Introduction
Remittances are of crucial significance in the economy of Bangladesh and are primarily accountable for improving foreign exchange reserves. Expatriates working abroad send remittances to their native countries and support families while affecting economic growth. The government, in order to monitor remittances, has suggested numerous taxation regimes and legislations. The article discusses remittance-based taxation, laws, and incentive regimes existing for remitting from abroad to Bangladesh and compliance with respective Bangladesh legislations and statutes.
Tax Consequences on Remittances
Income Tax Ordinance, 1984, stipulates that remittances from non-resident Bangladeshis (NRBs) are not liable to income tax. Foreign remittances are preferred by the government because they ensure economic stability. However, expatriates must be aware of crucial tax-related aspects.
Remittances sent through legal banking channels are entirely tax-free. However, if the money received is later invested in Bangladesh, tax authorities may inquire about the source of funds under the Money Laundering Prevention Act, 2012. Additionally, financial institutions or exchange houses that facilitate remittance transfers must comply with corporate tax regulations as per the Finance Act, 2023.
Legal Framework for Remittances
Bangladesh has established multiple laws to ensure that remittance transactions are secure and efficient. These include:
The Foreign Exchange Regulation Act, 1947, which regulates foreign exchange transactions and ensures remittances are conducted through authorized channels. The Money Laundering Prevention Act, 2012, prevents illegal money transfers and mandates that remittances be sent via proper financial institutions. The Anti-Terrorism Act, 2009, ensures that remittances are not used for financing terrorism or illegal activities. Furthermore, the Banking Companies Act, 1991, governs the operations of financial institutions handling remittances.
Remittance Incentives for Legal Sending
The government of Bangladesh offers a number of incentives to encourage legal remittance sending.
A 2.5% cash incentive is available on remittances received through authorized channels. Expatriate remitted money is also exempt from tax under the Investment Promotion Act, 2017. Moreover, payments through banks and financial institutions are speedily and securely done at minimal service charges ensuring transparency.
Consequences of Illegal Remittance Transactions
Remitting money through hundi or any other illegal process can result in catastrophic outcomes. Illegal money transfer under the Money Laundering Prevention Act, 2012, can call for penalties and fines. Money being transferred by illegal means stands the risk of seizure by the government authorities. Such persons risk being blacklisted, their travels are banned, or even prosecution under the Anti-Terrorism Act, 2009.
How to Send Remittances Legally
In order to avoid legal problems and hassle-free transactions, expatriates will always have to use approved exchange houses and banks that are approved by Bangladesh Bank. It is also wise to keep transaction records handy for future purposes. Expatriates will also have to check the exchange rate and fees prior to sending money so that they get the best possible value. Expatiates also have to be careful of dishonest money transfer operators who provide very high rates of exchange but do not have a license.
Conclusion
It is highly essential for the expatriates and their families in Bangladesh to know the legal and taxation aspect of remittances. Tax incentives and exemptions have been offered by the government to encourage the use of legal channels of remittances. Non-compliance with regulations can result in severe legal consequences. Expatriates, by following the proper legal channels and using authorized financial institutions, can make Bangladesh prosper economically while ensuring the security of their hard-earned money.
