The Double Taxation Relief (Taxes on Income) (Bangladesh) Order 1980

EXPLANATORY NOTE

Under the Convention with Bangladesh scheduled to this Order, air transport profits, certain trading profits not arising through a permanent establishment, pensions (other than Government pensions) and the earnings of temporary business visitors are, subject to certain conditions, to be taxed only in the country of the taxpayer's residence. Where an enterprise resident in one country carries on business through a permanent establishment in the other, the profits of the enterprise which are attributable to that permanent establishment may be taxed in that other country. Government salaries and pensions are normally to be taxed by the paying Government only. The remuneration of visiting teachers and certain payments made to visiting students are, subject to certain conditions, to be exempt in the country visited. Income from immovable property may be taxed in the country in which the property is situated and income derived by public entertainers from their personal activities may normally be taxed in the country in which those activities are exercised.

Where income continues to be taxable in both countries, relief from double taxation is to be given by the country of the taxpayer's residence. The credit to be given in the United Kingdom for tax payable in Bangladesh is to include credit for tax spared under certain provisions of Bangladesh law.

The rate of tax in the country of source on dividends flowing to the other country is normally not to exceed 10 per cent where the dividend is paid to a company which controls at least 10 per cent of the voting power in the paying company and 15 per cent in all other cases.

The maximum rate of tax to be imposed by the country of source upon interest paid to a resident of the other country is, in general, 10 per cent. The rate of tax, however, is not to exceed 7½ per cent where the interest is derived by a bank or other financial institution. Interest received by the Government (or a governmental institution) of either state is to be exempt in the country of source.

The rate of tax in the source country on royalties flowing from one country to the other is in general not to exceed 10 per cent.

There is provision for the taxation of capital gains on immovable property by the country in which the property is situated. Capital gains arising from the disposal of movable property are normally to be taxed only in the country of the taxpayer's residence unless they arise from the disposal of assets of a permanent establishment or fixed base which the taxpayer has in the other country.

There are also provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country and for the exchange of information and consultation between the taxation authorities of the two countries.

The Convention is to take effect in the United Kingdom in respect of income tax and capital gains tax for the tax year 1978/79 and subsequent years and in respect of corporation tax for the financial year commencing on 1 April 1978 and subsequent years.