tax at source on income of non-resident foreigners in Bangladesh

The government of Bangladesh has rationalized the income tax rate on income of non-resident foreigners including consultant, service providers, artist, player, singer and professional derived in the country to avoid complexities in deducting the tax. 

As a move to rationalize income tax to be deducted at source on income of non-residents, the government reduced the tax rate as less as 5 per cent from the current 30 per cent.  

According to the Income Tax Ordinance-1984, tax at source on income of non-resident for many services is applicable at highest rate which is now 30 per cent. 

The rationalised rates will be applicable from the next fiscal year of 2015-2016 to be started July, 1 after approval of the National Parliament, known as Jatiyo Sangshad by the end of June.

The National Board of Revenue has already proposed an amendment of the ordinance in this connection. 

The government or any person responsible for making payment to a non-resident of any amount which constitutes income of such non-resident chargeable to tax shall deduct tax on the amount at applicable rate specified in the ordinance, taxmen said. 

According to the proposal, the highest 30 per cent tax will be applicable on payment to a non-resident for advisory or consultancy service, certification, pre-shipment inspection service, on salary or remuneration and dividend to any person, not being a company and to artist, singer, player and any other payments not specified in the ordinance. 

Twenty per cent tax will be applicable on payment for accounting or tax consultancy, legal service, management or event management, professional service, advertisement broadcasting, architecture, interior design or landscape design, on charge or rent for satellite, airtime or frequency and on interest, royalty or commission and dividend to company. 

Tax at source at the rate of 15 per cent will be charged on capital gain received from capital assets (not being securities listed with stock exchange, Dhaka Stock Exchange and Chittagong Stock Exchange), on payment for advertisement making, courier service and machinery rent. 

Ten per cent tax on capital gain received by a company, or firm if such gain is arisen from securities listed with any stock exchange in Bangladesh which is not exempted from tax in the country of such non-resident, and on insurance premium. 

Tax at source, also known as tax deduction at source or TDS, at the the rate of 7.5 percent will be applicable on payment for air transport or water transport, 5.25 percent on exploration or drilling in petroleum operations, survey for oil or gas exploration and any service for making connectivity between oil or gas field and its export point and 5 per cent tax on payment to non-resident contractor, sub-contractor or supplier.     

According to the income tax law, known as Income Tax Ordinance-1984, of Bangladesh, non-resident means a person who is not a resident of Bangladesh. 

on the other hand, resident, in respect of any income year, means-(a) an individual who has been in Bangladesh for a period of, or for periods amounting in all to, one hundred and eighty two days (182 days) or more in that year, or for a period of, or periods amounting in all to, ninety days (90 days) or more in that year having previously been in Bangladesh for a period of, or periods amounting in all to, three hundred and sixty-five days (365 days) or more during four years preceding that year. 

(b) a Hindu undivided family, firm or other association of persons, the control and management of whose affairs is situated wholly or partly in Bangladesh in that year; and

(c) a Bangladeshi company or any other company the control and management of whose affairs is situated wholly in Bangladesh in that year.