Bangladesh Tax Regime

Bangladesh operates a classical corporate income tax system layered on a source- and residence-based framework, combined with a progressive personal income tax and a broad-based VAT. Corporate tax rates are differentiated by listing status, sector and mode of receipts and payments, with a distinctive three-way minimum-tax comparative that can bind profitable and loss-making companies alike. The regime is administered by the National Board of Revenue (NBR) under the Income Tax Act 2023, which recodified and replaced the long-standing Income Tax Ordinance 1984. Treaty relief, incentives for export-oriented and technology sectors, and an expanding digital and withholding-tax net are central features of current policy, as Bangladesh pursues fiscal consolidation ahead of its graduation from Least Developed Country status.

1.1 Sources

Primary legislation includes the Income Tax Act 2023, the Value Added Tax and Supplementary Duty Act 2012, the Customs Act 2023 and Finance Acts issued with each annual budget.

1.2 Recent developments

The Income Tax Act 2023 continues to be refined through successive Finance Acts, most recently for assessment year (AY) 2025/26, with legislated rate paths already fixed for AY 2026/27 and 2027/28. Non-publicly traded companies face a rate increase from the conditional 25% to a flat 27.5% sustained across years, while several conditional lower rates available in 2025/26 (contingent on transacting receipts, expenses and investments through the banking channel) are scheduled to tighten or fall away in 2026/27. One-person companies and associations of persons see their favourable current-year rates converge upward to 27.5% in 2026/27. The government has also continued to expand the mandatory tax identification number (TIN) net, digital VAT invoicing (integrated VAT online system), and source-tax coverage on services, ahead of LDC graduation and the associated phase-out of certain trade preferences.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Rates and residence

A resident company is taxed on its worldwide income; a non-resident company is taxed only on income accruing, arising in, or deemed to accrue or arise in, Bangladesh. Residence follows incorporation in Bangladesh or, for a foreign company, control and management situated wholly in Bangladesh during the income year. For AY 2025/26, headline rates range from 20.0%–22.5% for publicly traded companies that issued at least 10% of paid-up capital via IPO (conditional on banking-channel transactions), 22.5%–25.0% for other publicly traded companies, and 25.0%–27.5% for non-publicly traded companies, again conditional on receipts, expenses and investments over prescribed thresholds being routed through bank transfer. From AY 2026/27 and 2027/28 the conditional bands narrow and several categories — including one-person companies, firms, associations of persons, and trusts — converge on a flat 27.5%. Publicly traded banks, insurers and financial institutions (other than merchant banks) are taxed at 37.5%, non-publicly traded financial institutions at 40%, merchant banks at 37.5% rising to 40% from 2026/27, mobile operator companies at 40% where publicly traded (subject to the minimum 10% IPO float condition) and 45% where not publicly traded, and tobacco product manufacturers at 45% plus a 2.5% surcharge. Private universities and specified private professional colleges benefit from a reduced rate, falling from 15% to 10% from AY 2026/27. The assessment year runs from 1 July following the end of the relevant income year, so a company with a 1 July–30 June income year ending 30 June 2025 is assessed in AY 2025/26 (1 July 2025–30 June 2026).

A minimum tax regime overlays these headline rates: taxpayers compare (i) regular tax on net profits, (ii) tax withheld at source under specified sections, and (iii) a minimum tax on gross receipts, and pay the highest of the three. The gross-receipts minimum tax applies to all companies (and to firms/persons above prescribed turnover thresholds) at rates from 0.10% (new manufacturers, for their first three income years) up to 3% for tobacco and carbonated/sweetened beverage manufacturers, with a general 1% rate for other cases and 1.5% for mobile operators. Minimum tax paid in excess of the regular liability is creditable against future years' excess of regular tax over minimum tax.

2.2 Dividends and participation exemption

Bangladesh does not operate a formal participation exemption regime. Inter-corporate dividends received by a resident company are includible in taxable income but are typically taxed at a reduced effective rate through rebate mechanisms and are subject to withholding at source (generally 20% for resident companies, subject to specific exemptions for certain categories), which is creditable against the final liability. Outbound dividends to non-resident shareholders are subject to withholding tax, reduced under applicable tax treaties. There is no group relief for inter-company dividend flows outside specific holding structures recognised by the NBR.

2.3 Income determination and deductions

Taxable income is computed under the heads of income specified in the Income Tax Act 2023 (business/profession, capital gains, and other sources, among others), based on accounting profit adjusted for tax rules. Ordinary and necessary business expenses are deductible if incurred wholly and exclusively for business purposes and properly evidenced; a range of specific disallowances apply, including overseas travel and entertainment above prescribed limits, perquisites to employees above ceiling amounts, and payments made otherwise than by banking channel above threshold amounts (which are disallowed outright rather than merely triggering minimum tax). Depreciation follows prescribed rates under the Third Schedule (typically reducing-balance for plant and machinery, with accelerated rates for specified assets), and initial/investment allowances are available for new industrial undertakings. Head-office and intra-group management expense allocations to a Bangladeshi permanent establishment are capped by statute.

2.4 Interest limitation

Interest and financial expenses are deductible only to the extent incurred for business purposes and, for cross-border related-party financing, subject to arm's-length transfer-pricing scrutiny. The Income Tax Act 2023 caps deductible interest on loans from non-financial-institution related parties by reference to prescribed debt-to-equity benchmarks, and interest on capital borrowed for the acquisition of a capital asset not yet put to use is required to be capitalised rather than expensed. There is no codified fixed-ratio (EBITDA-based) earnings-stripping rule as such, but excessive related-party interest is routinely challenged administratively and through transfer-pricing adjustment.

2.5 Losses

Business losses (other than losses from speculation business, which may only offset speculation profits) may be carried forward and set off against business income for up to six income years following the loss year. Capital losses may be carried forward for six years against capital gains only. There is no loss carryback. Continuity of business is generally required to preserve carryforward on a change in shareholding of closely held companies, and losses of an amalgamating entity do not automatically transfer to the amalgamated entity absent specific NBR approval.

2.6 Group taxation

Bangladesh does not have a consolidated or group-relief tax filing regime; each company is assessed as a separate taxable entity regardless of group membership. Intra-group transactions, including management charges, cost allocations and financing, are subject to transfer-pricing documentation and arm's-length scrutiny where cross-border, and to general anti-avoidance and related-party disclosure rules domestically. Mergers and amalgamations can qualify for limited tax relief (such as capital gains exemption on qualifying share exchanges) only where structured to meet statutory conditions and, in practice, NBR clearance.

2.7 Controlled foreign companies

Bangladesh does not operate a dedicated CFC attribution regime taxing undistributed profits of foreign subsidiaries in the hands of resident shareholders. Anti-avoidance exposure for offshore low-tax structures instead arises indirectly through general anti-avoidance provisions, transfer-pricing rules for cross-border related-party dealings, and the taxation of any Bangladesh-source income repatriated to or through such structures. Resident companies remain taxable on dividends actually received from foreign subsidiaries, with foreign tax credit relief available for underlying and withholding taxes paid abroad, subject to treaty and domestic limitation rules.

2.8 Transfer pricing

Cross-border transactions between associated enterprises must be conducted at arm's length under the transfer-pricing provisions of the Income Tax Act 2023, benchmarked against internationally accepted methods broadly consistent with OECD principles. Taxpayers with international related-party transactions above prescribed thresholds must file a statement of international transactions and maintain contemporaneous documentation, produced to the Transfer Pricing Cell on request; a mandatory transfer-pricing certificate from a chartered accountant is required above a higher threshold. Penalties apply for non-filing or non-maintenance of documentation independent of any ultimate adjustment. Bangladesh does not yet operate a formal advance pricing agreement programme.

2.9 Incentives

Tax holidays and reduced rates are available for eligible industries in specified sectors and economic/export-processing zones, typically for five to ten years depending on location, subject to NBR approval and conditions on employment, environmental compliance and reporting. Export-oriented sectors, including information technology and IT-enabled services, benefit from preferential rates or exemptions on export income, and cash incentives (subsidies) are available for various export categories outside the income tax system. Accelerated depreciation and investment allowances support new industrial undertakings, and double-taxation relief is available for approved foreign-source income. Special Economic Zones and Hi-Tech Parks offer bundled tax holidays, duty exemptions on capital machinery, and simplified administration to attract foreign direct investment.

2.10 Pillar Two

Bangladesh has not adopted the OECD/G20 Pillar Two global minimum tax framework, and no income inclusion rule, undertaxed profits rule or qualified domestic minimum top-up tax has been legislated as of June 2026. Large multinational groups headquartered elsewhere with Bangladeshi subsidiaries may nonetheless be affected indirectly where a foreign parent jurisdiction's income inclusion rule applies a top-up charge in respect of low-taxed Bangladeshi profits, particularly where local incentives (tax holidays, reduced rates) bring the effective rate below 15%; groups in scope should monitor NBR policy given the global adoption trend and Bangladesh's LDC-graduation-driven incentive review.

2.11 Branch income and reorganisations

A foreign company's Bangladesh branch or permanent establishment is taxed on its Bangladesh-source income at the non-publicly-traded company rate applicable to its category, computed under the same rules as a resident company, subject to specific restrictions on deductibility of head-office overheads and royalties. Bangladesh does levy a branch remittance charge on top of that: profit remitted outside Bangladesh by a company not incorporated in Bangladesh under the Companies Act, 1994 is treated as a dividend under section 2(81)(e) of the Income Tax Act, 2023 and taxed at 20% in the hands of a taxpayer other than a natural person under paragraph 2(b) of the Seventh Schedule — paragraph 2 having been substituted in full by section 158 of the Finance Act, 2026 with effect from 1 July 2026, so that paragraph 2(a) now carries the 15% rate applying to a natural person — and deducted at source under section 119. Section 119(3), as substituted by section 74 of the Finance Act, 2026, deems that deduction the payee's final tax only where the non-resident has no permanent establishment in Bangladesh, so a branch, being a permanent establishment, falls outside that deeming. A reduced or nil rate is available only on a National Board of Revenue certificate under section 119(2) where a tax treaty applies, and repatriation is separately subject to Bangladesh Bank exchange-control clearance. Domestic reorganisations — amalgamations, demergers and share-for-share exchanges — receive limited statutory relief from capital gains taxation only where structured to satisfy conditions under the Income Tax Act 2023 and Companies Act, and cross-border reorganisations affecting Bangladeshi assets typically trigger capital gains and stamp duty exposure absent specific relief.

3.1 Residence and rates

An individual is resident if present in Bangladesh for 182 days or more in the income year, or for 90 days or more in the income year together with 365 days or more in the preceding four years. Residents are taxed on worldwide income; non-residents on Bangladesh-source income only, generally at a flat rate for most categories absent treaty relief. For resident individuals, income up to a basic exemption threshold (differentiated for women, senior citizens, persons with disabilities and other categories, generally around BDT 350,000–400,000 for AY 2025/26) is tax-free, with progressive slab rates thereafter running 10%, 15%, 20%, 25% and a top marginal rate of 30% on income above the highest slab (the former 5% entry slab was removed with effect from assessment year 2026/27). A minimum tax applies to resident individuals with income above the threshold even where computed tax would otherwise be nil, varying by location (higher in Dhaka and Chattogram city corporations).

3.2 Capital income and real estate

Capital gains on the transfer of capital assets are generally included in total income and taxed at slab rates, though gains on listed securities held by individuals are commonly exempt or taxed at concessional rates subject to conditions, and gains on transfer of certain immovable property may instead be subject to a source tax at the time of registration in lieu of the ordinary computation, at rates that vary by location and property value. Dividend income from resident companies is subject to withholding at source and included in total income with credit for tax withheld; rental income is taxed at slab rates after a standard deduction for repairs and other allowable expenses. Interest income is generally subject to source withholding, creditable against final liability.

3.3 Social security and payroll

Bangladesh has no comprehensive state social-insurance contribution system comparable to Western social security; the principal statutory employee benefit is the Workers' Provident Fund and, since 2025, transitional participation obligations in the government-run Universal Pension Scheme for eligible categories of income. Employers must withhold income tax from salary under the pay-as-you-earn mechanism monthly, based on the employee's declared or estimated annual income, and remit within prescribed timelines. Employers with the requisite number of workers must operate a Workers' Profit Participation Fund and Welfare Fund under the Labour Act, contributing a share of net profit for employee benefit, which is deductible for the employer.

3.4 Inbound individuals

There is no separate net wealth tax on individuals as such, but a statement of assets, liabilities and expenses (wealth statement) must generally be filed alongside the income tax return for taxpayers above prescribed asset thresholds, and a surcharge applies on the tax payable where net wealth exceeds specified bands, rising in steps up to 35% of the tax payable for the highest wealth band. Gift tax as a standalone levy does not exist; gifts may instead have income tax or stamp duty consequences depending on the nature of the asset and relationship of the parties. Foreign nationals working in Bangladesh are subject to the same residence tests as citizens, and treaty relief or foreign tax credit may mitigate double taxation on income also taxed abroad; expatriates commonly negotiate net-of-tax remuneration structures given the absence of a dedicated inbound-expatriate regime.

Bangladesh operates an extensive source-tax (withholding) regime covering dividends, interest, royalties, technical service fees, and a wide range of domestic payments (contractors, rent, professional fees, and more), reflecting the NBR's reliance on withholding as a primary collection and information tool. Domestic dividend withholding is generally 20% for resident companies and non-resident companies, and 10%–15% for resident individuals depending on TIN status, while outbound royalty and technical fee withholding to non-residents is generally 20% absent treaty relief, subject to a higher default rate where the non-resident lacks a valid TIN. Bangladesh's treaty network of more than 35 conventions typically reduces dividend withholding to 10%–15% and royalties/technical fees to 10%, with 'most favoured nation' and non-discrimination clauses relevant to several partner jurisdictions. Treaty relief requires a tax residency certificate and, increasingly, beneficial-ownership substantiation.

A resident payer generally must withhold and remit source tax within statutory deadlines regardless of treaty status; the non-resident payee then claims treaty relief through refund or advance certificate procedures where domestic withholding exceeds the treaty rate. Absence of a valid TIN for a resident payee can trigger a higher withholding rate (commonly double the standard rate) under the Income Tax Act 2023's TIN-compliance incentive provisions, making TIN verification a standard part of payment processing for Bangladeshi counterparties.

5.1 General anti-abuse and hybrids

The Income Tax Act 2023 contains general anti-avoidance provisions empowering the NBR to disregard or recharacterise arrangements entered into primarily to obtain a tax benefit without commercial substance, alongside specific anti-avoidance rules targeting thin capitalisation, transfer mispricing and treaty shopping. There is no codified hybrid-mismatch neutralisation regime of the ATAD type; instead, deduction and characterisation issues involving hybrid instruments or entities are addressed through ordinary income-characterisation and anti-avoidance principles applied case by case. Treaty benefits are subject to beneficial-ownership and substance review by the NBR, particularly for interposed holding structures with limited activity in the treaty partner jurisdiction.

5.2 Exit taxation and disclosure

Bangladesh does not impose a dedicated exit tax on individuals or companies ceasing residence, though capital gains tax and exchange-control clearance requirements effectively tax and regulate the transfer of Bangladeshi assets on emigration or corporate redomiciliation. Bangladesh is not a signatory to the OECD's DAC6-style mandatory disclosure regime, but statutory information-reporting obligations apply to specified transactions, and the NBR participates in exchange-of-information arrangements under its treaty network and multilateral instruments to which it is a party. Country-by-country reporting obligations apply to constituent entities of large multinational groups headquartered in Bangladesh consistent with BEPS Action 13 notification and filing thresholds.

6.1 VAT

VAT is levied under the VAT and Supplementary Duty Act 2012 at a standard rate of 15%, alongside reduced rates (commonly 5%, 7.5% and 10%) for specified goods and services and a truncated-base mechanism that produces effective rates below the headline rate for sectors such as construction, restaurants and certain trading activities. Registration is mandatory for businesses above an annual turnover threshold (with a lower turnover-tax regime for smaller businesses below the VAT threshold but above a minimum floor). Monthly VAT returns are filed electronically through the Integrated VAT Administration System, with input tax credit available for VAT-registered businesses on qualifying business inputs, subject to documentation and sector-specific restrictions. Supplementary duty applies in addition to VAT on luxury, environmentally harmful and specified goods.

6.2 Transaction, payroll and other taxes

Stamp duty applies on a wide range of instruments, including share transfers, property conveyances, mortgages and loan agreements, at rates set by the Stamp Act as amended. Registration fees and, for immovable property transfers, gains tax collected at the point of registration add materially to real estate transaction costs. There is no net wealth tax on companies, but the individual wealth-surcharge described in section 3.4 applies. Customs duties, regulatory duties and specific excise levies apply to imports, with the NBR administering both direct and indirect tax collection. Local government bodies levy limited municipal taxes (holding/property tax) on real estate within their jurisdiction, separate from national taxation.

7.1 Filing, assessment and audit

The standard income year is 1 July to 30 June, though banks, insurers and certain other regulated entities may use the calendar year, and companies may apply to align with a foreign parent's financial year. Corporate returns are filed electronically with the relevant Deputy Commissioner of Taxes' circle, generally within the statutory deadline following the end of the income year, with provisions for extension on application. The NBR conducts risk-based audits and desk assessments, with a self-assessment procedure available to compliant taxpayers meeting specified conditions; the general reassessment window allows reopening of assessments within a prescribed number of years, extended for cases involving concealment or fraud. Advance tax (quarterly instalments based on the last assessed or estimated income) is payable during the income year, with interest for shortfall.

7.2 Rulings, appeals and penalties

Taxpayers may appeal an assessment order to the Commissioner of Taxes (Appeals), and thereafter to the Taxes Appellate Tribunal, with further appeal on points of law to the High Court Division of the Supreme Court and, ultimately, the Appellate Division. Bangladesh does not operate a general advance-ruling system for corporate tax comparable to those in more developed treaty-rich jurisdictions, though the Transfer Pricing Cell provides guidance in specific cases. Penalties apply for late filing, underpayment of advance tax, failure to withhold or remit source tax, and non-maintenance of required documentation, with interest accruing on unpaid tax; concealment of income can additionally trigger penalty up to a multiple of the tax evaded and, in serious cases, prosecution.

Late filing of the income tax return triggers a monetary penalty and interest on unpaid tax, and can additionally jeopardise access to concessional withholding-tax rates and government contracting, given the widespread requirement to produce a valid TIN certificate and tax clearance for routine business dealings in Bangladesh.

9.1 Entity choice

The private limited company is the standard vehicle for foreign investment, incorporated under the Companies Act 1994 with a minimum of two shareholders and two directors, no statutory minimum capital for most sectors (though sector-specific minimums apply, e.g., for banking and non-bank financial institutions), and full corporate tax status at non-publicly-traded company rates. Branch, liaison and representative offices of foreign companies require Bangladesh Investment Development Authority (or Bangladesh Bank, for financial-sector entities) approval and are subject to activity restrictions, particularly for liaison offices, which cannot generate local revenue. Public limited companies suit capital-market ambitions and access lower conditional rates when a sufficient IPO float is achieved. One-person companies, introduced as a distinct category, offer a simplified structure for sole promoters but face rate convergence with standard corporate rates from AY 2026/27.

9.2 Structuring and incentives

Investors commonly combine Economic Zone or Hi-Tech Park location with export-oriented activity to stack tax holidays, duty-free capital machinery import, and preferential source-tax treatment on export proceeds. Given the absence of a group relief or consolidation regime, financing and cost-allocation structures should be tested against the arm's-length and thin-capitalisation rules in section 2.4 and the transfer-pricing documentation thresholds in section 2.8, and banking-channel documentation should be built into every material payment and receipt given the reach of the conditional-rate and disallowance rules in sections 2.1 and 2.3. Repatriation planning must account for Bangladesh Bank exchange-control clearance, which functions as a practical constraint on dividend and branch-profit remittance independent of the tax rules themselves.

9.3 Worked effective-rate illustration

A non-publicly traded Bangladeshi manufacturing company has annual turnover of BDT 800,000,000 and reports accounting/taxable profit of BDT 60,000,000 for AY 2026/27, having routed all qualifying receipts, expenses and investments through banking channels. Regular corporate tax at the applicable 27.5% flat rate on taxable profit is 60,000,000 × 27.5% = BDT 16,500,000. The gross-receipts minimum tax at the general 1% rate is 800,000,000 × 1% = BDT 8,000,000. Tax already withheld at source on the company's receipts during the year (illustratively, contract and supply withholding) totals BDT 5,000,000. Comparing the three figures — regular tax BDT 16,500,000, source-tax withheld BDT 5,000,000, and gross-receipts minimum tax BDT 8,000,000 — the company's final liability is the highest of the three, i.e. BDT 16,500,000, since minimum tax and withholding here fall below the regular tax charge; the BDT 5,000,000 already withheld is credited against the BDT 16,500,000 due, leaving BDT 11,500,000 payable on assessment. The effective rate on taxable profit is 16,500,000 / 60,000,000 = 27.5%, equal to the headline rate in this profitable scenario; the minimum-tax comparative would instead bind and raise the effective rate above 27.5% of accounting profit in a lower-margin or loss-making year.

9.4 Compliance

Expect electronic corporate and VAT return filing, monthly source-tax withholding and deposit obligations across a wide range of payment categories, mandatory TIN verification for counterparties to avoid punitive withholding, transfer-pricing documentation above the thresholds in section 2.8, and an annual wealth statement requirement for individual promoters and directors above asset thresholds. Companies operating in incentive zones must maintain separate zone-compliance records (employment, environmental and export-performance conditions) to preserve tax-holiday eligibility, and groups with foreign-parent reporting obligations should track any Pillar Two top-up exposure arising from the interaction of Bangladeshi incentives with a parent jurisdiction's income inclusion rule.