How Does TDS Deduction Work for Foreign Employers in Bangladesh?
Payroll tax compliance in Bangladesh centres on Tax Deducted at Source (TDS) from monthly salaries under the Income Tax Act 2023. Employers deduct tax when salary is paid, deposit it to the government treasury within two weeks, and file the prescribed return with the National Board of Revenue. EOR BD handles the calculation, the deposit paperwork and the supporting records for foreign companies employing staff here.
For end-to-end monthly salary processing, explore our payroll outsourcing in Bangladesh service. For employee records and payroll-input coordination, see our HR administration support.
What Our Service Covers
- Calculate TDS per employee record from approved monthly salary inputs
- Prepare withholding details and treasury deposit documentation each cycle
- Maintain six document types for every monthly payroll cycle
- Coordinate the return filed with the National Board of Revenue
- Respond to finance-team queries within the same monthly cycle
What Does Payroll Tax Compliance in Bangladesh Include?
Payroll tax compliance in Bangladesh covers six functions: salary tax calculation, withholding tax (TDS) records, payroll tax documentation, National Board of Revenue (NBR) filing coordination, expat payroll tax support and audit-ready record preparation. EOR BD delivers all six for foreign companies, with no local entity required.
Can Foreign Companies Handle Payroll Tax Without a Local Entity?
Foreign companies can meet Bangladesh payroll tax obligations without opening a local entity. As the legal employer, EOR BD calculates TDS per employee, coordinates filing with the National Board of Revenue (NBR), and maintains the records your auditors expect — while your finance team approves every run from wherever it sits.
When your finance team sits in London or Singapore, the monthly Bangladesh cycle has to run without your supervision. EOR BD keeps approved inputs organised, calculates each deduction against the current slab structure, and delivers a reviewed file before any disbursement — from our Dhaka office, in your working hours.
How the Monthly Deduction Cycle Runs
TDS is calculated per employee record against the FY2026-27 slabs — the first BDT 400,000 is tax-free, with rates from 10% to 30% above that. Deducted amounts reach the government treasury within two weeks under the Income Tax Act 2023 and the Withholding Tax Rules 2024. Our Dhaka team prepares the challan trail, the deduction summary and the payroll register before your finance lead signs off.
For end-to-end salary processing, explore our payroll outsourcing services in Bangladesh.
What Sets Our Dhaka Operation Apart
Nothing is disbursed without your written approval. You receive a gross-to-net breakdown per employee — not a single net figure — so every deduction line is visible before payment.
• Six document types retained each cycle, ready for auditor requests
• Calculations checked against NBR slab tables, not assumptions
• Corrections re-issued within the same cycle, never carried forward
• Records held locally in Dhaka, accessible on request
For employee record and monthly data coordination, see our HR administration support in Bangladesh.
Which Laws Govern These Obligations
Three instruments define what an employer must do:
• Income Tax Act 2023 — salary deduction at source, treasury deposit and withholding return
• Bangladesh Labour Act 2006, Section 234 — Workers’ Profit Participation Fund at 5% of net profit, split 80:10:10, payable within nine months of the year close
• Bangladesh Labour Act 2006, Section 264 — Provident Fund, where a recognised fund has been established
Rates and thresholds are published by the National Board of Revenue and change with each Finance Act.
How Is Salary Tax Calculated and Reported in Bangladesh?
Salary tax is calculated per employee against the current NBR income-tax slabs, deducted at source (TDS) from monthly pay, then deposited to the government treasury and recorded. EOR BD computes each figure, produces the deduction summary for your sign-off, and archives the supporting evidence.
Every employee record is measured against the FY2026-27 slab table before anything is deducted. The first BDT 400,000 of annual taxable income carries no tax; above that, rates step from 10% to 30%. For end-to-end salary processing, explore our payroll outsourcing services in Bangladesh.
Deducted tax does not stay with the employer. Under the Income Tax Act 2023 and the Withholding Tax Rules 2024, the amount must reach the government treasury within two weeks of the deduction date, with a challan recording the transfer.
Withholding returns are filed with the National Board of Revenue on the prescribed schedule, and each employee receives a deduction certificate. Records are retained so an auditor asking about a specific month gets an answer from the existing file.
How Does the Monthly Payroll Tax Cycle Work?
The cycle runs in four stages: you share the month’s payroll data, we compute deductions against current NBR slabs, your finance team signs off before any payment is released, and the deducted tax is deposited and archived. Provident fund and other statutory benefits under the Bangladesh Labour Act 2006 are applied on the same run.
Share Your Monthly Payroll Data
You send the month's salary inputs — basic pay, allowances, bonuses, overtime, leave adjustments and any employee changes. Our Dhaka team checks the file for completeness before anything is calculated, so missing data surfaces at the start rather than at approval stage.
Compute Deductions
TDS is calculated per employee record against the FY2026-27 slabs — the first BDT 400,000 is tax-free, with rates from 10% to 30% above that. Provident Fund is applied where a recognised fund exists. You receive a gross-to-net breakdown showing every line, not a single net figure.
Sign Off Before Release
The payroll register and deduction summary go to your finance team before any payment leaves. Nothing is disbursed without your written sign-off. If a figure needs revision, it is corrected and re-issued within the same cycle — never carried into the next.
Deposit and Archive
Deducted tax reaches the government treasury within two weeks under the Income Tax Act 2023 and the Withholding Tax Rules 2024, with the challan filed against the cycle. Payslips, withholding records and deduction summaries are archived so auditor requests are answered from the existing file.
What Deductions Come Off a Salary in Bangladesh?
Three deductions apply to Bangladesh payroll. Personal Income Tax is withheld from every taxable salary at rates published in the Finance Act. Provident Fund and Workers' Profit Participation Fund apply only where specific conditions are met. The table below sets out each rate, the trigger, and the governing authority.
Deduction | What it is | Rate and trigger | Authority |
Personal Income Tax (PIT) | Salary tax withheld at source from each employee’s monthly pay before disbursement | First BDT 400,000 of annual taxable income is exempt. Rates run from 10% to 30% above that. The 5% entry slab was abolished for FY2026-27. Non-residents are taxed at a flat rate on Bangladesh-sourced income. | |
Provident Fund (PF) | Employee and employer contributions paid into a recognised retirement fund | Applies only where a recognised fund has been established. Contribution rates are set by the fund’s own rules and matched by the employer. Not automatic for every employer. | Employer-established scheme under the Labour Rules 2015 |
Workers’ Profit Participation Fund (WPPF) | A share of net profit set aside and distributed to eligible workers | 5% of net profit, split 80:10:10 between the Participation Fund, Welfare Fund and Workers’ Welfare Foundation Fund. Payable within nine months of the financial year close. Employees with fewer than six months of service in an accounting year are not eligible. |
What Do Finance and HR Teams Ask About Payroll Tax in Bangladesh?
Finance and HR teams most often ask who is responsible for deducting payroll tax, what records must be retained, how expatriate staff are treated, and whether a local entity is required at all. The answers below address each, framed against the Income Tax Act 2023 and the Withholding Tax Rules 2024.
What this page covers, and what it does not. This page is about payroll tax compliance for companies that already have employees in Bangladesh — salary tax calculation, withholding records, deduction summaries and monthly documentation. It does not cover company registration. For name clearance, Memorandum of Association or investment approval, see company incorporation in Bangladesh. To employ staff without registering an entity, see Employer of Record in Bangladesh.
What payroll tax deductions apply to employees in Bangladesh?
Three deductions apply. Personal Income Tax (PIT) is withheld at source — the first BDT 400,000 of annual income is exempt, with rates from 10% to 30% above that. Provident Fund (PF) applies only where a recognised fund exists. Workers’ Profit Participation Fund (WPPF) requires 5% of net profit, split 80:10:10.
Who is responsible for deducting payroll tax in Bangladesh?
The employer is the withholding authority under the Income Tax Act 2023. Tax is deducted when salary is paid and deposited to the government treasury within two weeks. Through EOR BD, our Dhaka team calculates each deduction and prepares the challan, while your company approves every payroll input in writing.
What payroll tax records must a company maintain in Bangladesh?
Six document types are retained each cycle: salary registers, itemised deduction records, individual payslips, treasury challans, deduction certificates issued to employees, and the monthly withholding statement. EOR BD keeps all six in a structured file so auditor requests are answered from existing documentation rather than reconstructed.
How does payroll tax work for expatriate employees in Bangladesh?
Residency status decides the rate. Residents are taxed on the same progressive slabs as local staff, starting at 10% above BDT 400,000. Non-residents are taxed at a flat rate on Bangladesh-sourced income. A tax clearance certificate is generally required before an expatriate departs at the end of an assignment.
Can a foreign company manage Bangladesh payroll tax without a local entity?
Yes. Under an Employer of Record arrangement, EOR BD acts as the legal employer while your company directs the work. PIT deduction, treasury deposit and payroll documentation are handled locally. No entity registration, no RJSC filing and no local corporate bank account are required from your side.
Does BIDA approval affect payroll tax for expatriate staff?
No. BIDA governs work permits and the expatriate-to-local employment ratio, not payroll tax. Salary tax deduction follows the Income Tax Act 2023 regardless of permit status. For work permit and investment approval matters, see company incorporation in Bangladesh.
How is payroll tax filed with the NBR each month?
Filing follows the monthly cycle: deductions are computed per employee, your finance team approves the payroll register, and the deducted tax is deposited to the government treasury and recorded. EOR BD coordinates the filing with the National Board of Revenue (NBR) and keeps the supporting documentation on file for audit.
How does provident fund affect payroll tax in Bangladesh?
Provident fund is a statutory benefit administered under the Bangladesh Labour Act 2006 and sits alongside income-tax deduction rather than replacing it. EOR BD applies both on the same payroll run, so your deduction summary shows income tax and provident fund separately and reconciles to the amount disbursed.
Get Your First Cycle Mapped Out