Employer Tax Obligations in Bangladesh: A Comprehensive Guide

Understanding employer tax responsibilities is crucial for businesses operating in Bangladesh. The following mandatory contributions represent the core employer tax obligations:

Employer Tax Range: 0% - 8%

Social Security: 0%
Provident Fund (conditional): 7% - 8%
Workers Profit Participation Fund (conditional): 5% of company profits

Social Security Framework

Bangladesh currently maintains no mandatory social security system for employers. However, international companies must still comply with local labor regulations, particularly regarding employee welfare provisions. Many progressive organizations voluntarily offer supplementary benefits such as private medical insurance, retirement plans, and additional perks to enhance their competitive positioning in the talent market.

Provident Fund Requirements

Private sector establishments must establish provident funds when at least three-quarters of their workforce submits written requests. Employers contribute 7% to 8% of employee wages monthly, with matching employee contributions deposited into individual provident fund accounts.

Workers Profit Participation Fund (WPPF)

Under Bangladesh Labor Law, companies meeting specific capital thresholds—either paid-up capital exceeding 100 million BDT or permanent assets valued over 200 million BDT—must allocate 5% of their annual profits to the Workers Profit Participation Fund.

Additional Voluntary Benefits

While not legally mandated, many employers enhance their compensation packages with benefits including paternity leave, performance bonuses, meal allowances, transportation subsidies, retirement savings plans, and comprehensive healthcare coverage.

Employee Tax Responsibilities in Bangladesh

Employees in Bangladesh bear responsibility for several tax obligations:

Employee Tax Range: 0% - 38%

Provident Fund (conditional): 7% - 8%
Personal Income Tax: 0% - 30%

Provident Fund Contributions

Employees in establishments with active provident funds contribute 7% to 8% of their basic salary after completing one year of service. These contributions enjoy tax exemption provided annual contributions don't exceed one-third of the employee's total compensation.

Personal Income Tax Structure

Residency status determines tax liability in Bangladesh. Individuals qualify as residents if they spend 182 days in a fiscal year or 365 days across four consecutive years with 90 days in the current year. Non-residents typically face a flat 30% tax rate on Bangladesh-sourced income.

Resident taxpayers follow a progressive tax structure with seven tiers:

Annual Taxable Income (BDT)	Tax Rate (%)
0 - 350,000	0
350,001 - 450,000	5
450,001 - 850,000	10
850,001 - 1,350,000	15
1,350,001 - 1,850,000	20
1,850,001 - 3,850,000	25
3,850,001 and above	30

Special exemptions apply to specific demographics:

Women and seniors (65+): 400,000 BDT basic exemption
Disabled taxpayers: 475,000 BDT exemption
Third-gender individuals: 475,000 BDT exemption
War-injured freedom fighters: 500,000 BDT exemption
Parents/guardians of disabled persons: Additional 50,000 BDT exemption

Navigating Bangladesh Tax Compliance

International companies often partner with local experts like SailGlobal to ensure full compliance with Bangladesh's evolving tax regulations. Proper tax management not only avoids penalties but also enhances employee satisfaction and retention.

Bangladesh Employer and Employee Tax Guide 2024: Compliance & Rates