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Bangladesh has taken steps to amend its decades-old double taxation avoidance treaty (DTAA) with Pakistan, aiming to strengthen bilateral trade and investment after more than 15 years of limited engagement.

Signed in 1981, the treaty no longer reflects modern business realities such as digital platforms, e-commerce, and the gig economy, officials said. Both countries have exchanged draft protocols to update the agreement, formally known as the “Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.”

“The existing treaty does not cover digital businesses or new trade patterns, which may discourage investment between the two countries,” a senior tax official noted. The proposed amendments are expected to facilitate cross-border transactions, particularly in e-commerce and virtual business operations.

Currently, the treaty defines permanent establishment largely in terms of physical assets—factories, warehouses, branches, and extraction sites. Bangladesh’s new Income Tax Act 2023, however, recognises virtual businesses and digital platforms, underscoring the need for alignment.

The move comes as the interim government recently decided to revive the long-dormant joint economic commission with Pakistan, signalling a fresh effort to restore economic cooperation.