Double Taxation Avoidance Procedure in Bangladesh
The Double Taxation Avoidance Agreement (DTAA) is an international tax treaty signed between two countries to prevent taxpayers from being taxed twice on the same income, asset, or financial transaction. This agreement is particularly important for individuals and entities engaged in international business or employment, ensuring that their earnings are not subject to double taxation in both the country of residence and the country where the income is generated.
Why Does Double Taxation Occur?
Double taxation arises when:
- A company’s profits are taxed at both the corporate level and shareholder level.
- Income earned from international trade or employment is taxed in the country where it is generated and again in the taxpayer’s home country upon repatriation.
- A non-resident earns income in Bangladesh and is required to pay taxes both in Bangladesh and their country of residence.
This form of taxation increases costs for businesses and individuals, discouraging foreign investment and international trade.
Legal Framework for DTAA in Bangladesh
Under Section 244 & Section 251 of the Income Tax Act 2023, the Government of Bangladesh is empowered to sign DTAA treaties with other countries to avoid double taxation and prevent fiscal evasion. The government has signed DTAA agreements with 36 countries, including the (Austria, Belgium-Luxembourg Economic Union, Cambodia, China, Denmark, France, Germany, India, Indonesia, Islamic Republic of Iran, Italy, Japan, Republic of Korea, Malaysia, Netherland, Democratic People’s Republic of Korea, Pakistan, Philippines, Poland, Romania, Singapore, Switzerland, Thailand, Turkey, United Arab Emirates, United Kingdom, United States of America, Uzbekistan, Vietnam). All BITs signed by the Bangladesh government offer protection against expropriation and typically include non-discrimination, prompt, adequate and effective compensation. The principles of most-favored nation (MFN) and national treatment (for post-establishment, not for entry) are also granted.
These agreements generally offer either:
- Complete tax exemption to avoid double taxation.
- Reduced tax rates to minimize tax liabilities.
These treaties help in the smooth flow of international trade and investment, ensuring transparency in tax collection and proper tax allocation between the two countries.
Tax Deduction on Payments to Non-Residents in Bangladesh
As per Section 119 of the Income Tax Act 2023, when a resident person or entity makes a payment to a non-resident, tax must be deducted at a rate of up to 30% unless:
- The non-resident obtains a certificate from the National Board of Revenue (NBR)confirming that they are either exempt from tax or eligible for a reduced tax rate under a DTAA.
- The NBR reviews the application and issues the certificate within 30 days.
Additionally, if a foreign entity earns capital gains from transferring shares in a Bangladeshi company, the company or relevant authority must ensure that applicable taxes have been paid before finalizing the transfer.
Required Documents to obtain the Certificate:
• Tax Residence Certificate of Non-Resident
• TIN (Tax Identification Number)
• Tax Clearance Certificate
• Audit Report
• Incorporation Certificate
• Bank Details
• Schedule-X & Form XII of Bangladeshi Resident Company
• Agreement between resident & non-resident counterpart
Any other documents as shall be guided by the NBR Officials
DTAA and Banking Transactions in Bangladesh
The Finance Act of Bangladesh mandates that if a non-resident is eligible for tax benefits under a DTAA, they must obtain a certificate from the NBR before claiming any tax exemptions. Banks must verify this certificate before allowing tax benefits on foreign remittances.
Tax Exemptions on Certain Foreign Remittances
Under Section 119 of the Income Tax Act 2023, specific remittances sent abroad are exempt from tax deduction at the source, including:
- Arbitration fees
- Hajj-related remittances
- Priority pass charges
Future of DTAA in Bangladesh
DTAA plays a crucial role in facilitating foreign direct investment (FDI), trade, and international employment opportunities. The government of Bangladesh should continue expanding its network of double taxation treaties to attract more foreign investors and skilled professionals, thereby boosting economic growth and ensuring a fair tax system.
Tax Residency Certificate in Bangladesh
To know more about Tax Residency Certificate in Bangladesh, [visit here]
Simplify Double Taxation Avoidance with LegalSeba LLP
At LegalSeba LLP, our team of seasoned legal professionals specializes in international tax matters, offering comprehensive support to help businesses and individuals navigate Double Taxation Avoidance Agreements (DTAA) in Bangladesh. Here’s how we can assist you:
🔹 Expert Tax Advisory
Get personalized legal guidance on DTAA provisions, tax exemptions, and treaty benefits. Our experts ensure you understand the applicable regulations and how to minimize tax liabilities effectively.
🔹 Document Preparation & Compliance
We assist in preparing and verifying all required documents, including DTAA certificates, tax residency proofs, and NBR applications, ensuring full compliance with Bangladeshi tax laws and treaty obligations.
🔹 Regulatory Filings & Approvals
From obtaining necessary approvals from the National Board of Revenue (NBR) to ensuring correct tax deductions at source, we handle all legal formalities to prevent double taxation and unnecessary tax burdens.
🔹 Seamless Coordination with Authorities
Our team facilitates smooth communication with tax authorities, banks, and government agencies, ensuring hassle-free processing of DTAA-related claims and proper tax credit allocation.
🔹 Dispute Resolution & Legal Representation
If you encounter tax disputes, delays in DTAA approvals, or conflicting tax claims, we provide strong legal support to safeguard your financial interests and resolve issues efficiently.
With our in-depth expertise and commitment to compliance and efficiency, LegalSeba LLP ensures a smooth and stress-free experience in navigating Double Taxation Avoidance Agreements in Bangladesh.
Contact Us Today
Let LegalSeba LLP be your trusted partner in handling your Taxation matters efficiently, ensuring compliance and peace of mind for your business.
📞 Phone/WhatsApp: +8801753718223
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