Contractor Payroll and Work Permits in Bangladesh
PayrollBD runs the pay cycle for contractors and expatriate hires engaged in Bangladesh. Contractor payroll is the monthly work of calculating a contractor fee, deducting tax at source under the Income Tax Act 2023, releasing the net payment, and filing the withholding return. Your company keeps the contract. We run the cycle behind it.
What is contractor payroll in Bangladesh?
Contractor payroll in Bangladesh is the handling of fee payments to people engaged on a contract rather than a wage. The work splits into four fixed tasks each cycle. We compute the fee against the contract or the invoice. We deduct tax at source at the rate the Income Tax Act 2023 sets for that payment class.
We release the net amount through your own bank. Then we file the monthly withholding return. The contract between your company and the contractor never moves. Where the engagement is genuinely employment rather than a contract for services, the file belongs in managed payroll services instead, and we will say so before the first cycle runs.
The four tasks in every cycle.
- Fee computation — the fee checked against the contract or invoice.
- Deduction at source — tax withheld before the contractor is paid.
- Net release — the instruction prepared for your bank, authorised by you.
- Withholding return — filed monthly with the National Board of Revenue.
Fee and invoice check
Tax deducted at source
Work permit filing
Bank disbursement file
Monthly withholding return
How is tax deducted from a contractor?
Tax comes off the payment before the contractor receives it. The paying company carries that duty, not the contractor. Section 89 of the Income Tax Act 2023 governs payments to a contractor or a supplier. It sets deduction at a prescribed rate not exceeding ten percent of the base value.
Section 90 governs payment made to a resident for a service. Its prescribed rate does not exceed twenty percent. Which section applies depends on how the engagement is written. That is why we read the contract before the first cycle runs.
| What the law requires | Named source | Who is accountable |
|---|---|---|
| Tax deducted from a contractor or supplier payment | Income Tax Act 2023, section 89 | The paying company |
| Tax deducted from a service payment to a resident | Income Tax Act 2023, section 90 | The paying company |
| Withholding return filed by the fifteenth each month | Income Tax Act 2023, section 177 | The paying company |
| Work permit held before a foreign national works | Bangladesh Investment Development Authority | The hiring company |
| Authority to pay a person resident outside Bangladesh | Foreign Exchange Regulation Act 1947, section 5 | The remitting bank |
Read the row that matches your engagement, then check it against the contract you already hold. The provisions themselves sit in the Income Tax Act 2023 chapter on deduction at source, published by the Legislative and Parliamentary Affairs Division. Reviewed by Eicra Binte Islam — HR Admin, PayrollBD.
Who does this service fit?
This service fits a company paying people in Bangladesh who are not on its wage roll. Three cases come up most often. A foreign firm engaging local specialists on contract. A company bringing in an expatriate consultant who needs a work permit. A group running employee payroll elsewhere that needs only the contractor leg handled.
It does not fit a company whose people work fixed supervised hours. That is employment, and it belongs in a different file.
- Foreign firm, local specialists. Contract engineers, developers or advisers paid a fee in Bangladesh.
- Inbound expatriate. A foreign national who needs a work permit and E-visa processing before work begins.
- Split arrangement. A group running employees through employer of record and needing only the contractor leg run.
Not sure which side your engagement falls on? Send us the contract before the first payment. We read it against the Labour Act definitions and say which of the two services fits, in writing.
What does a cycle cover?
Every cycle follows the same five movements. Each one produces a document your finance team can check. Nothing in the list below is optional. Nothing is bundled into a vague retainer. The cycle opens when your approved fee list reaches us. It closes when the withholding return is filed for that month.
How does a work permit run?
A foreign national needs a work permit before working in Bangladesh. The hiring company needs its own registration first. The Bangladesh Investment Development Authority states that companies and commercial offices must hold a BIDA registration to appoint foreign nationals. It also states that an expatriate must submit the work permit application within fifteen days after arrival.
An inter-ministerial committee awards the permit. PayrollBD prepares and submits that file alongside the payroll it will later run. The procedure is set out by the Bangladesh Investment Development Authority work permit procedure.
- Confirm the engagement type. We read the contract and confirm whether the person is engaged as a contractor or as a worker under the Bangladesh Labour Act 2006, because the two carry different obligations.
- Register the file and the rate. We record the fee basis, the deduction rate that applies under the Income Tax Act 2023, the payment currency and the bank route for release.
- Open the work permit route. Where the contractor is a foreign national, we prepare the work permit application for BIDA and track it through the inter-ministerial committee.
- Run the cycle and deduct at source. Each cycle we compute the fee, deduct tax at source, prepare the disbursement instruction for your bank and issue the deduction certificate.
- File the withholding return. We prepare and file the monthly withholding return, which section 177 of the Income Tax Act 2023 requires by the fifteenth of the following month.
Send the signed contract, the fee basis and the bank the payment will leave from. We open the file, confirm which deduction provision applies, and run the first cycle on your next payment date.
Companies already running an employee roll with us usually place contractors on the same reporting pack, so finance reconciles one register rather than two. Full-cycle employee work sits under payroll processing solutions, and the ledger side under accounting and bookkeeping services.
Where does contractor payroll go wrong?
Contractor payroll fails on classification far more often than on arithmetic. The common failure is treating someone as a contractor when the relationship is really employment. That pulls Labour Act duties onto a file never built to carry them. The second failure is paying a foreign national before the permit is awarded.
The third is releasing a payment abroad without the banking authority the Foreign Exchange Regulation Act 1947 requires.
Section 2(65) of the Bangladesh Labour Act 2006 defines a worker as a person engaged for wages. The work covered is skilled, unskilled, manual, technical, business development or clerical. Section 2(49) treats a person given managerial or administrative responsibility in writing as an employer instead. A contractor paid a fee against deliverables sits outside that wage relationship. Reading the contract against those two definitions before the first payment is the cheapest control available.
Each cycle hands back these records.
- Fee computation sheet showing base value and the deduction applied for every contractor in the cycle.
- Deduction certificate issued to each contractor for the tax withheld at source that cycle.
- Disbursement instruction prepared in your bank’s format, ready for your authorised signatory.
- Withholding return file assembled for the monthly filing under section 177.
- Permit and visa file holding the BIDA submission and its correspondence for every expatriate.
What do buyers ask before they sign?
These are the questions buyers put to us before an engagement starts, and the first one decides how the whole file is built. They are answered in the order they usually come up. Each answer states the position first, then names the provision it rests on, so the point can be checked against the Act rather than accepted on trust.
Where a question has no fixed statutory answer, we say so instead of estimating one.
How does payroll work for a contractor in Bangladesh?
A contractor is paid a fee against an invoice or a contract milestone, not a monthly wage. PayrollBD calculates the fee, deducts tax at source at the rate the Income Tax Act 2023 sets for that payment class, releases the net amount through your bank, and issues the deduction certificate.
Section 89 of that Act covers payments to a contractor or supplier and section 90 covers payment for a service to a resident. Your company remains the contracting party throughout.
Is a contractor treated as a worker under Bangladeshi law?
No. Section 2(65) of the Bangladesh Labour Act 2006 defines a worker as a person engaged in skilled, unskilled, manual, technical, business development or clerical work for wages, and section 2(49) treats a person given managerial or administrative responsibility in writing as an employer rather than a worker.
An independent contractor engaged on a fee against deliverables sits outside the wage relationship, which is why contractor payroll and employee payroll are run as separate services.
How do you set up a work permit for a foreign contractor?
The hiring company must hold a BIDA registration before it appoints a foreign national. BIDA states that an expatriate must submit the work permit application within fifteen days after arrival, and that an inter-ministerial committee awards the permit. PayrollBD prepares the file, submits it through the BIDA One Stop Service portal, and tracks it to decision.
We also handle the E-visa steps that run alongside the permit.
What documents does the payroll cycle produce?
Each cycle produces a fee computation for every contractor, a deduction certificate showing tax withheld at source, a disbursement instruction prepared for your bank, and a consolidated register your finance team can reconcile. At month end we prepare the withholding return required by section 177 of the Income Tax Act 2023.
Records are handed back in a format your auditor can read without rework.
When does contractor payroll not fit a company?
It does not fit where the person is doing the work of an employee under supervision on fixed hours, because that relationship belongs in employee payroll and carries Labour Act obligations a contractor file does not. It also does not cover the tax a contractor owes in their own country of residence.
Where the engagement is really employment, we say so and move the file to managed payroll instead.
Hand Us Your Contractor Payroll
Send the contract, the fee basis and the bank the payment will leave from. We confirm which deduction provision applies, open the file and run the first cycle on your next payment date. Scope and fee are set by three things: how many contractors are in the cycle, whether any of them is a foreign national needing a work permit, and whether the payment leaves Bangladesh. A written scope follows before any cycle runs.