U.S. Tax Treaties with Bangladesh & Pakistan: Personal Services Income

Pay for certain personal services performed in the United States is exempt from US income tax if you are in the United States for a limited period of time, if you are a resident of the countries listed by the U.S. and if you meet the other conditions. Countries Bangladesh and Pakistan are in that list as well.

Bangladesh

If the residents meet the following conditions, the income that residents of Bangladesh get for performing personal services as independent contractors or self-employed in the United States is excluded from the U.S. income tax:

  • If the residents of Bangladesh are in the United States for no longer than 183 days in any 12-month period of time during the tax year.
  • Residents of Bangladesh who do not have a regular fixed base available to them in the U.S. to run their services.
  • ** If the residents of Bangladesh have a fixed based available to them, the income is attributable to that fixed base.

Residents of Bangladesh who are receiving income for the services they run in the United States as employees (dependent personal services) are excluded from he U.S. income tax if they meet the requirements below:

  • They are in the United states for no longer than 183 days in any 12-month period of time during tax year.
  • The income they are receiving is paid by, or on behalf of, an employer who is not a U.S. resident.
  • The income does not originate from a permanent establishment or a fixed base owned by the employer in the United States.

These exemptions are not applicable to:

  • Public entertainers such as theater, radio, television artists, musicians or athletes from Bangladesh who are getting more than $10,000 for the purpose of performing their activities or services in the United States during the year. In addition to that, if their activities and visits to United States are wholly or substantially supported by the public funds of the Bangladesh government or local authorities, their income is exempt from the U.S. tax.
  • The income received from operating an aircraft or ship by a Bangladesh enterprise in international traffic is excluded from the U.S. tax. On the other hand, the income is not exempt from the U.S. tax if thee aircraft or ship is operated by a U.S. enterprise.
  • If the resident of Bangladesh is a shareholder of a U.S. company, these exemptions are not applicable to director fees charged as board members of the U.S. company. An amount greater than the amount paid by a shareholder to a non-shareholder is subject to US tax at a rate of 15%.

PAKISTAN

Residents of Pakistan who are subject to Pakistani tax and perform personal services including professional services for or on behalf of a resident of Pakistan are exempt from the U.S. income tax if they are in the United States for no longer than 183 days during the tax year.

For further questions please do not hesitate to contact us!

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