An agreement between the Swiss and Bangladeshi governments which prevents the double payment of income tax is now in force and applies to income received in 2010.

The double taxation agreement, which was signed in 2007 and ratified last week, covers income tax and means that residents of one country who are paid by an entity of the other country will not have to pay this tax twice.

The aim of the agreement is to promote Swiss direct investment in Bangladesh, which currently stands at $120 million. It will facilitate cross border business by reducing the payable taxes of expat employees and providing legal protection for companies withholding tax on dividends, interest and royalty payments.

This March the Swiss Federal Council changed its administrative assistance policy to allow information sharing for matters of tax avoidance and law enforcement, and this is now the OECD standard for bilateral agreements. However as the Swiss-Bangladeshi agreement was signed prior to this date it is based on Switzerland’s old policy, meaning the two countries will only share information relating to the agreement in question.

According to a spokesperson from the Swiss government, the Bangladeshi government did not wish to renegotiate the contract to take into account the change in Swiss policy as they were keen for the agreement to come into force, as was the Swiss private sector.