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News | 12-03-2024 | 12:31
Dutch State Secretary for Tax Affairs Van Rij and Bangladeshi Minister Abdul Hassan Mahmood Ali signed a new bilateral taxation agreement in Dhaka on March 12. The aim of the agreement is to avoid double taxation and further promote the economic interests of the Netherlands and Bangladesh.
Bangladesh is an important trading partner of the Netherlands. The two countries have been cooperating in the field of sustainable, inclusive and responsible business for many years, and Bangladesh has recently made great strides in its development. In fact, from 2026, Bangladesh will be considered a middle-income country. The Netherlands hopes to further support the country’s development with this new tax agreement.
Expanding taxing powers
To this end, Bangladesh will receive greater taxing rights under the treaty. The Netherlands adopted a new tax treaty policy in 2020. Bangladesh is the first low-income developing country to conclude a new treaty with the Netherlands, which gives the source country the right to tax gross payments for technical services. This means that Bangladesh has the right to impose a 10% tax on payments made from Bangladesh to Dutch service providers for technical services provided in Bangladesh. More source taxing rights are also granted by expanding the treaty’s provisions on permanent establishments. This makes it more likely that a business located in one country will have a taxable presence in another country, such as when it provides services or carries out insurance activities. The two sides also agreed that the source country can tax gains from the transfer of shares and similar interests in businesses that consist mainly of real estate.
The treaty also includes arrangements to prevent tax avoidance. These and other provisions in the treaty mean that it meets the minimum standards of the OECD/G20 Base Erosion and Profit Shifting Project to combat tax avoidance.
The Netherlands is committed to improving the tax capacity of developing countries, for example through a project involving 23 developing countries including Bangladesh. These efforts are based on the Sustainable Development Goals (SDGs). One of the key goals of the SDGs is to improve the domestic revenue-generating capacity of developing countries.
Next step
Before a treaty can enter into force, both countries must complete the necessary procedures for ratification. In the Netherlands, the treaty must first be submitted to the Council of State for an advisory opinion and then to Parliament for ratification within four months of signing.
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