ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.biz

Bangladesh Payroll Handbook

www.aceadvisory.biz

Updated to Finance Act 2017

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.biz

Firm Profile

2

ACE Advisory is a leading provider of advisory, consulting, outsourcing and

local professional services. We focus on providing an integrated set of

multidisciplinary services with our deep local knowledge.

Our 3 core services support clients of various sizes with Expansion to

Bangladesh & BPO, Offshore BPO, & Advisory & Consulting on Corporate

Registration Services and Tax. Whether a client wants to setup in

Bangladesh or outsource its payroll function, we provide the support by

combining deep sector expertise, local insight and technology.

We provide a single point of contact to coordinate continuous management

of outsourced operations across our 3 business services.

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.biz

Firm Profile contd..

Our range of services include:

1. Expansion to Bangladesh & BPO

– Local Entity Setup

– Other Local Registrations

– BPO - Finance & Accounting

– BPO - Payroll & HR

– BPO - Corporate Secretarial

– BPO – Tax Compliance

2. Offshore BPO

– General Accounting

– Procure to Pay

– Order to Cash

– Record to Report

3. Advisory & Consulting

– Accounting Advisory

– Management

Consultancy

– Process Advisory

– Tax Advisory

– International

Expansion

3

For more information on above services please visit our website at www.aceadvisory.biz.

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.biz

Preface

This handbook is intended to provide a brief but complete insight into payroll andpersonal income tax implications in Bangladesh.

This has been prepared as a guidance for employers wishing to employ local andexpatriate employees in Bangladesh and incorporates provisions of the Income TaxOrdinance 1984 and the Finance Act 2017.

The information provided in this handbook is general in nature and is not intendedto address the circumstances of any particular individual/firm/entity/employer.Although we always endeavour to provide accurate and timely information, noguarantee is provided that the information will be applicable at the time it isreceived or read. Readers are requested to seek further professional advice bypresenting a particular case for examination.

Note the guidelines given in this handbook apply to management level staff only.Payroll implications for labour and unskilled staff are not dealt with here.

4

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.biz

Employing Staff

Bangladesh Nationals

• Locally incorporated entities are free to employ Bangladesh Nationals above 18years of age.

• There is no registration process with the government for hiring employees.

• Employer’s must ensure that employees earning above BDT 16,000 per monthhave an e-TIN (Tax Identification Number).

• Employment contracts are generally used locally to govern the relationshipbetween employer and employee.

Expatriates

• Locally incorporated entities are allowed to employ expatriates subject to certainconditions which must be met including:

– Bringing in USD 50,000 into Bangladesh.

– Having a local to expat ratio of 5:1

– Proving that the expertise of the expat is not available locally.

– Etc.

5

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.biz

Introduction – Personal Income Tax

General

In general, Bangladesh residents are taxed on their worldwide income. Otherresidents are taxed on income earned in Bangladesh irrespective of where thepayment is made.

There is no provision for married couples to file joint returns. Returns are to be filedby 30 November.

Residence

An individual is treated as resident if he/she resides in Bangladesh for 182 days ormore in a tax year; or 90 days or more in an income year if that person haspreviously resided in Bangladesh for a period of more than 365 days in the preceding4 years.

Residence is determined in Bangladesh purely on the period of presence irrespectiveof residency in other countries.

Taxable Income

Taxable income is the total income earned from all sources excluding exempt income.

6

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.biz

Income from Salary

7

• Basic Salary

• Festival Bonus

• Incentive Bonus

• Arrear Salary

• Advance Salary

• Wages or any other payment

• Overtime

• Contribution to Provident Fund

• Pension Fund

• Gratuity Fund

• Superannuation Fund

• Project pay

• Leave Encashment

• Compensation pay

• Leave Fare Assistance

• Any other payment made to employees other than above

Income from salary includes the following:

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.bizTaxability of Salary Income

8

Individuals enjoying salary income are subject to tax on salary and all other benefits. A summary of taxability and allowances are as below:

Income Head Taxability

Basic Salary Fully taxed

House Rent Allowance

(in cash/with salary)Tk. 25,000 per month or 50% of basic salary, whichever is lower is exempt from tax.

Rent free accommodationActual rent paid by employer or 25% of basic salary, whichever is lower shall be added to total

income and taxed.

Conveyance Allowance

(in cash/with salary)Tk. 30,000 per annum is exempt from tax where no conveyance facility is provided by employer.

Conveyance provided for

personal/private use

If employer provides conveyance for personal or private use, 5% of the employee’s basic salary

or Tk. 60,000 whichever is higher, is added to total income and taxed.

Medical Expenses

Tk. 120,000 per annum or 10% of basic salary, whichever is lower is exempt from tax.

Medical expenses up to Tk. 1,000,000 paid to a disabled employee shall not be included in his

total income.

Medical expenses paid to an employee (other than a shareholder director) for a surgery relating

to heart, kidney, eye, liver and cancer of the employee, shall not be included in the total income

of such employee.

Travel (local & foreign)Amounts paid at actual against bills/receipts are tax free. Any benefit paid in addition in cash is

taxable.

Festival Bonus Fully taxable

Performance Bonus Fully taxable

Utility expenses Fully taxable

Telephone/Mobile

allowanceTax free as long as it is for official use.

Entertainment allowance Fully taxable

Other allowances Fully taxable

Any reimbursements Tax free as long as it was incurred for official purposes.

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.biz

Exclusions from Taxable Income

9

Income Head Exempt Amount

Dividend of listed company Tk. 25,000 per year

Payment from recognized Provident Fund as per

Provident Funds Act 1925 or approved superannuation

fund

Fully exempt

Gratuity income Tk. 25,000,000

Payment from Workers Profit Participation Fund

(WPPF)Tk. 50,000 per year

Income from equity mutual fund or unit fund Tk. 25,000 per year

Income from Wage Earners Development Bond, US

Dollar Premium Bond, US Dollar Investment Bond,

EURO Premium Bond, EURO Investment Bond, Pound

Sterling Premium Bond, Pound Sterling Investment

Bond

Fully exempt

Pensioner’s savings certificate Tk. 500,000 per year

Pension Fully exempt

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.bizTax Credit from Investment

10

An assesse/employee shall be entitled to a credit from the amount of tax payable ifhe/she invests during the income year in the following items:

# Details Limit

1. Life insurance premium No limit

2. Contribution to approved Provident Fund (both by the employee and employer) No limit

3.Contribution to Deposit Pension Scheme (DPS) sponsored by a scheduled bank or a

financial institutionBDT 60,000

4. Donation to a national level institution set up in memory of the liberation war No limit

5. Donation to a national level institution set up in memory of Father of the Nation No limit

6. Investment in Bangladesh Government Treasury Bond No limit

7.Investment in stocks and shares of listed companies, mutual fund and debentures

listed with any stock exchangeNo limit

8. Purchase of computer or laptop by an individual assessee

The eligible investment amount will be the lesser of:

a) Actual investment as per above tableb) 25% of total incomec) BDT 15,000,000

Total Income Amount of Credit

Up to BDT 1,000,000 i. 15% of eligible amount

BDT 1,000,001 to BDT 3,000,000

i. 15% up to Tk. 250,000 of eligibleamount

ii. 12% on balance

Above BDT 3,000,001

i. 15% up to Tk. 250,000 of eligibleamount

ii. 12% on next Tk. 500,000 of eligibleamount

iii. 10% on balance of eligible amount

The amount of credit will be as follows:

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.bizIncome tax rates

11

Amount of Taxable Income Rate

Female & Individuals Over 65

Disabled Individuals

Gazetted War-Founded Freedom Fighter

Any other individual

BDT 300,000

BDT 375,000

BDT 425,000

BDT 250,000

Nil

On the next BDT 400,000 10%

On the next BDT 500,000 15%

On the next BDT 600,000 20%

On the next BDT 3,000,000 25%

On the balance 30%

Income tax is charged to individuals on fixed slabs. The slabs of total income andcorresponding tax rates are given below:

The tax rate for non-residents is a flat 30%.

Minimum tax payable/deductible is BDT 5,000 per year provided the individual crosses the tax free threshold.

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.biz

Payroll Tax

12

• Tax on employee’s salary and other taxable employee benefits arerequired to be withheld on a monthly basis by the employer.

• If the employee has sources of income other than salary fromemployer, he/she shall be responsible to declare such income at thetime of tax return filing.

• Tax deducted from employee salary must be deposited to the Govt.Exchequer within 2 weeks from date of deduction.

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.biz

Long term benefits

13

Provident Fund

Provident fund is not mandatory in Bangladesh. Employers can setup two kinds of provident funds:

a) Registered Provident Fund – a fund has to be created with a trustee board and registered withthe tax authorities. The fund will be treated as a complete separate legal entity with its ownmanagement. Contributions must be made to the fund according to the trust deed. This is verycomplex and can be expensive to administer. Contributions made to such a registered fund is taxexempt for employers and employee.

b) Un-registered fund – this is an internal fund managed by the employer. This has no taxexemption.

Gratuity Fund

Gratuity fund is not mandatory in Bangladesh. Employers can setup a gratuity fund and final gratuitypayments are tax free up to levels mentioned on Page 9.

Pension

There is no state managed pension or social security system in Bangladesh. Private employers arealso not required to provide a pension or maintain a pension fund. However, they are free to do so ifthey wish.

ACE Advisory, a partnership firm registered in Bangladesh.

www.aceadvisory.biz

14

ACE Advisory House – 540/5, Road – 12 (West) Baridhara DOHSDhaka – 1206 Bangladesh Tel :+88 019 5550 8855Web : www.aceadvisory.biz

Contact

Seezan Choudhury Montakim Ahmed Partner PartnerTel : +880 19 2929 6262 +880 173 035 7157 Email : seezan.choudhury@aceadvisory.biz montakim.ahmed@aceadvisory.biz