Siblings, in-laws to pay tax for remittance from expatriates

Marking the Eid festival, many expatriates send money home to purchase sacrificial animals and cover other festive expenses. The proposed budget for fiscal year 2024-25 considered this money, other than those sent to parents, children, or spouses, as the recipient’s income and imposed up to 30 per cent tax on it. 

If an expatriate sends $500 from Canada to his brother's bank account to buy clothes and gifts for family members, the amount will be declared as the recipient’s income and will require up to 30 per cent taxation. Both the gift giver and the recipient must show this transaction in their income tax returns.

According to the proposed budget, cash and other gifts sent by expatriates to anyone other than their spouses, children, and parents will be subject to taxation. 

Bangladesh receives a large sum of remittances from the Middle East and Malaysia. It was noticed that expatriates send money through the bank accounts of siblings, relatives, and friends, when their elderly parents, spouses, or minor children do not have accounts. 

If the recipient becomes anyone other than parents, children, and spouses, the amounts will be considered as capital income of the account holders and come under taxation, according to a new proposal of the National Board of Revenue (NBR). 

The executive director of the Policy Research Institute (PRI), Ahsan H. Mansur, expressed concern over this policy, saying, “Expatriate workers send remittances to their brothers, sisters and friends. This is our reality. Remittance is not taxed. But the complications over gifts in the new NBR proposal are not consistent with the government's overall policy on remittances. The NBR initiative will complicate the situation."

Asked about the policy, a NBR official said remittances sent by expatriates to people other than some certain ones would be treated as capital income and taxed accordingly. It is taxable even if it becomes a gift. 

To avoid this tax, the remitter must declare the amount as his own money and the recipient must show it as a liability in their tax returns. 

As Bangladesh does not tax remittances or expatriate income, the proposal sparks confusion. The revenue board did not provide any formal explanation in this regard, while its officials said the tax circular, once issued, will clarify these matters.

According to NBR officials, opening a bank account is now an easy task. If parents, spouses, or children have bank accounts, it will ensure direct transfers to the intended individuals and exempt from additional taxation. 

Ahsan H Mansur suggested that expatriates may open joint bank accounts with their relatives they intend to send money to regularly. Also, if an expatriate’s wife does not have a bank account, he can send money to his brother, or in laws, who will later hand it over to his wife. However, the process requires a formal deed. 

According to Bangladesh Bank, the country receives up to $25 billion annually in expatriate income through banking channels. Besides, substantial amounts of money are transferred illegally via hundi.

The expatriate welfare and overseas employment ministry estimates that 1,125,833 workers went abroad for employment in the 2022-23 fiscal year. Of them, nearly 450,000 workers went to Saudi Arabia. Overall, the Bangladeshi diaspora numbers approximately 10 million.