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Employer’s Responsibilities in Income Tax Compliance

The taxation of expatriate employees in Bangladesh is governed by the Income Tax Ordinance, 1984, which mandates that employers are responsible for withholding and remitting income tax at source (TDS) to the National Board of Revenue (NBR). Even where an employment contract stipulates that the employee’s salary is inclusive of taxes, the obligation to ensure tax compliance remains with the employer.

Legal Basis for Employer’s Tax Obligations

Pursuant to Section 50 of the Income Tax Ordinance, 1984, employers are statutorily required to withhold income tax at the applicable rate before disbursing salaries to employees, including expatriate personnel. Failure to comply with this statutory duty exposes the employer to liability, including potential tax evasion claims, penalties, and retroactive tax assessments.

To ensure compliance with tax obligations, employers should adopt the following measures:

• Deduct the requisite Tax Deducted at Source (TDS) from employee salaries prior to disbursement.
• Issue a Tax Deduction Certificate to each employee as proof of tax payment.
• Maintain monthly tax deposit records with the NBR for audit and compliance verification.
• Ensure that the company fulfills its tax withholding obligations rather than relying solely on employee self-paid income tax submissions, as such an arrangement does not absolve the employer of liability. Regulatory authorities may still impose enforcement actions on non-compliant employers.

Social Security Contributions and Employer Obligations

Bangladesh does not have a government-mandated social security system applicable to expatriates. However, certain employers voluntarily offer benefits such as provident funds, gratuity schemes, and health insurance as part of an expatriate’s employment package.

Where such benefits are included, employers must:

• Clearly define the terms of contributions and withdrawals in employment contracts.
• Ensure proper documentation of employer and employee contributions.
• Establish clear legal provisions governing payout terms for employees upon termination or repatriation.

As there is no mandatory government social security scheme applicable to expatriates, there is no statutory requirement for expatriates to submit social security payment slips unless explicitly required under the terms of their employment contract.

Legal Framework Governing Expatriate Employment in Bangladesh

The employment of foreign nationals in Bangladesh is subject to multiple legal frameworks, including:

• Bangladesh Investment Development Authority (BIDA) Regulations
• Bangladesh Export Processing Zones Authority (BEPZA) Rules (for companies operating in EPZs)
• Labour Laws, including the Bangladesh Labour Act, 2006
• Income Tax Ordinance, 1984
• Foreign Exchange Regulation Act, 1947

Employers hiring expatriates must ensure full compliance with these laws, including the procurement of necessary work permits, tax clearances, and contractual protections, to mitigate legal and financial risks.

1. Non-Compliance with Work Permit and Visa Regulations

Under BIDA regulations, expatriates must possess a valid work permit and E Visa before commencing employment in Bangladesh.

Blacklisting Triggers

✅ Employing an expatriate without a valid work permit. ✅ Failure to renew an expatriate’s visa or work permit within the stipulated timeframe. ✅ Employing more expatriates than permitted under the legal ratio requirements (1:20 for industrial sectors, 1:5 for commercial sectors). ✅ Allowing expatriates to work beyond their visa validity without obtaining renewal approvals.

Legal Consequences

❌ Revocation of company approval to employ expatriates. ❌ Rejection of future work permit applications. ❌Blacklisting by BIDA, BEPZA (for EPZ-based entities), or other regulatory authorities. ❌ Deportation of expatriates working without legal authorization.

Legal Basis for Employer’s Tax Obligations

Pursuant to Section 50 of the Income Tax Ordinance, 1984, employers are statutorily required to withhold income tax at the applicable rate before disbursing salaries to employees, including expatriate personnel. Failure to comply with this statutory duty exposes the employer to liability, including potential tax evasion claims, penalties, and retroactive tax assessments.

To ensure compliance with tax obligations, employers should adopt the following measures:

• Deduct the requisite Tax Deducted at Source (TDS) from employee salaries prior to disbursement.
• Issue a Tax Deduction Certificate to each employee as proof of tax payment.
• Maintain monthly tax deposit records with the NBR for audit and compliance verification.
• Ensure that the company fulfills its tax withholding obligations rather than relying solely on employee self-paid income tax submissions, as such an arrangement does not absolve the employer of liability. Regulatory authorities may still impose enforcement actions on non-compliant employers.