TRW & Co · UK–Bangladesh corridor
The UK–Bangladesh Double Taxation Agreement
The UK Bangladesh double tax treaty is the 1979 convention that decides which country taxes cross-border income. It caps source-country tax on dividends at 10% or 15%, interest at 10% or 7.5% and royalties at 10%, sets residence tie-breakers and requires credit for tax paid in the other country. It remains in force, unamended, as of October 2026.
Key pointThe treaty’s credit for Bangladeshi tax on dividends is often worthless to a UK company because most dividends it receives are exempt from UK corporation tax, while credit for tax on royalties and interest still has real value.
At a glance
Signed 1979, still current
Signed in Dhaka on 8 August 1979 and in force from 8 July 1980; GOV.UK lists no amending protocol for the Bangladesh convention as of October 2026.
Dividend caps
Source-country tax on dividends is capped at 10% for a company controlling at least 10% of voting power, and 15% in all other cases.
Interest and royalties
Interest is capped at 10%, or 7.5% for banks and financial institutions including insurers; royalties, including equipment rentals and know-how, are capped at 10%.
Wide agency PE rule
A representative who habitually secures orders, or fills orders from local stock, can create a permanent establishment even without authority to sign contracts.
Credit method both ways
Each country credits the other’s tax on the same income, with underlying tax credit for UK companies holding at least 10% of voting power.
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The short answer
The UK Bangladesh double tax treaty is the 1979 convention between the two governments for the avoidance of double taxation and the prevention of fiscal evasion. It decides which country may tax income and gains that cross the corridor, caps Bangladesh and UK withholding on dividends, interest and royalties, and requires the country of residence to give credit for tax paid in the other.
The headline rates are simple. Dividends may be taxed in the source country at up to 10% where the beneficial owner is a company controlling at least 10% of the voting power, and 15% otherwise. Interest is capped at 10%, or 7.5% for banks and other financial institutions. Royalties are capped at 10%.
The detail is where the value lies: residence tie-breakers for people with homes in both countries, a permanent establishment definition that is wider than the modern international model in some respects, and credit rules that interact with the UK's dividend exemption. As of October 2026, GOV.UK lists only the original 1979 convention for Bangladesh, with no amending protocol.
Status, dates and taxes covered
The convention was signed in Dhaka on 8 August 1979 and entered into force on 8 July 1980. It took effect retrospectively: in the UK from 6 April 1978 for income tax and capital gains tax and from 1 April 1978 for corporation tax, and in Bangladesh for years of assessment beginning on or after 1 July 1978. The UK gave it effect through the Double Taxation Relief (Taxes on Income) (Bangladesh) Order 1980.
It covers UK income tax, corporation tax and capital gains tax, and Bangladesh income tax and super-tax. Article 2 extends it to identical or substantially similar taxes introduced later, which is how it continues to apply to Bangladesh's current income tax legislation. The full text is published by HMRC on its Bangladesh tax treaties page.
The treaty applies only to persons resident in one or both countries. It does not cover VAT, customs duties, stamp duties or UK inheritance tax, so those need separate analysis.
Who relies on the UK Bangladesh double tax treaty
In practice, the UK Bangladesh double tax treaty matters to four groups: UK companies with Bangladeshi subsidiaries, branches or licensees; Bangladeshi businesses selling into or investing in the UK; British Bangladeshi families with property, savings or pensions in both countries; and employees, students and academics who move between the two. Each group uses different articles, so start by identifying the income stream and the country in which the recipient is resident.
Residence and the tie-breaker rules
Many people in the corridor are resident in both countries under domestic law. The UK applies its statutory residence test, and Bangladesh applies its own day-count and connection tests. When both treat an individual as resident, Article 4 of the UK Bangladesh double tax treaty breaks the tie in a fixed order:
- Permanent home. The person is resident where they have a permanent home available to them.
- Centre of vital interests. If they have a permanent home in both, the country with which their personal and economic relations are closer wins.
- Habitual abode. If that cannot be decided, or there is no permanent home in either, the country of habitual abode wins.
- Nationality. If there is a habitual abode in both or neither, nationality decides.
- Mutual agreement. Dual British–Bangladeshi nationals, or nationals of neither, are left to the two tax authorities to settle.
The last step matters in practice. Because many people in the corridor hold both nationalities, the nationality test often fails to resolve the question, and the outcome then depends on a mutual agreement between HMRC and the National Board of Revenue. Keep evidence of where your home, family and business interests are. Our guide to dual British–Bangladeshi nationality covers the wider consequences.
Companies are simpler. A company resident in both countries is treated as resident where its place of effective management is situated. A UK-incorporated company whose board actually meets and decides in Dhaka can therefore be treated as resident in Bangladesh for treaty purposes.
Permanent establishment and business profits
Business profits of a UK enterprise are taxable in Bangladesh only if it carries on business there through a permanent establishment (PE), and then only on the profits attributable to it. The same applies in reverse.
A PE is a fixed place of business, including a place of management, branch, office, factory, workshop or mine. A building site or construction or assembly project counts only if it lasts more than 183 days. Storage, display, purchasing, information-gathering and other preparatory or auxiliary activities are excluded.
The dependent agent rule is where the UK Bangladesh double tax treaty is broader than many modern treaties. A person acting for the enterprise creates a PE not only if they habitually conclude contracts, but also if they keep a stock of goods from which they regularly fill orders, or if they habitually secure orders wholly or almost wholly for the enterprise. A UK seller with a sales representative in Bangladesh who secures orders can create a PE even if contracts are signed in London.
The treaty has no separate article for fees for technical services. Payments for know-how or "information concerning industrial, commercial or scientific experience" fall within the royalties article. Pure services generally fall under business profits or independent personal services, taxable in Bangladesh only through a PE or fixed base, or where an individual is present for 120 days or more in the fiscal year. Agree the characterisation with the payer before the first invoice, because the payer decides what to deduct.
Withholding rates under the UK Bangladesh double tax treaty
The treaty does not exempt investment income at source. It caps the source country's tax, and the residence country gives credit. HMRC's treaty summary sets out the same maximum rates as the treaty text.
| Income | Article | Treaty maximum | Conditions and notes |
|---|---|---|---|
| Dividends to a company with at least 10% of voting power | 10 | 10% | Beneficial owner must be a company controlling, directly or indirectly, at least 10% of voting power |
| Other dividends | 10 | 15% | Includes individual shareholders and smaller corporate holdings |
| Interest to banks and financial institutions | 11 | 7.5% | Includes insurance companies; recipient must be subject to tax on the interest |
| Other interest | 11 | 10% | Recipient must be subject to tax on the interest; government interest exempt |
| Royalties | 12 | 10% | Includes equipment rentals and know-how |
| Gains on shares (not land-rich) | 13 | Residence country only | Land-rich shares can be taxed where the property is |
The UK does not withhold tax on dividends under its domestic law, so in practice the dividend article mainly protects UK investors in Bangladeshi companies. The UK does deduct tax from certain interest and royalty payments, and Bangladeshi recipients can apply to HMRC for treaty relief. Where interest or royalties are paid above an arm's length amount between related parties, the treaty rates apply only to the arm's length part.
Capital gains are treated differently. The UK Bangladesh double tax treaty lets the country where immovable property is situated tax gains on that property and on shares in companies whose assets consist principally of it. Gains on other shares and movable property, unless connected with a PE, are taxable only in the seller's country of residence. That makes the asset mix of a Bangladeshi company relevant to any UK investor planning an exit.
Employment, pensions, students and directors
Salaries are taxable where the work is done. A Bangladesh resident working in the UK is exempt from UK tax only if present for no more than 183 days in the UK fiscal year concerned, paid by an employer not resident in the UK, and not charged to a UK PE. The test refers to the fiscal year, not any rolling 12-month period, which can help or hurt depending on timing.
Private pensions and annuities are taxable only in the recipient's country of residence. Government service pensions are generally taxable only in the paying country unless the recipient is a national of the other country only. Directors' fees can be taxed where the company is resident.
Students and trainees are exempt in the host country on remittances from abroad for their maintenance and education, grants and modest earnings needed for maintenance, for up to five years. Visiting teachers and researchers are exempt for up to two years, subject to conditions. Our article on the UK student visa from Bangladesh covers the immigration side.
How double taxation is eliminated
Article 22 uses the credit method in both directions. The UK allows Bangladesh tax paid on Bangladeshi income as a credit against UK tax on the same income, subject to UK domestic credit rules. Bangladesh does the same for UK tax.
For a UK company holding at least 10% of the voting power in a Bangladeshi company, the UK credit can include the Bangladeshi corporate tax on the underlying profits. That mattered more before the UK introduced its dividend exemption. Today most dividends received by UK companies fall within the distribution exemption in the Corporation Tax Act 2009, so there is usually no UK tax to credit against. Bangladesh withholding on dividends then becomes a final cost, which pushes some groups towards royalties or interest, where credit remains useful.
The treaty also contains a "tax sparing" clause for specified Bangladeshi incentives, so that tax spared under those reliefs was treated as paid for UK credit. It applied only to listed provisions as they stood in 1979, or agreed similar ones, and only for ten years after a relief was first granted. It is rarely relevant now.
For individuals, the UK replaced the remittance basis for most non-domiciled individuals with a residence-based regime from 6 April 2025. Article 21 of the treaty restricts relief where income is taxed only on remittance, so review older planning that relied on that interaction. See our guide to the new foreign income and gains regime.
Illustrative scenario
This scenario is illustrative only and does not describe any real client or matter.
A UK software company owns 100% of a Bangladeshi development subsidiary and also sends a UK engineer to Dhaka for several months a year. The subsidiary pays a licence fee for the platform and an annual dividend.
Under the UK Bangladesh double tax treaty, the licence fee is a royalty, so Bangladesh may tax it at no more than 10%, and the UK company can claim credit against UK corporation tax on that income. The dividend can be taxed in Bangladesh at no more than 10%, but it is likely to be exempt in the UK, so that tax is a final cost. The engineer's salary is exempt in Bangladesh only if the 183-day, employer and PE conditions are all met. The group keeps day counts, ensures the engineer has no authority to conclude contracts, and documents the transfer pricing for the licence.
Risks and common mistakes
Assuming the treaty applies automatically
A Bangladeshi payer will normally deduct the domestic rate unless it is satisfied that the recipient is a UK resident and beneficial owner. Obtain an HMRC certificate of residence for the relevant period and provide it before payment. Recovering excess tax afterwards through a refund claim in Bangladesh is slower and less certain than getting the rate right at source. Check the format the payer's tax adviser expects, as requirements are applied in practice by the payer and its bank.
Creating a permanent establishment by accident
The treaty's agency rule catches a representative who habitually secures orders for the UK business, even without signing power, and one who fills orders from a local stock of goods. Construction and assembly projects create a PE if they last more than 183 days. Review the role of local agents, distributors and seconded staff, and record the start and end of each project. A PE brings Bangladeshi tax filing, attribution of profits and potentially VAT obligations.
Managing a UK company from Dhaka
A UK-incorporated company is UK resident under domestic law, but if Bangladesh also treats it as resident, the treaty tie-breaker looks to the place of effective management. A company whose directors all live in Bangladesh and take real decisions there may be treated as resident in Bangladesh for treaty purposes. Hold board meetings where the company is meant to be managed, minute them properly and make sure the directors there actually decide.
Relying on an old treaty without checking domestic law
The convention dates from 1979 and has not been amended by a protocol listed on GOV.UK. It has no limitation-on-benefits clause, no "other income" article and no arbitration stage in its mutual agreement procedure. Domestic anti-avoidance rules, transfer pricing rules and beneficial ownership tests in both countries still apply. Read the treaty with current UK and Bangladeshi law, not in isolation, and revisit planning when either country changes its rules.
Disputes, information exchange and next steps
Where a taxpayer considers that either country is taxing contrary to the treaty, Article 24 allows a case to be presented to the competent authority of the taxpayer's country of residence, which is HMRC for UK residents and the National Board of Revenue for Bangladesh residents. The authorities must endeavour to resolve it, but the treaty does not oblige them to reach agreement and has no arbitration clause. Article 25 allows the authorities to exchange information needed to apply the treaty and domestic law.
Before relying on the treaty, check HMRC's list of agreements in force and the original treaty text. Then confirm residence, beneficial ownership and characterisation of each payment, and model the after-tax result in both countries.
TRW & Co's London office advises with our Dhaka team on UK tax, transactional tax and corridor structures, including how to repatriate profits from Bangladesh. If the UK Bangladesh double tax treaty affects your business or personal affairs, contact us or explore our UK–Bangladesh practice.
Frequently asked questions
01Is there a double tax treaty between the UK and Bangladesh?
Yes. The UK and Bangladesh signed a convention for the avoidance of double taxation and the prevention of fiscal evasion on 8 August 1979. It entered into force on 8 July 1980 and took effect from 1978 in both countries. The UK gave it effect through the Double Taxation Relief (Taxes on Income) (Bangladesh) Order 1980. HMRC publishes the text and a summary of the withholding rates, and as of October 2026 lists no amending protocol.
02What is the withholding tax on dividends from Bangladesh to the UK?
Under Article 10 of the treaty, Bangladesh may tax dividends paid to a UK-resident beneficial owner at no more than 10% if the owner is a company controlling at least 10% of the voting power in the payer, and 15% in other cases. Bangladesh’s domestic rate applies if it is lower. To benefit, the UK recipient usually provides an HMRC certificate of residence to the Bangladeshi company before the dividend is paid.
03Do I pay tax twice on Bangladeshi income if I live in the UK?
Usually not in full. If you are UK resident, the UK taxes your worldwide income, but the treaty requires the UK to give credit for Bangladeshi tax paid on the same income, up to the UK tax on it. Treaty caps limit what Bangladesh can deduct on dividends, interest and royalties. Rental income from Bangladeshi property may be taxed in Bangladesh, with UK credit. Keep evidence of Bangladeshi tax paid to support the claim on your UK return.
04How does the treaty decide residence if I live in both countries?
Article 4 applies a sequence of tests: where you have a permanent home; if in both, where your centre of vital interests lies; then where you have a habitual abode; then nationality. If you are a national of both countries, or neither, the tax authorities settle the question by mutual agreement. For dual British–Bangladeshi nationals, the earlier tests usually decide the matter, so evidence of home, family and economic ties is essential.
05Does the treaty cover technical service fees?
The treaty has no separate article for fees for technical services. Payments for know-how and information about industrial, commercial or scientific experience fall within the royalties article and are capped at 10%. Payments for pure services are generally treated as business profits or independent personal services, which Bangladesh can tax only through a permanent establishment or fixed base, or where an individual spends 120 days or more there in the fiscal year. Bangladeshi payers may take a different view, so agree the characterisation early.
06Has the UK–Bangladesh treaty been updated for BEPS?
HMRC’s Bangladesh treaty page lists only the 1979 convention as of October 2026, with no amending protocol. The text has no limitation-on-benefits clause, no principal purpose test in its own wording and no arbitration in its mutual agreement procedure. Both countries’ domestic anti-avoidance and transfer pricing rules still apply. Check the current position with HMRC and the National Board of Revenue before relying on the treaty for a significant transaction.
Sources and official materials
- UK–Bangladesh Double Taxation Convention 1979 (full text) — The treaty as in force, with all 27 articles
- Bangladesh: tax treaties (GOV.UK) — HMRC page listing the convention and its effective dates
- HMRC DT3102: Bangladesh treaty summary — Withholding rates and conditions
- HMRC DT3100: Bangladesh agreements in force — Status of the UK–Bangladesh agreement
- Double Taxation Relief (Taxes on Income) (Bangladesh) Order 1980 — UK statutory instrument giving the treaty effect
- Get a certificate of residence (HMRC) — How UK residents evidence residence for treaty claims
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.