Bangladesh

As per the Bangladesh tax laws, income is categorised into seven areas, namely, income from employment, income from rent, agricultural income, income from business or profession, capital gains, income from financial assets, and income from other sources.

Inventory valuation

There is no separate method in the tax laws for inventory valuation. See Adoption of IFRS in the Other issues section for more information.

Capital gains

See Capital gains taxes in the Other taxes section for more information.

Dividend income

Any dividend paid by a Bangladeshi company is deemed to accrue or arise in Bangladesh and is taxable in Bangladesh.

Tax-paid dividend distributed in favour of a company, if the company distributing such dividend income maintains a separate account for such tax-paid dividend, is excluded from the gross total income.

Dividend is taxable in Bangladesh at 20% in the hands of a company. The WHT deducted on dividend is considered as minimum tax in the hands of the recipient.

Interest income

Interest income deemed to accrue or arise in Bangladesh includes interest payable by the government, residents (except when interest is paid for business or profession carried out outside Bangladesh or for earning income from outside Bangladesh), and non-residents (in case interest is paid for business or profession carried out in Bangladesh or earnings in Bangladesh).

Interest income is chargeable to tax at regular tax rates.

Rental income

Any income earned from the renting of any property after deducting allowable expenses is taxable as ‘income from rent’. Property means house property, land, furniture, fixtures, factory buildings, business premises, machinery, personal vehicles, and any other tangible capital asset that can be rented.

House property refers to any house, building, or structure, which includes furniture, fixtures, and fittings that are an integral part of the house and the land upon which the house is situated. Buildings used solely as warehouses or factory buildings where rent is part of the payment for plant and machinery are not considered as house property.

Allowable expenses from rental income include the following:

• Costs for insuring the property against loss or damage.
• Interest or profit paid on loans from banks or financial institutions for buying, building, renovating, or reconstructing the property.
• Any taxes, fees, or annual charges on the property, as long as they are not capital charges.
• Pre-rental period interest on loans for the property’s acquisition, construction, repair, or reconstruction before it was rented out.
• Standard deduction related to rent collection, utilities (water, sewerage, electricity, gas), service charges, and repair and maintenance, as well as other basic service charges:
• House property used for commercial purposes: 30%.
• House property used for non-commercial purposes: 25%.

When a house property is rented out only partially, the expenses related to the property can be claimed as deductions in proportion to the rental income received. 

If a house property is rented out for only a portion of the income year, the expenses that can be claimed as deductions should be proportionate to the duration for which the property was rented.

Royalty income

Royalty earned in respect of business or profession carried out in Bangladesh or for the purpose of earning income in Bangladesh is taxable in Bangladesh. Royalty income is chargeable to tax at normal corporate tax rates.

Partnership income

A partnership firm is taxable as an individual. Please refer to Treatment of flow-through business entities in the Other issues section of the Individual tax summary for details.

Unrealised gains or losses

Unrealised gains and losses are not considered for the purpose of computing income from business.

Foreign currency exchange gains or losses

Only realised gains and losses from foreign currency exchange are considered for computing income from business.

Other significant items

Special areas considered as income from other sources (IFOS)

• If any asset is purchased (other than commercial stock or financial asset) below the FMV, then the difference of purchase price and FMV is taxable as IFOS.
• Purchase price of any asset is taxable as IFOS in case tax is not deducted or collected at the time of making payment.
• For any profit or benefit received due to waiver of loan or liability (whether convertible or not), the monetary value of such loan or liability is taxable as IFOS.
• Income from winning a lottery, word game, card game, online games, or games of any nature is taxable as IFOS.
• Receipt of paid-up share capital by an unlisted company in cash is taxable as IFOS, except receipt of any assets or services in the form of share capital in accordance with the Companies Act, 1994.
• Borrowing of any amount from any other person other than through a banking medium is taxable as IFOS. Such borrowing will be deductible in the year of repayment.
• If the value of a motor car or jeep exceeds 10% of the paid-up share capital and reserves along with accumulated profits, then 50% of such excess is deemed to be IFOS.

Foreign income

A Bangladeshi company is taxed on its global income. A foreign company is taxed only on income that is received in Bangladesh, or that accrues or arises, or is deemed to accrue or arise, in Bangladesh. This income is subject to any favourable DTAA provisions. There is no anti-deferral regime in Bangladesh.