Some people are not aware of their income, they don’t even know how much tax they have to pay in order to their yearly salary amount. But don’t worry there’s a smart solution in Bangladesh which is the Withholding Tax.
When companies cut off the portion of the tax from their employee’s salaries (Whoever is capable of tax) and give employees a tax-free amount of salary this process is known as withholding Tax. In this writing, you will have detailed information on withholding Tax in Bangladesh and its’ rate for 2022-23.
Withholding Tax in Bangladesh
As lots of people in Bangladesh are not aware of the Withholding Tax, so unconsciously they go through this system. The main purpose of this system is to hold the tax amount from the employee’s salary who is not properly conscious of income tax.
Imagine for a while, you work in a company, and your monthly salary is about 30,000 Taka, so your total yearly income will be 360000 TK, which is a taxable amount. Now the owner of that company deducted the tax from your total income from the salary and gave you the salary, and sent the deducted amount directly to the government treasury, which is withholding tax.
The Benefit of Withholding Tax
The most important point of withholding tax is that you don’t need to calculate it or have the tension to pay it off. The company you work for does this for you. The company calculates the tax according to your salary, cuts off a specific portion from your salary, and pays that to the government treasury. So the benefit of withholding tax is that you don’t need to calculate it and pay it yourself.
Who are Capable of Withholding Tax Returns For 2022-23?
Every person, being a company, shall file or cause to be filed, with the Deputy Commissioner of Taxes where he is being assessed, a return of withholding tax collected or deducted as per provisions of Chapter VII of this Ordinance.
According to Section 75(A) of the Income Tax Ordinance, 1984, at the source of that entity, There is an obligation to deduct that entity twice per financial year. Every person, being a company, shall file or cause to be filed, with the Deputy Commissioner of Taxes where he is being assessed, a return of withholding tax collected or deducted as per provisions of Chapter VII of this Ordinance.
According to the jurisdiction through certain forms in the process as and when at certain times. The return has to be filed which is called a withholding tax return.
Those Who Have To Pay Withholding Returns
There is a list of all companies, organizations, NGOs, and society that have to pay withholding tax with returns.
- Any Company
- Co-operative Society
- Micro Credit Institutions
- Private hospitals, clinics, diagnostics
- International English Medium School
- Local authorities
- Partnership Firm
- According to Chapter 7 of the Income Tax Ordinance, those who deduct taxes at source.
- Artificial Juridical Person
- An association of person
- Local Authority
Time To File Withholding Tax Returns
As per section 75(A), the withholding Tax returns in Bangladesh must be filed at two sources every financial year.
First Return of Withholding Tax: for deduction at source during the period from July 1 to December 31. It has to be submitted by January 31.
Second Return of Withholding Tax: Deduction at source during the period from January 1 to June 30. It has to be submitted by July 31. Return Form- SRO No. 259-Act/Income Tax/2016 The return has to be filed in the form prepared.
Application for time: In view of the Written application of the return filer, the Deputy Commissioner of Taxes can extend the time by 15 days. If you have any need regarding the application, you can directly go to the Segunbagicha office and ask for it.
Withholding Tax From the Company
Withholding tax companies are defined in SRO, as well as in VAT and SDU Act 2012. The relevant VAT rates or specified sums must be withheld at source when paying for services or products; otherwise, penalties may apply. Below is a list of withholding organizations required to deduct VAT at source and deposit it in the government Treasury:
- Ministry, department, or office of any administration;
- Social welfare department or NGOAB-authorized NGO;
- Governmental, parishioner, or equivalent organizations;
- Banks, insurance companies, or other financial institutions; Secondary or advanced school establishments;
- Limited liability companies
Responsibilities of Withholding Tax Company
Withholding tax companies have the primary responsibility of not receiving any supply from a supplier who does not provide a combined tax invoice (Mushak 6.3) and not paying any price against such supply.
Taxes deducted at source must be deposited in the prescribed manner within 15 days of invoice payment by the withholding tax company or supply receiver, and Mushak 6.6 must be issued within three working days, with the main copy going to the Mushak circle, a copy going to the supplier, and a copy being retained for five years by the withholding entity.
The Tax and SD Act of 2012 penalizes withholding tax companies that fail to meet the above obligations. In the following paragraphs, we will discuss the punishment for noncompliance with withholding tax.
Responsibilities of the Supplier of Withholding Tax
During supply, the supplier is also responsible for giving Mushak 6.3. Upon receipt of Mushak 6.6, the supplier must make a declining correction according to Mushak 9.1. A supplier is entitled to make changes within 6 months of the month in which the tax payment was made, but if the adjustment is not made within that period, the amount is forfeited.
Interest, Penalties of Withholding Tax
Tax must be withheld and paid to the government Treasury by the supplier and the withholding tax company. The person responsible for withholding tax must pay interest every six months as the provider of products or services.
Tax Commissioners can impose a personal punishment of up to BDT 25,000 if tax is withheld but not paid to the government offers.
Withholding Tax Rate In Bangladesh 2022-2023
The withholding tax in Bangladesh could be different according to the type of company or organization. Here is the full information about the withholding tax rate in Bangladesh.
- The withholding tax rate of ac hotels, restaurants, decorators, caterers, surveyors, plant or capital machinery rental firms, audit, and accounting firms, television, online broadcasting program supplier, law firm, rent-A-car architects, interior, designers, decorators, engineering firms, sound, and lightening rent, chartered plan, event organizers, manpower supplier, sponsorship services is 15%.
- The withholding tax rate for Motorcar garages, workshops, dockyards, printing, auctioneer, building, floor or spaces, cleaning, maintenance firms, the seller of tickets, or the lottery is 10%.
- The withholding tax rate of Non Ac hotels, restaurants, construction firms, furniture showrooms, procurement providers, purchasing goods participating auctions, and credit rating agencies is 7.5%.
- The withholding tax rate of indenting firms, transport contractors, information technologies, and enabled services is 5%.
- The rate of withholding tax in companies like, land development, real estate, and re-registration is 2%.
These are all about the rate of withholding tax 2022-23 on the income of the company, the employees will get cut a particular amount of the percentage from their salaries as withholding tax. For further queries, please do comment.