Bangladesh

Taxable period

The prescribed tax year in Bangladesh (other than for banks, insurance companies, or financial institutions) is from 1 July to 30 June of the following year.

The prescribed tax year for banks, insurance companies, and financial institutions is from 1 January to 31 December.

A subsidiary or holding company in Bangladesh having a foreign parent has an option to adopt a different financial year to keep themselves aligned with their foreign parent.

Tax returns

Companies are required to file their tax returns within the due date, known as ‘Tax Day’. The due date for filing the income tax return for companies is the 15th day of the seventh month following the end of the income year or the 15th day of September following the income year if the 15th day of the seventh month as mentioned above falls prior to this date. 

In case of failure to file the return within the Tax Day, additional tax is levied at 2% per month on the difference between the tax assessed on the total income and tax already paid or deducted for the period commencing from the first day immediately following the Tax Day to the date of filing the return (where the return is filed) or the date of regular assessment (where the return is not filed).

Moreover, to claim certain tax incentives or deductions, taxpayers have to furnish their tax returns on or before the due date specified for filing the tax returns.

Relief from filing an income tax return has also been specified for certain classes of taxpayers.

Payment of tax

Tax is payable in advance in specified instalments on or before 15 September, 15 December, 15 March, and 15 June of the tax year (this also applies in case a taxpayer is assessable to income tax in Bangladesh for the first time and whose total income for that financial year is likely to exceed BDT 600,000). Any remaining tax due based of the return must be paid on a self-assessment basis before the income tax return is filed.

Interest is levied at 10% per annum (15% if the return is filed after Tax Day) on the amount of shortfall if taxes paid are less than 75% of the amount of assessed tax payable. Interest is computed from 1 July following the relevant financial year to the date of regular assessment or a period of two years starting from 1 July, whichever is shorter.

Penalties

Penalty for shortfall in payment of Advance Tax (AT) is equal to the amount of AT that has been short paid.

Tax audit process

The Board, or any authority under the Board, is authorised to select returns for audit and send them to the Commissioner of Taxes. The Commissioner of Taxes appoints an inquiry team, an audit team, and an audit curator for each audit case. The DCT issues a notice to the taxpayer informing her or him of the audit and sends a copy of such notice to the inquiry team. The inquiry team, audit team, and the audit curator undertake the audit procedure and submit the final audit report to the DCT to either complete the audit proceedings or to initiate assessment proceedings. Based on the report, the Commissioner of Taxes takes a decision, and the DCT informs the taxpayer of the next course of action. The audit process must be completed within two years from the end of the year of selection for the audit.

Statute of limitations

The Board grants a time period of two years from the end of the AY to issue a notice for audit selection. The audit is to be completed within two years from the end of the year in which the notice for audit selection has been issued.

Topics of focus for tax authorities

Some of the topics of focus for tax authorities in Bangladesh are as follows:

• Simplifying and clarifying the income tax provisions and procedures to facilitate compliance and reduce disputes.
• Widening the tax base and scope by introducing new measures, such as taxing undisclosed income and wealth, expanding the definition of deemed dividends, and imposing minimum tax on more sources of income.
• Enhancing the use of technology and digital platforms for filing returns, making payments, preserving records, and conducting audits and assessments.
• Rationalising the tax rates and incentives for individuals and corporations, especially in sectors such as information technology, manufacturing, and economic zones.
• Strengthening the enforcement and penalty mechanisms for tax evasion, non-compliance and fraud, and streamlining the appeal and dispute resolution processes.

Anti-avoidance rules

The General Anti-Avoidance Rules (GAAR) in Bangladesh are designed to prevent tax evasion and avoidance through various means. These rules are part of the country’s tax legislation and are aimed at ensuring that all taxable income is properly reported and taxed.

The DCT has the authority to adjust tax benefits if a taxpayer is found to have misused tax arrangements. The adjustments can include enhancement of income, amendment of tax liability, adjustment of tax refund, revision of allowances, concessions, and revoking any tax benefits.

These adjustments are intended to be comprehensive and affect all relevant aspects under the Act. The procedure for making these adjustments begins with the DCT issuing a notice to the taxpayer, which outlines the reasons for believing there has been an abuse of the tax system and requests the necessary documentation and information for review.