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| Corporate Accounting treatment |
Withholding tax rate in Bangladesh 2024 2025:
In Bangladesh, the withholding tax system is a crucial part of the country's tax regime. It requires businesses and individuals to deduct tax at source from various payments, such as salaries, interest, dividends, and service fees. The withholding tax rates for the fiscal year 2024-2025 are subject to regular updates by the National Board of Revenue (NBR) through budget announcements and regulatory changes. Here's an overview of some key withholding tax rates:
1.Salary Income:
For Resident Individuals:
Employers must deduct withholding tax (commonly known as Tax Deducted at Source or TDS) from employees’ salaries based on the progressive tax rates applicable. The rates vary depending on income slabs, with higher income groups taxed at higher rates.
Income up to BDT 3,50,000: Exempt (for male individuals)
Income up to BDT 4,00,000: Exempt (for female individuals)
Income exceeding these thresholds: Subject to progressive tax rates of 10%, 15%, 20%, and 25%.
In case of expatriates working in Bangladesh, the employer is required to withhold tax at a flat rate of 30% unless they qualify for resident status.
2.Interest on Bank Deposits or Securities:
For Residents:
Interest paid on bank deposits, savings instruments, or securities is subject to withholding tax at 10% if the recipient has provided a valid TIN (Taxpayer Identification Number). Without a TIN, the withholding tax increases to 15%.
For Non-Residents:
Interest payments to non-residents are subject to a withholding tax of 20%.
3.Dividends:
For Residents:
Dividends paid by companies listed on the stock exchange are subject to a withholding tax of 10% if the shareholder has a valid TIN. Without a TIN, the rate increases to 15%.
For Non-Residents:
Dividends paid to non-residents are subject to withholding tax at a rate of 20%.
4.Contractual Services and Payments:
Withholding tax is also applicable on payments made to contractors, suppliers, or service providers. The rate of deduction depends on the nature of the services:
Supply of Goods:
Withholding tax of 3%-7% depending on the type of goods supplied.
Provision of Services (e.g., technical services, consultancy, management services):
The withholding tax rate ranges from 10% to 12% for residents.
For non-residents providing technical services, the rate is 20%.
Professional Services (e.g., legal, audit):
Withholding tax rate is 10% for individuals or firms.
5.Rental Income:
Rental income from land, buildings, or other properties is subject to withholding tax.
For individuals, the rate is 10% if the annual rental exceeds BDT 3,00,000.
For companies, the rate is 5%.
6.Royalties and Fees for Technical Services:
Payments made to non-residents for royalties or technical services are subject to a withholding tax of 10%.
7.Commission or Brokerage:
Any payment made for commission or brokerage is subject to withholding tax at the rate of 10%.
8.Capital Gains:
For Residents:
Gains from the transfer of listed securities are generally exempt from withholding tax.
For Non-Residents:
Capital gains from the transfer of securities or other assets are subject to withholding tax at 10%.
9.Payments to Foreign Contractors or Consultants:
Payments made to non-resident contractors or consultants are subject to withholding tax at the rate of 20%.
10.Export Proceeds:
Export of Goods:
The withholding tax on export proceeds is 0.50% (reduced rate for some industries) but may vary based on government incentives and industry-specific benefits.
Important Points to Note:
TIN Requirement: A valid Taxpayer Identification Number (TIN) is required to avail the lower withholding tax rates for many types of payments, such as interest and dividends.
Double Taxation Avoidance Agreements (DTAA): Bangladesh has treaties with several countries to avoid double taxation, which may allow reduced withholding tax rates for payments to foreign entities, subject to treaty provisions.
Adjustments:
The tax deducted at source is generally treated as an advance payment of tax and can be adjusted against the final tax liability when the individual or business files its annual tax return.
In Finally:
The tax rates and rules may change based on the national budget and updates from the National Board of Revenue (NBR), so it's always recommended to stay updated or consult a tax advisor for the latest rates and regulations.