The Tax and VAT Landscape in Bangladesh: A Complete Guide to the Country’s Taxation System
Bangladesh’s taxation framework consists of Income Tax and Value Added Tax (VAT), the two primary revenue systems administered by the National Board of Revenue (NBR). Understanding these laws is essential for individuals, businesses, investors, and foreign companies to ensure legal compliance, avoid penalties, and manage financial obligations effectively.
The tax and VAT landscape in Bangladesh
Tax and Vat: Annual charge levied on both earned income ( wages , salaries , commission ) and unearned income ( dividends , interest , rents ). In addition to financing a government’s operations, progressive income taxation is designed to distribute wealth more evenly in a population , and to serve as automatic fiscal stabilizer to cushion the effects of economic cycles . Its two basic types are (1) Personal income tax , levied on incomes of individuals , households , partnerships , and sole-proprietorships ; and (2) Corporation income tax , levied on profits ( net earnings ) of incorporated firms.
A value-added tax (VAT) or goods and services tax (GST) is a popular way of implementing a consumption tax Bangladesh and many other countries. It differs from the sales tax in that taxes are applied to the difference between the seller-purchased price and the resale price. This is accomplished by taking full tax on all sales, but refunding the tax difference to the sellers.
The VAT is an alternative to a sales tax and is meant to deal with a specific problem. While with a sales tax, a business selling goods is responsible for making a subjective decision about the intent of a buyer, the business may not be fully competent to make the decision.
In Bangladesh, the fiscal landscape is governed by two primary regimes: Income Tax (direct tax on earnings) and VAT (indirect tax on consumption).
Income Tax: Direct Tax on Earnings
Income tax is governed by the Income Tax Act, 2023. It is applied to the total income of individuals, companies, and other entities.
VAT: Value Added Tax
VAT is an indirect tax regulated by the VAT and Supplementary Duty Act, 2012. It is collected at every stage of the supply chain where value is added.
The PSR Requirement
The Proof of Submission of Return (PSR) is now mandatory for 40+ services in Bangladesh. You cannot do the following without a PSR:
- Obtaining or renewing a trade license.
- Opening a bank account for a business.
- Applying for a credit card.
- Renewing a car registration.
Tax Rebates
You can reduce your total tax liability by investing in Approved Securities.
- Where to invest: Sanchaypatra (Savings Certificates), Life Insurance premiums, or the Stock Market.
- The Benefit: You typically receive a rebate of 15% on the allowable invested amount.
Key Deadlines
-
Tax Day (Individual): November 30
This is the final date for individuals to file their annual returns without a penalty.
-
Monthly VAT Return: 15th of each month
Businesses must submit their VAT-9.1 form by the 15th of the following month.
- Corporate Return: Varies.