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Residential Status of An Assessee

•Residential status refers to either to the period of stay of an assessee in Bangladesh or degree of
control or management affairs of an assessee during the income year
•In Bangladesh the ITO 1984 section 2(55) or 2(42) states that an assessee may be resident or non
resident•It is not comparable with the citizenship of a person.
•A person may be the citizen of a country but he may not be the resident of income tax purposes if
the conditions of the provisions of the ordinance are not satisfied.
Classification of Assessee on the basis of residential status
1.Resident
An individual will be resident in any income year if he fulfills any of the conditions stated in Section 2(55)
of the ITO 1984.Such as he should stay for a period of 182days or more in that income year.
2.Non Resident
An individual will be declared a non resident as per section 2(42) in any income year if he does not fulfill
the conditions section2(55) of the ITO 1984.As per citizenship a non resident can also be divided into ;a)Non
resident Bangladeshi , b)Non resident foreigner.

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Residential Status of an Individual

a) Residential Status of an Individual:
According to Section 2(55)(a) of the ITO 1984, an individual will be a resident in any income year if
he fulfills any of the following two conditions:
If he stays in Bangladesh for a period of, or for periods amounting in all to, one hundred and eighty-
two [182] days or more in that year; or
 for a period of, or periods amounting in all to, ninety days [90] or more in that year having previously
been in Bangladesh for a period of, or periods amounting in all to, three hundred and sixty-five days
[365] or more during four years preceding that year; Here, it is not essential that an assessee should
stay at the same place during this period .His stay of 182 days or more may not be a continuous
one. It is sufficient if he stays for a minimum period of 182 days in aggregate in an income year. If
none of the above two conditions are satisfied, such individual is non-resident in Bangladesh during
that income year as per Section 2(42).

 Residential Status of HUF, Firm and AOP:

According to Section 2(55)(b) of the ITO 1984, a Hindu undivided family, firm or other association of
persons, will be a resident if the control and management of those affairs is situated wholly or partly
in Bangladesh in that year. On the other hand, if the control and management of these bodies are
situated wholly outside Bangladesh, they will be treated as non-resident.

 Residential Status of Company:

According to Section 2(55)(c) of the ITO 1984, a Bangladeshi company or any other company, the
control and management of whose affairs is situated wholly in Bangladesh in that year will be
considered as resident. If the control and management of a company is situated partly or wholly
outside Bangladesh, it will be considered as non-resident.

Effects of Residential Status in Assessing Income:

Determination of residential status of an assessee has a significant bearing on the tax liability as
incidence of income tax varies according to the residential status of an assessee as per Section 17
of the ITO, 1984. Therefore, the scope of total income varies according to the residential status of an
assessee. These provisions may be summarized as under:

To be tax ed or not Resident       Non-resident

Income received or deemed to Taxable   Taxable
be received in
Bangladesh                
Income accrued or arose or Taxable  Taxable 
     deemed to accrue or arise in
     Bangladesh                                
Income accrued or arose outside Taxable  Non-taxable
    Bangladesh                                
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Assessee: Assessee means a person by whom any tax or other sum of money is payable
under the Income Tax Ordinance 1984 (amendment). Assessment:

Assessment, with its grammatical variations and cognate expressions, includes re-assessment
and additional or further assessment.

Assessment year: "Assessment year" means the period of twelve months commencing on the
first day of July every year; and includes any such period, which is deemed, under the
provisions of this Ordinance, to be assessment year in respect of any income for any period.

Classification of Assessee

According to Person

1. An Individual

2. A Firm

3. An Association of Persons

4. A Hindu undivided family

5. A Local Authority

6. A Company and

7. Every other Artificial Judicial Person

According to Residential Status

1. Resident

2. Non-resident (Bangladeshi Non-resident & Foreign Non-resident)

Rules for determining residential status of Assessee:

A. Individual:

1.

If an individual resides 182 days at least in an income year within Bangladesh territory Example-
1: Mr. X is in Bangladesh from August 1, 2000 to November 30, 2000. Is he a resident of
Bangladesh
Solution: (August 31 days + September 30 days - October 31 days + November 30 days) = Total
122 days. He is a non-resident.

Example-2: Mr. Y is in Bangladesh from 1-7-2000 to 30-10-2000. Then he went to USA. Then
he remains in Bangladesh from1-1-2001 to 30-4-2001. Does Mr. Y have the residential statusff

Solution: (July 31 days + August 31 days + September 30 days + October 31 days + January 31
days + February 28 days + March 31 days + April 30 days) = Total 243 days. He is a resident.
(Because he was in the same Income year starting from July 2000 to June 2001)

Example-3: Mr. Z is in Bangladeh consecutively from 1-5-2000 to 30-11-2000. Does Mr. Z have
the residential statusff

Solution: (May 31 days + June 30 days) = 61 days and (July 31 days + August 31 days +
September 30 days + October 31 days + November 30 days) = Total 153 days. He is a non-
resident. (Because he was in the two different income years starting from July 1999 to June
2000 and July 2000 to June 2001)

2.

If an individual resides 90 days in an income year and 365 days in previous 4 income

years

B. Hindu undivided family, firms or other association of persons

In an income year if the control & management of these, were situated in the territory of
Bangladesh partly or fully.

C. Company

If the management & control of a company (Bangladeshi/Foreign) whose affairs situated wholly
in Bangladesh
Book

To test residential status of an individual, the following flow chart will be helpful:
In case if an individual is found to be resident in more than one country due to his/her physical
presence, normally 'tie breaker rule' is applied. As per this rule first it need to be ascertained
which country is his/her citizenship. If it is found that he/she is a citizen of both countries, then it
shall be ascertained where is his/her habitual residence is.

Bangladeshi resident company

Section 2(11) defined Bangladeshi company as those company formed and registered under the
Companies Act 1913 or 1994 as well as established or constituted by or under any Bangladeshi
law and having its registered office in Bangladesh. As per Section 2(55(c) of ITO 1984 all such
Bangladeshi company as well as any other company the 'control and management' of whose
affairs is situated wholly in Bangladesh in that year shall be treated as Bangladesh resident.

Control and management Control and Management normally involve holding of directors
meeting, physical undertaking and subjects of trade etc. It can happen that a company is
resident in one country but the trading is undertaken in another country. In India the term used is
"place of effective management", which means a place where key management and commercial
decisions that are necessary for the conduct of business of an entity as a whole are, in
substance made. Control of a business not necessarily means from where the actual trading or
physical business activities are conducted. A fundamental case on this matter is De Beers
Consolidated Mines Ltd v Howe where a South African incorporated mineral company is
determined as having resident of London, UK. This matter is also elaborated further in various
avoidance of double taxation treaty prepared under OECD guidelines.

Residential status of an assessee:

Section 2(55) defines the term 'resident" as follows: - 'Resident', in respect of any income year,
means-

(a)

An individual who has been in Bangladesh-

(i) for a period of, or for periods amounting in all to, 182 days or more in that year; or

(ii) for a period of, or for periods amounting in all to 90 days or more in that year having
previously been in Bangladesh for a period of, or for periods amounting in all to 365 days or
more during 4 years preceding that year:

(b) a Hindu un-dividend family, firm or other association of persons, the control and
management of whose affairs is situated wholly or partly in Bangladesh in that year; and

(c) a Bangladeshi company or any other company the control and management of whose affairs
is situated wholly in Bangladesh in that year; and, under section 2(42), 'non-resident' means a
person who is not a resident.

It is important to note here that the concept of resident as defined in the Income Tax Ordinance
has nothing to do with the nationality of a particular individual. A foreign national