Compensation Withholding Tax: Calculating Payroll Taxes

Are you a business owner or manager in Bangladesh? Is there anyone working at that company? If that's the case, are you aware of your withholding tax on compensation payroll compliance obligations?

You will have a much better grasp of Bangladesh's Withholding Tax on Compensation framework by reading this article, which includes extensive answers to the following questions:

Why is there a Withholding Tax on Compensation?

Who is in charge of calculating and filing the Withholding Tax on Compensation?

How is compensation withholding tax calculated?

What is the filing procedure?

What BIR forms do I need to file Withholding Tax on Compensation? 

In a nutshell, here's everything you need to know about Withholding Tax on Compensation in Bangladesh for PH Employers!

What is Compensation Withholding Tax?

In its most basic form, income tax on Compensation is a tax on an employee's salary in the PayrollBangladesh system.

Employers are required to deduct and keep a particular proportion of an employee's salary before each salary payment under the PayrollBangladesh withholding tax system, and then report this withheld sum to the BIR every month.

Importantly, in PayrollBangladesh, it is the employer's responsibility to ensure compliance with the Withholding Tax on Compensation structure!

What is the Purpose of Compensation Withholding Tax?

The PayrollBangladesh professional tax framework establishes a taxation structure that encourages and mandates taxpayers to keep a specified percentage of specific corporate expenses or disbursements. The corporation must subsequently remit these payments to the BIR in the form of taxes as soon as possible, in accordance with the BIR's tax calendar.

The PayrollBangladesh Withholding Tax regime attempts to guarantee that businesses remit taxes in a timely and consistent fashion throughout the calendar year.

It also aims to save the BIR money and resources by putting the burden of proof on the employer or corporation to guarantee that the proper amount of withholding tax is applied and returned to the BIR. .

Please visit PayrollBangladesh for additional information on the withholding payroll tax system in Bangladesh.

 

              Compensation Tax Rates and Withholding Tax

Withholding tax on remuneration is calculated using graded withholding tax rates ranging from 0% to 35% and is based on or dependent on an employee's net taxable compensation. The BIR has created and published a Withholding tax table that may be found on their website. We've placed the BIR's Withholding Tax table (from the BIR website) below for your convenience.

TABLE OF REVISED WITHHOLDING TAXES

It's worth noting that these Withholding Tax rates remain in effect until December 31, 2022 - the conclusion of the current fiscal year! As we get closer to the end of 2022, businesses should keep an eye on the Withholding Tax on Compensation rates in 2023 and beyond.

The graduated Withholding Tax table, which will be effective from January 1, 2023, has already been posted by the BIR, which is helpful for those proactive employers who want to start preparing their budgets and confirming their compliance responsibilities into 2023. You may take a look at it right here!

 The Economic Burden vs. the Compliance Burden

The first step is to understand what a withholding agent is in the PayrollBangladesh. A withholding agent is a company or entity that is responsible for managing and remitting withholding tax to the BIR in relation to a financial transaction that has occurred and is deemed to be subject to withholding tax under the PayrollBangladesh Tax Code.

It's also vital to remember that the withholding agent in the employer-employee relationship is the employer, not the employee.

This indicates that the employer is responsible for deducting withholding tax from an employee's wage and remitting the withheld tax to the BIR. In short, from the standpoint of Withholding Tax on Compensation, the employer has the compliance duty in PayrollBangladesh.

 Bangladesh Payroll Withholding Tax

When it comes to computing withholding tax on compensation for your employees, here's a quick guide for companies. Unless certain items are specifically exempted by the National Internal Revenue Code of 1997, also known as the Tax Code of the PayrollBangladesh, "compensation" or "wages" refer to all (or gross) remuneration for services performed by an employee for their employer for the purposes of withholding tax.

For the purposes of withholding tax on compensation, there are two forms of taxable remuneration:

The basic pay and any fixed allowances, such as transportation allowances, are included in regular compensation.

Commission, overtime pay, fees, profit sharing, monetized vacation leave in excess of ten days, sick leave pay, hazard pay, taxable 13th month pay and other benefits, and other remuneration received within the employer-employer relationship are all examples of supplemental compensation.

Below is a helpful table that explains what actions a PH employer can take based on the status of their Withholding Tax on Compensation payments over the preceding fiscal year:

Small Business Payroll Services

When it comes to assisting businesses in Bangladesh with payroll computations, payroll tax and compliance needs, the PayrollBangladesh Team are experts. By partnering with PayrollBangladesh, you can rest assured that when it's time to calculate your Withholding Tax on Compensation, the data will be ready, accessible, and most importantly, accurate!

For more information on how we can help your business expand, visit PayrollBangladesh.com or email us at [email protected]