News item | 12-03-2024 | 12:16
On March 12, State Secretary Van Rij and Minister Abdul Hassan Mahmood Ali of Bangladesh signed a new tax treaty in Dhaka. This tax treaty prevents double taxation and contributes to the economic interests of both countries. Bangladesh is an important trading partner and the Netherlands wants to further support the development of Bangladesh with this tax treaty.
Both countries have been partners for years in joint sustainable, inclusive and responsible entrepreneurship. Bangladesh has also made major progress in development in recent years and will therefore be seen as a middle-income country from 2026. The Netherlands would like to further support this development with this new tax treaty.
Wider tax rights
The Netherlands does this by giving Bangladesh more tax rights in the tax treaty. Bangladesh is the first developing country that belongs to the lowest income category with which the Netherlands has concluded a new treaty since the new treaty policy of 2020, which includes a source state tax on gross payments for technical services. This gives Bangladesh the right to levy 10% tax when a payment for technical services is made from Bangladesh to a Dutch service provider for technical services provided in Bangladesh. In addition, more withholding tax rights are granted by expanding the permanent establishment provision in the treaty. This means that a company can more quickly have a taxable presence in the other treaty country, for example when providing services or insurance activities. A source state tax has also been agreed on for profits realized from the alienation of shares and similar rights in companies that largely consist of real estate.
In addition, agreements have been made in the treaty to prevent tax avoidance. With these and other agreements in the treaty, this tax treaty meets the minimum standards of the OECD/G20’s so-called Base Erosion and Profit Shifting project against tax avoidance.
The Netherlands is committed to contributing to taxation in developing countries, including with the 23 developing countries project, of which Bangladesh is a part. This arises from the sustainable development goals, in which developing countries’ generation of their own income is an important part.
Follow-up
Before the treaty enters into force, the mandatory approval procedure must still be completed in both countries. In the Netherlands, the treaty is therefore first submitted to the Council of State for advice and then submitted to parliament for approval within four months after signing.