Overview Tax Compliance in Bangladesh
The National Board of Revenue (NBR), the country's top tax authority, oversees the many taxes included in Bangladesh's tax framework. Understanding the tax system is crucial for ensuring compliance and fulfilling tax responsibilities. Like many other countries, Bangladesh has put in place a comprehensive tax regulation system that applies to both personal and business income. Particularly for businesses wanting to establish new entities or shift existing activities, these tax systems can greatly affect a country's competitiveness in the international arena.
What is tax?
A tax is a compulsory charge or levy that the government imposes on people, companies, and other entities to raise money for public spending and the operation of the state. A governing body or other entity with similar jurisdiction may impose a financial obligation or charge on a taxpayer, an individual or a legal entity. A breach of this commitment that is not paid for or avoided may have legal ramifications according to the law. It is an essential part of a nation's fiscal strategy and is used to pay for various public programmes and infrastructure, including healthcare, education, defence, and transportation.
What are tax compliance services?
Tax compliance services are a variety of professional support and advice provided to individuals and organizations to ensure that the compliance with tax laws and rules is there. These services are intended to assist individuals and businesses in meeting their tax obligations accurately and efficiently. Tax compliance specialists are well-versed in the tax system, including tax laws, filing requirements, deadlines, and processes.
They specialize in personal income tax, corporate tax, value-added tax (VAT), and international tax matters. Individuals and organizations can benefit from tax compliance services such as tax return preparation, filing, tax planning, audit representation, and settling tax disputes.
Who is taxed in Bangladesh?
Individuals in Bangladesh, whether residents or non-residents, must pay taxes on income received within the country. An individual must have resided in Bangladesh for a minimum of 182 days in a given year to be identified as a resident.
National Board of Revenue
The National Board of Revenue is the top institution for enforcing tax laws and guaranteeing compliance. It is an autonomous body within the Ministry of Finance responsible for revenue collection, regulation enforcement, and taxpayer guidance. The National Board of Revenue (NBR) is responsible for the development and ongoing evaluation of tax policies and laws, as well as engaging in tax treaty negotiations with foreign governments and participating in discussions among ministries about economic issues affecting fiscal policies and tax administration.
The NBR's major job is to collect tax revenues such as Value Added Tax (VAT), Customs Duty, Excise Duty, and Income Tax. The NBR is organized into three wings dedicated to different taxes: the Customs Wing, the VAT Wing, and the Income Tax Wing. In addition, the NBR has two more wings: the IT Wing and the Research & Statistics Wing.
Different types of taxes in Bangladesh
- Corporation Tax: Corporate tax is a type of taxation levied on the profits made by corporations or businesses. It is a direct tax levied by the government on income made by companies or entities operating within its jurisdiction. The corporate tax system is designed to collect income from firms based on their taxable profits and contribute to the general funding of public services and government expenditures. The residents of Bangladesh are taxed on all the worldwide income from business, while the non-residents are taxed only for Bangladesh-based income. For publicly traded companies, the rate is 22.5%, while the tax rate is 40% for insurance companies, banks and financial institutions.
- VAT:Value-Added Tax is a consumption tax levied on the value added at each level of the products and services supply chain. It is an indirect tax which is paid by the end user but collected and remitted to the government by enterprises. VAT is a popular tax system in many nations worldwide, including Bangladesh. VAT is founded on the idea that the tax is levied on the value added by each enterprise during the manufacturing or distribution process. This means that companies must charge VAT on their sales and can refund the VAT they paid on their purchases.
The usual rate of value-added tax (VAT) is 15%, although many services are excluded from this rate. When it comes to exports, they are exempt from VAT and hence taxed at a rate of zero. Reduced rates of 5%, 7.5%, and 10% apply to specific products and services. An advance tax is necessary in the case of imported products. Manufacturers are liable to a 3% tax, while other imports are subject to a 5% tax. For suppliers with a turnover of more than BDT thirty million, VAT registration is necessary.
- Custom Duty:Customs tax, also known as import duty or tariff, is a governmental financial fee levied on products imported into a country. It is a type of tax imposed by a country's customs authority to generate income, control commerce, and safeguard domestic businesses.
Customs tax is levied on a variety of imported commodities, including raw materials, completed goods, machinery, and consumer goods. The charge is usually computed as a percentage of the value of the imported products, which is referred to as the "duty rate." The duty rate may differ based on the nature of the commodities, their origin nation, and the trade agreements or customs procedures in force. Customs duty serves several functions.
- Excise Duty:Excise duty is a particular type of tax that the government imposes on specific products or services that are produced, bought, or utilized domestically. Instead of being based on the income or assets of a person or company, this type of tax is levied directly on certain items during their manufacture, importation, or sale.
Excise duty is used to raise money for the government and is frequently applied to control the consumption or production of particular items.
- Social Security:Neither employers nor workers must make required payments to social security.
- Payroll Tax: There is no specific payroll tax; companies are nevertheless required to withhold taxes from employee salaries.
- Transfer Tax:Although there isn't a special transfer tax, stamp duty and registration costs are associated with the transfer of real estate in Bangladesh. In addition, other relevant taxes, including advance income tax, local government tax, capital gains tax, and business income tax, may also apply.
- Stamp Duty:Financial instruments, real estate, and certain transactions within Bangladesh are subject to stamp duties under the Stamp Act of 1899.
Bangladesh's financial year runs from July 1 to June 30. Banks, insurance companies and financial organizations, on the other hand, have the option of using the calendar year as their income year. In some situations, the tax authorities may allow a firm that is a subsidiary or holding company of a foreign parent company or a branch/liaison office to use a different financial year. This is usually permitted when the overseas company uses a separate/different financial year to consolidate its accounts with the parent company.
Services Offered by Enterslice
We offer a range of tax management services and have particular expertise in the following spheres:
- Tax Compliance Advisory: Our strategy strives to boost quality, drive strategic value throughout the organization, decrease costs, and limit risks. We support our client's efforts to navigate regulatory changes, translate data into insightful knowledge, and enhance compliance and planning procedures. The communication among the tax, financial, and legal departments is fostered by our interdisciplinary staff, allowing for easy coordination.
- Tax Policy Advisory: We assist customers in managing and resolving tax challenges, both locally and across various jurisdictions, in the face of growing scrutiny and the need to defend tax positions. Our professionals create plans to reduce potential tax liabilities while assuring adherence to changing tax laws; We offer solutions that are suited to the demands of our clients and essential advice on how to handle tax disputes.
- Assistance in R&D Tax: Many countries give tax breaks and incentives for research and development (R&D) activities in the ever-changing world of intellectual property (IP) rights. We work with businesses to determine their eligibility for R&D super-deductions in Hong Kong and make sure that the requirements are met. Our services make sure that customers complete all legal obligations while maximizing their R&D tax benefits.
- Acquisitions and mergers: Complex cross-border transactions need professional advice. Throughout the M&A process, we support clients while taking into account the actual ramifications of tax changes in local jurisdictions. We support customers in maximizing tax outcomes and ensuring seamless transaction execution by proactively addressing tax concerns and potential problems.
- International Tax Planning: Organisations now confront greater tax uncertainty as international tax legislation changes, notably the OECD's BEPS efforts and rising tax transparency. Our specialists assist customers in navigating dynamic local legal and regulatory environments. We help companies efficiently manage tax risks by offering strategic assistance and maintaining compliance with changing regulations.
At Enterslice, we are committed to helping our clients succeed in their tax obligations at every level of their operations. We can provide smooth and effective tax management solutions because of our integrated services, sector knowledge, and use of the most recent tools and technology.