Bangladesh -- Cryptocurrency Tax Framework Regulatory Overview

It is crucial to understand that cryptocurrency/virtual assets are currently considered illegal and prohibited in Bangladesh by the central bank, Bangladesh Bank. This fundamental legal status overrides any formal "tax treatment" as the underlying activity itself is not recognized or permitted.

Therefore, there is no specific, official tax framework or legislation from the National Board of Revenue (NBR) in Bangladesh regarding the taxation of cryptocurrency. The concept of applying capital gains tax, income tax, or VAT to an illegal activity does not exist within the formal tax system.

Here's a breakdown based on the current situation:

1. Illegality and Its Implications

The Bangladesh Bank has repeatedly issued warnings and circulars prohibiting the use, trading, and facilitation of virtual currencies (like Bitcoin, Ethereum, etc.) within Bangladesh. The primary reasons cited include:

• Violation of Foreign Exchange Regulations: Virtual currencies are not legal tender and are not issued by any recognized central bank or government. Engaging in transactions with them can violate the Foreign Exchange Regulation Act, 1947.
• Money Laundering and Terrorist Financing Risks: Their anonymous and decentralized nature makes them susceptible to illicit activities.
• Lack of Central Authority/Consumer Protection: No regulatory body oversees these assets, leaving users vulnerable.

Consequence: Since the activity of dealing with cryptocurrency is illegal, any "income" or "gains" derived from it cannot be legally declared for tax purposes as income from a legitimate source. Attempting to declare such income could lead to investigations under anti-money laundering laws, foreign exchange regulations, and potentially other criminal statutes, rather than simply being subjected to income tax.

2. Capital Gains Tax Rates

• No Specific Rates for Crypto: There are no specific capital gains tax rates for cryptocurrency in Bangladesh because it is not recognized as a legal asset for investment.
• General Capital Gains: For legitimate assets like land, buildings, and shares, Bangladesh has specific capital gains tax provisions (e.g., varying rates for listed vs. unlisted shares, or property, with exemptions in some cases). These do not apply to crypto.
• Hypothetical (Illegal Context): If an individual were to somehow declare "gains" from crypto, the NBR would not treat it as capital gains from a recognized asset. It would likely be treated as undeclared income from an illegal source, subject to general income tax laws at the highest marginal rates, along with penalties, and potentially triggering actions under other laws (e.g., anti-money laundering).

3. Income Tax on Crypto

• No Specific Provisions: There are no specific income tax provisions for income generated from cryptocurrency activities (e.g., mining, trading, staking, or earning crypto as payment) because the activities themselves are prohibited.
• General Income Tax Principles: Bangladesh's Income Tax Ordinance, 1984, taxes income from all sources unless specifically exempted. However, this presumes the income is derived from a legal activity.
• Hypothetical (Illegal Context): Similar to capital gains, any "income" derived from cryptocurrency would be considered income from an illegal source. Tax authorities, if they became aware of such income, would likely pursue it under general income tax rules for undeclared income, potentially with punitive measures, rather than as a regularly taxable source.

4. VAT/GST Treatment

• No VAT/GST on Crypto: Given the illegality of cryptocurrency, there is no VAT (Value Added Tax) or GST (Goods and Services Tax) treatment for it in Bangladesh.
• General VAT Framework: VAT is applicable to the supply of goods and services. Since virtual assets are not recognized as legitimate goods or services for transactions within Bangladesh, they fall outside the VAT system.

5. Reporting Requirements for Individuals and Businesses

• No Crypto-Specific Reporting: There are no specific reporting requirements for cryptocurrency holdings or transactions for individuals or businesses in Bangladesh because engaging in such activities is illegal.
• General Reporting: Income tax returns (e.g., Form IT-11GA2023 for individuals) require the disclosure of all assets and liabilities, both domestic and foreign. However, legally, individuals cannot hold or transact in cryptocurrencies within Bangladesh. Declaring such assets could imply involvement in illegal activities.
• Implications of Non-Compliance with Prohibition: The primary "reporting requirement" in this context is to not engage in cryptocurrency activities. Any involvement could lead to legal action under foreign exchange, anti-money laundering, or anti-terrorism financing laws.

6. Crypto-Specific Tax Legislation

• None Exists: Bangladesh does not have any crypto-specific tax legislation. The legal framework is one of prohibition, not regulation or taxation.

Specific Tax Authority References (Bangladesh Bank)

The primary authority on the legal status of cryptocurrency is the Bangladesh Bank (BB). The National Board of Revenue (NBR) has not issued any separate guidance on taxing cryptocurrency because the central bank has already declared it illegal.

1. Bangladesh Bank Website:

   • URL: https://www.bb.org.bd/
   • You can typically find circulars and notifications under the "Notices/Circulars" or "Press Release" sections.

2. Key Circular (Widely Cited):

   • DOS Circular Letter No. 1, dated 24 December 2017 (Department of Off-site Supervision): This circular explicitly warned against dealing in virtual currencies like Bitcoin. While direct PDF links can change, news outlets and official archives often reference it. It states that "any person exchanging, transferring or supporting transaction with virtual currency is violating the Foreign Exchange Regulation Act, 1947, Anti-Money Laundering Act, 2012 and Anti-Terrorism Act, 2009."

   • Subsequent Warnings: The Bangladesh Bank has periodically reiterated these warnings through various press releases and public statements over the years, most recently in 2021 and 2022.

Note: As there is no legal basis for cryptocurrency in Bangladesh, there are no NBR circulars or SROs (Statutory Regulatory Orders) that outline specific tax treatments (capital gains, income tax, or VAT) for it. The NBR cannot tax an activity that the central bank deems illegal.

Disclaimer: This information is for general informational purposes only and does not constitute legal or tax advice. The legal and regulatory landscape around cryptocurrency is complex and subject to change. Given the outright prohibition of cryptocurrency in Bangladesh, engaging in such activities carries significant legal and financial risks. It is strongly recommended to consult with legal and tax professionals in Bangladesh for specific advice.