What You Need to Know About Personal Taxes in Bangladesh Before Registering a Company
- Jan 9
- 6 min read
When starting a business in Bangladesh, understanding the local tax system is crucial for both compliance and planning. While much of the focus for new entrepreneurs tends to be on corporate taxes and business registration, personal taxes in Bangladesh are equally important—especially for individuals who plan to live and work in the country. In this article, we will break down the personal tax system in Bangladesh, what entrepreneurs need to know, and how personal taxes could impact both your business and your financial planning before registering your company.
The Personal Income Tax System in Bangladesh
The personal income tax system in Bangladesh operates on a progressive scale, which means that the more you earn, the higher percentage of your income you will pay in taxes. The tax rates for individual income vary based on income brackets, residency status, and the type of income you earn.
1. Income Tax Rates for Residents For individuals who are considered residents of Bangladesh (those who stay in the country for 182 days or more in a given year), the personal income tax rates are as follows:
Up to BDT 3,00,000: 0% (tax-free)
BDT 3,00,001 to BDT 6,00,000: 10%
BDT 6,00,001 to BDT 12,00,000: 15%
BDT 12,00,001 to BDT 30,00,000: 20%
Above BDT 30,00,000: 25%
For individuals earning above a certain threshold, there are higher tax rates to apply. The 25% tax rate is imposed on incomes exceeding BDT 30,00,000.
2. Income Tax Rates for Non-Residents If you’re a non-resident (someone who stays in Bangladesh for less than 182 days per year), the tax rate on your income is generally higher than the rate for residents. Non-resident individuals are taxed at a flat rate of 30% on their income earned within Bangladesh.
3. Tax Exemptions and Allowances Bangladesh offers certain exemptions and allowances to lower the taxable income for residents. For example:
A basic exemption of BDT 3,00,000 applies to most taxpayers.
Special allowances are given to individuals involved in specific sectors like agriculture, as well as to individuals with disabilities.
Income from certain government bonds and interest earned on savings accounts may also be exempt from taxes.
It’s important to stay informed about these exemptions, as they can reduce your overall taxable income and thus your tax liability.
4. Corporate Tax and Personal Taxes When you’re starting a company in Bangladesh, it’s important to distinguish between personal taxes and corporate taxes. A company’s profits will be taxed separately from your personal income. The corporate tax rate in Bangladesh generally hovers around 25% to 35% for most businesses, depending on the sector.
If you are the business owner or a director, you will be subject to personal income taxes on your salary, dividends, or any personal income you receive from the business. However, companies can distribute profits to shareholders as dividends, and these dividends may be subject to a tax rate of 10%. While the company itself is taxed on its earnings, you may have to pay taxes on your income from the company, such as salaries or dividends.
5. Other Taxes Impacting Individuals in Bangladesh Beyond income tax, there are other types of taxes that business owners and entrepreneurs in Bangladesh should be aware of:
Value Added Tax (VAT): Bangladesh applies VAT on goods and services at a standard rate of 15%. If you’re operating a business that sells goods or services to consumers, you’ll need to account for VAT on your sales. While this tax isn’t directly related to your personal income, it will affect your business operations, cash flow, and how you manage your finances.
Social Security Contributions: Bangladesh has a Provident Fund system that is similar to social security in other countries. Employees and employers must contribute a certain percentage of their salaries to this fund, which provides benefits for retirement, sickness, and other welfare benefits. These contributions are deducted from employees’ salaries but are also an important consideration for business owners when hiring employees.
6. Filing Personal Income Taxes In Bangladesh, personal income tax returns must be filed annually. The process involves submitting your tax return by November 30th of the year following the tax year. It’s important to maintain accurate financial records throughout the year, including salary payments, dividends, investments, and any other sources of income. If you’re a business owner, you’ll also need to report your business income in your personal return.
7. Double Taxation Treaties Bangladesh has signed Double Taxation Agreements (DTAs) with several countries, which aim to reduce the risk of double taxation for residents and businesses. These agreements allow business owners who are also taxpayers in other countries to avoid being taxed twice on the same income. If you plan to operate internationally or receive foreign income, these treaties can provide relief and help you optimize your tax obligations.
How Personal Taxes Affect Entrepreneurs in Bangladesh
As an entrepreneur, understanding the personal tax landscape is crucial for both legal compliance and financial planning. Here are some of the key ways personal taxes can impact your business and finances:
1. Salaries and Personal Income As a business owner, any salary or compensation you receive from the business will be subject to personal income taxes. If you choose to pay yourself a salary, it’s important to understand how that will impact your personal tax return. Additionally, if you take dividends from your company, those will also be taxed separately at 10% under Bangladesh’s dividend tax regime.
2. Tax Deductions and Business Expenses If you’re running a business and have employees, there are various tax deductions you can take advantage of to reduce your taxable income. These may include deductions for salaries paid to employees, business-related expenses, and operating costs. However, these deductions should be carefully documented to ensure compliance with the tax authorities.
3. Impact of Expanding or Scaling Your Business As your business grows, you may need to hire additional staff, purchase assets, or expand operations. These actions will affect your tax filings, both at the corporate and personal level. For instance, if your company reaches certain revenue thresholds, you may qualify for VAT registration and need to account for VAT on your sales.
4. Planning for Retirement and Future Growth Personal taxes should also be considered in the context of your long-term business goals. If you’re looking to plan for retirement or reinvest in your business, understanding the tax implications of how you pay yourself and manage profits will be critical. The taxes you pay on your income today will impact your personal savings, investment decisions, and future cash flow.
Tips for Managing Personal Taxes as a Business Owner in Bangladesh
Managing your personal taxes in Bangladesh involves more than just submitting a tax return. Here are some key tips to keep in mind:
1. Keep Detailed Records: Accurate record-keeping is essential for minimizing tax liabilities and ensuring compliance with the tax authorities. Maintain a detailed log of your business income, expenses, and all personal income.
2. Consult with a Tax Professional: Since Bangladesh’s tax laws can be complex, especially for entrepreneurs, working with a local tax advisor or accountant can help you navigate the system and avoid costly mistakes. A tax professional can also help you take advantage of any available deductions or exemptions.
3. Leverage Tax Benefits: Take advantage of any tax exemptions or benefits available to you as a business owner. This could include deductions for business-related expenses, tax holidays, or incentives for certain types of businesses, such as startups in the technology or export sectors.
4. Understand Your Obligations as an Employer: If you hire employees, you will have additional tax responsibilities, such as withholding income tax, paying social security contributions, and managing VAT. Ensuring compliance with these obligations will help avoid penalties.
How B2B Hub Can Assist with Personal Taxes in Bangladesh
Starting and running a business in Bangladesh involves navigating both corporate and personal tax obligations. B2B Hub provides comprehensive services to entrepreneurs looking to register a company and manage their business operations in Bangladesh.
Our services include:
Company formation and registration
Tax registration with the National Board of Revenue (NBR)
Guidance on tax filings and compliance
Assistance with VAT registration and tax planning
Support for corporate banking and employee payroll systems
We help entrepreneurs in Bangladesh manage their tax obligations and ensure they comply with the local tax laws.
B2B Hub offers comprehensive company formation and corporate services in any jurisdiction of your choice. For inquiries, please contact us at +44 770 018 3107, visit our website at b2bhub.ltd, or send us an email at reg@b2bhub.ltd.
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