The income tax treaty between Bangladesh and Bhutan was signed on 18 April 2017. The treaty is the first of its kind between the two countries.
The treaty covers Bangladesh income tax and Bhutanese income tax, including any surcharges.
The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 120 days.
Article 7 (Business Profits) includes a limited force of attraction provision whereby taxing rights are granted to a Contracting State on profits attributable to the sale of goods or merchandise or other business activities carried on in that Contracting State by a resident of the other State if the same or similar goods or merchandise or business activities are also sold or carried out by a PE maintained by that resident in the first-mentioned Contracting State.
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Both countries apply the credit method for the elimination of double taxation. A provision is also included for a tax sparing credit for tax that has been exempted or reduced in a Contracting State for a limited period in accordance with the laws and regulations of that State for tax incentives.
The treaty will enter into force once the ratification instruments are exchanged, and will generally apply in Bangladesh from 1 July of the year following its entry into force and in Bhutan from 1 January of the year following its entry into force.
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