Bangladesh: Business Environment

Company Tax

22.5% (reduced from 25% as from 1 July 2021)

Tax Rate For Foreign Companies

Resident entities are taxed on worldwide business income; non-residents are taxed only on Bangladesh-source income.
Branches of foreign companies are taxed at 27.5%.
Bangladesh provides tax incentives for foreign companies investing in special economic zones and hi-tech park zones (in the form of gradually decreasing tax discounts).

Capital Gains Taxation

Capital gains from the transfer of stocks and shares of public limited companies listed with the stock exchange except listed government securities are taxed at 10% for resident companies and 15% for non-resident shareholders. Income from capital gains is separated from total income and taxed at 15%, regardless of the period of holding of the asset from the date of its acquisition.
Capital losses can only be offset against capital gains.

Main Allowable Deductions and Tax Credits

All expenditures incurred to generate taxable income are generally tax-deductible. Amortisation of tangible and intangible assets is tax-deductible at rates ranging from 2% to 50%. The straight-line method allows for amortization and depreciation of pre-commencement expenses, such as feasibility studies, modelling, prototype creation, and experimental production, at a rate of 20%.

Goodwill cannot be amortised for tax purposes. Interest charges, including profit shares distributed to an Islamic bank, are also tax-deductible. Subject to conditions, the cost of free samples and entertainment expenses are allowed as deductions. Provision for bad debts is not allowed.

Service companies exporting at least 50% of their services, scientific research firms, companies investing in strategic sectors (outside the Grand Dhaka region) and suppliers of companies operating in a free trade area (at least 40% of their total sales) may be eligible for the free-trade area regime, benefiting from total or partial tax exemptions (corporation tax, VAT, stamp duty, capital gains).
Tax losses can be carried forward in full for up to six years. The carryback of losses is not permitted.

Other Corporate Taxes

No property tax is levied on real estate or land. Nevertheless, real estate transactions (sale, rent, transfer) are subject to stamp duty. Other types of stamp duty apply to most financial transactions. Rental income on plant and machinery paid to non-residents is subject to a 15% withholding tax.
Employers are not required to pay social security contributions and no salary tax is payable.
All enterprises with a gross income above BDT 5 million are subject to an alternative minimum tax of 0.6% on gross receipts if the amount due is higher than corporation tax. This rate is reduced to 0.1% for manufacturing companies in their first three years of operation. The rate for manufacturers of cigarettes and other tobacco products is 1%, and for mobile phone operators it is 2%. Suppliers with a turnover from BDT 5 million to BDT 30 million may opt for voluntary VAT registration or pay turnover tax at 4%.

Other Domestic Resources

Consult the Doing Business website, to obtain a summary of the taxes and mandatory contributions.

Tax Rate

Allowable Deductions and Tax Credits

The basic exemption for women and individuals above 65 years of age is BDT 350,000 (BDT 300,000 if under 65), increased to BDT 450,000 and BDT 475,000 for individuals with disabilities and freedom fighters, respectively. For parents or legal guardians of  physically challenged persons, the exemption is increased by BDT 50,000.
Payments to non-residents for services are deductible from personal income tax. Tax rebate on investment is provided for individuals investing in life insurance premiums, pension schemes, recognised charitable organisations, zakat funds, stocks and shares of listed companies and purchase of laptops (at varying rates between 10% and 15%).

Special Expatriate Tax Regime

Non-residents are taxed at a flat rate of 30%. Salaries and allowances for expatriate employees in foreign aid projects based on an agreement between the government of Bangladesh and a foreign government are exempt from tax.