirement of obtaining a work permit and SB & NSI clearance certificate. A3 or E1 visa holders can use their visa copy as a work permit. The individual must also obtain an e-TIN in Bangladesh to submit their tax return.

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2. Penalty for non-submission of Income Tax Return on due time

If the assignee misses the tax return deadline, the penalty is 10% of the tax on their last assessed income (minimum BDT 1,000). Additionally, there's a daily penalty of BDT 50 for each day the default continues.

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3. What are the current income tax rates for residents and non-residents in Bangladesh??

???????i.?????????RESIDENTS: No tax is payable by tax residents on income not exceeding BDT250,000.

??????ii.?????????NON-RESIDENTS: For non-residents other than Bangladeshi non-residents, tax rate is 30 percent (flat rate) on total taxable income.

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4. For the purposes of taxation, how is an individual defined as a resident of Bangladesh?

An individual is treated as a resident of Bangladesh if that person stays in Bangladesh for 182 days or more in any income year; or 90 days or more in an income year if that person has previously resided in Bangladesh for a period of more than 365 days during the 4 preceding years. Residence is determined in Bangladesh purely on the period of presence in Bangladesh irrespective of residency in other countries/jurisdictions. Short-term visitors and dependents of foreign nationals not earning any income in Bangladesh are not taxed in Bangladesh and are not required to file tax return.

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5. Are there any tax compliance requirements when entering or leaving the country/jurisdiction?

When entering into the country/jurisdiction, Bangladesh, the assignee has to obtain their work permit/A3 Visa/E1 Visa followed by obtaining tax registration number (which is known as e- TIN in) in Bangladesh. Security Clearance Certificate is also required to be obtained from NSI/SB under Home Ministry of Bangladesh.

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6. Departure Tax

For permanent departure from Bangladesh, the assignee must submit an Income Tax Return and obtain a tax clearance certificate, covering the period from 1st July to the date of departure. Estimated income up to departure can be included in the return to obtain the clearance certificate before leaving.

If the assignee plans to return, an exemption certificate is needed. The Deputy Commissioner of Taxes issues it based on a valid reason, either for a single journey or for all journeys within the specified period.

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7. What if the assignee comes back for a trip after residency has terminated?

In such case if they come back for a trip but not for work, then they are not required to submit any tax return. But if they come with valid work visa, they are required to submit tax return.

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8. Do Bangladeshi immigration authorities inform local taxation authorities about individuals' entry and exit from the country?

Our tax and immigration departments are not fully digitalized and synchronized. Immigration authorities don't automatically share foreign nationals' entry and departure info with tax authorities. Additionally, an Income tax booth is set up at international airports to check for Income tax clearance certificates (TCC) during departure.

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9. Will an assignee have a filing requirement in the host country/jurisdiction after they leave and repatriate?

According to our tax law, assignees must submit an exit tax return and obtain a tax clearance certificate before leaving permanently. Once the exit tax return is processed, the tax file is closed. After leaving the country permanently, the assignee cannot remit money from Bangladesh as their bank account is typically closed due to the cancellation of their work permits.

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10. Are there any penalties for individuals and/or companies in place for non-compliance with immigration law?

1) Under Section 16B(b) of The Income Tax Ordinance, 1984, if anyone employs a non-Bangladeshi citizen without prior approval, they'll face an additional tax of 50% of their income tax or BDT 5 lakh, whichever is higher.

2) According to Section 165 (c) of the Income Tax Ordinance, 1984, an organization is guilty of an offence and may face imprisonment up to 3 years (minimum 3 months), a fine up to BDT 5 lakh, or both, if they employ a non-Bangladeshi citizen without prior approval from the BIDA or any competent government authority (Source: BIDA, KPMG, TIB & others)

-Written By-Ismail Hossain Joy (MBA, BBA, PGD, LL.B)

Please connect me for more info: [email protected] or whats app: +8801915173971

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