In June 2026, the Government of Bangladesh announced its draft national budget for FY2026–27 (July 2026 to June 2027). This budget represents the current administration’s first comprehensive fiscal roadmap and is guided by the fundamental principles of ‘Stability, Reform and Inclusive Prosperity’. It is built on three pillars: restoring macroeconomic stability, institutional reform and stricter tax compliance, with businesses required to demonstrate greater transparency and digital readiness than ever before.
① Corporate Income Tax (Applicable from AY2026-27 to AY2030-31)
| Company Category | Tax rate |
| Listed companies (where 10 per cent or more of the paid-up capital has been transferred, e.g. through an IPO) | 22.5% If all transactions are made by bank transfer: 20% |
| Other listed companies | 27.5% If all transactions are made by bank transfer: 25% |
| Unlisted companies (general) | 27.5% |
| Listed banks, insurance companies and non-bank financial institutions (excluding commercial banks) | 27.5% |
| Unlisted banks, insurance companies and non-bank financial institutions, etc. | 40% |
| Tobacco manufacturer | 45% |
| Mobile phone operators (basic) | 45%: Provide 10% of paid-up capital in the IPO → 40% / Transfer 20% or more in the IPO → 10% rebate in the year of transfer |
| Sole traders in the manufacture of tobacco products | 45% |
| Trusts, AOPs and Partnerships | 27.5% |
| Cooperative Society (Registered under the Co-operative Societies Act 2001) | 20% |
| Private universities, private medical universities, private dental universities, private engineering universities, etc. | 10% |
- ① Personal income tax rates
| AY2026–27 / AY2027–28 (current and next academic year) | AY2028–29 to AY2029–30 (future) | ||
| Taxable income | Tax rate | Taxable income | Tax rate |
| up to the tax-free allowance | 0% | up to the tax-free allowance | 0% |
| NextBDT300,000 | 10% | NextBDT300,000 | 10% |
| NextBDT400,000 | 15% | NextBDT400,000 | 15% |
| NextBDT500,000 | 20% | NextBDT500,000 | 20% |
| NextBDT2,000,000 | 25% | NextBDT2,000,000 | 25% |
| The entire remaining balance | 30% | Next BDT26,400,000 | 30% |
| The entire remaining balance | 35% | ||
③ Rebates and additional tax for early and late filing (corporations)
| Filing period (from the end of the income year) | Rules |
| Within 6 months | A 5% rebate on the tax amount (up to BDT 25,000) |
| Within 15 days of the next three months | No rebates, no additional tax |
| From then until the end of the tax year | 2% surcharge (minimum BDT25,000) |
④ Rebates and Additional Tax on Early and Late Filing (Individuals – HUF) (HUF)
| Filing period (from the income year ending 30 June) | Rules |
| 1 July – 30 September | A 5% rebate on the tax amount (up to BDT 25,000) |
| 1 October – 31 December | No rebates, no additional tax |
| 1 January – 31 March | 2% surcharge (minimum BDT3,000) |
| 1 April – 30 June | 5% surcharge （最低 BDT5,000） |
⑤Tax rate applicable prior to tax litigation
| judicial level | Former tax rates | New and previous tax rates |
| CT(A)（Tax Tribunal） | 0% | 1% |
| TAT（Tax Appeals Tribunal） | 10% | 3% |
| High Court（HC） | 15〜25% | 10% |
※ The advance payment exemption scheme has been abolished
⑥ Excise duty (bank and financial institution account balances)
| Items | Current | Onwards (July 2026–) |
| Taxable threshold (account balance) | Above BDT300,000 | Above BDT400,000 |
| イスラム金融取引（複数ディールアカウント） | No provisions | Deduction from the main loan account only once a year |
> Advice for foreign-owned companies: You can benefit from a preferential tax rate of 2.5% by conducting all transactions via bank transfer. Please consider reviewing your cash transactions.
Key corporate tax amendments
(1) Expansion of the definition of ‘Permanent Establishment (PE)’
Non-resident corporations that carry out substantive digital or online activities within Bangladesh, or that have 100,000 or more online customers or registered users, may be subject to taxation as a PE. **Japanese companies providing e-commerce services or cross-border digital services should take particular note.
② Introduction of a new definition of ‘electronic sales’
All offers and acceptances of sale and purchase made via online platforms are defined as ‘electronic sales’. This applies even if delivery or payment is carried out offline.
③ Expansion of transactions where WHT (withholding tax) is no longer a final tax
Sanchaypatra (savings certificates: savings bonds issued by the Government of Bangladesh for citizens): WHT on income from Sanchaypatra, property compensation gains and capital gains on the disposal of property, etc., will be changed from its previous treatment as a final tax to ordinary income taxation. A review of tax returns and accounting procedures is required.
④ Change to the threshold for transactions between associated enterprises (transfer pricing)
Regarding the criteria for designating an ‘Associate Enterprise’, the ratio of accumulated liabilities to total book value of assets will be lowered from 50% to 35%. Japanese companies engaged in group finance will need to review their transfer pricing compliance.
⑤ Tax treatment of interest unpaid for over three years
Interest and profits that have been recognised as expenses but remain unpaid for more than three years will be treated as taxable income (they may be recognised as expenses at the time of actual payment). Care should be taken in managing interest on intra-group loans.
**⑥ Rebates and additional tax for early and late filing**
| Filing period (from the end of the financial year) | Treatment |
|—|—| | Within 6 months | 5% rebate on tax liability (capped at BDT 25,000) | | Within 15 days of the following 3 months | No rebate, no additional tax | | Thereafter until the end of the tax year | 2% additional tax (minimum BDT 25,000) |
⑦ Tax exemption for freelance and content creator income
Income from content creation and freelance work is exempt from tax. This may affect the management of labour and outsourcing costs for IT-related businesses.
⑧ Expansion of start-up incentives
The growth period has been extended to a maximum of nine years. Loss carry-forwards during this period are permitted regardless of changes in shareholders. The turnover tax rate is zero during the growth period.
⑨ Reduction in Advance Tax on Electric Vehicles (EVs)
Whilst advance tax on EVs is reduced, it is increased for non-EV vehicles. This is favourable for companies considering switching their company cars to EVs.
2. VAT (Value Added Tax) and Indirect Taxes
Key VAT Amendments
⑴ Expansion of the Obligation to Register for a BIN (Business Identification Number) [Important] Obtaining a BIN will become mandatory for all business interactions, including bank accounts, loans, business licence renewals, vehicle registration, contracts with public utility providers and membership of industry associations. **Even small-scale businesses exempt from registration and tax-exempt businesses will require a BIN, meaning that virtually all businesses will be subject to the registration obligation. ② Changes to the VAT filing cycle Quarterly filing (with a deadline of the 15th of the month following the end of each quarter) will become the standard. Monthly returns may be continued on a voluntary basis, but the obligation to make monthly payments remains. As the payment method will change to a system based on the previous period, there is a possibility of overpayments or shortfalls; care should be taken regarding the impact on working capital management.
③ Full automation of registration via the e-VAT system
The process from VAT registration application to approval and BIN issuance will be completed instantly via the electronic system. ERP records will be recognised as official declaration documents, and online submission will be possible.
④ Changes to the reverse charge VAT regime for imported services
A 15% VAT will be levied on all imported services, with the exception of items exempt under Schedule I. Paying banks and financial institutions will be obliged to withhold and remit the VAT. Japanese companies receiving services from overseas group companies or external vendors will need to review their contract and invoicing processes.
⑤ Changes to the treatment of ITC (Input Tax Credit) for labour costs: ‘Labour’ will be removed from the list of exclusions in the definition of ‘input’. This may make it easier to claim input tax credits on personnel service costs, which will benefit both the service and manufacturing sectors. ⑥ Modernisation of customs: Establishment of Free Trade Zones (FTZs)
New Free Trade Zones (FTZs) will be established where manufacturing, trade and repackaging can be carried out without the need for a bonded warehouse licence. Duty-free import of raw materials and deferred payment of customs duties for goods destined for the Domestic Trade Area (DTA) will also be permitted. This presents a significant opportunity for export-oriented manufacturing.
✓ Key continued and new VAT exemptions for manufacturing and imports
| Item | Details |
|—|—|
| Manufacture and assembly of mobile phones | VAT exemption extended until June 2030 |
| Electric cookers, water purifiers and electric water heaters | New VAT exemption introduced until June 2030 (from July 2026) |
| Manufacture of computers and technology products | VAT exemption extended until June 2030 |
| Manufacture and assembly of electric vehicles | 100% VAT exemption or VAT exemption exceeding 5%; exemption on imports of parts and spares (until 2030) |
| Refrigerators, air conditioners and compressors | VAT exemption exceeding 7.5%; exemption on locally sourced parts (until 2030) |
| Manufacture of lithium and sodium-ion batteries | Exemption from customs duties on raw materials (until 2030) |
| Medical devices, semiconductors and digital equipment | Continued and expanded tariff concessions |
| Imports of renewable energy | Exemption from customs duties, regulatory taxes, supplementary taxes and advance income tax (from July 2026) |
> **Implications for Japanese manufacturers:** Generous incentives are available for manufacturing investments in electronic equipment, household appliances, EVs and renewable energy. This presents a favourable opportunity to consider establishing manufacturing bases or expanding the scope of operations at existing facilities.
### Amendments to Excise Duty
Regarding excise duty on bank and financial institution account balances, the threshold for taxation will be raised from BDT 300,000 to BDT 400,000 (from July 2026).
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3. Personal Income Tax (Relating to Expatriate Employees)
✓ Tax Rate Structure
Whilst the tax rate structure (10%–30%) will be maintained, a top rate of 35% is scheduled to be introduced from the 2028–29 financial year. We recommend reviewing the remuneration packages for expatriates in anticipation of future increases in the tax burden.
✓ Changes to the Treatment of Non-Residents
Non-resident individuals who do not have a permanent establishment (PE) in Bangladesh will no longer be required to file a tax return in Bangladesh.
✓ Early Filing Incentive
As with corporations, individuals and HUFs are eligible for a 5% rebate on their tax liability (capped at BDT 25,000) for early filing (between July and September following the end of the income year).
4. Enhanced Compliance and Penalties
✓ New Penalties and Obligations to Note
– Failure to withhold or remit WHT: An additional tax of 150% of the outstanding amount will be imposed. The deductibility of related expenses will not be disallowed (a change from the previous rule where such expenses were not deductible) – Failure to comply with WHT obligations on capital expenditure: An additional tax of 150% of the outstanding amount, and the associated costs will be taxed as ‘other income’
– Corporate tax returns deemed incomplete: If a copy of the WHT return is not attached, the return will be deemed ‘incomplete’
– Tax exemption for solar power plant operators: Operators of in-house solar power generation centres are fully exempt from tax until June 2035
✓ Transfer pricing and intra-group transaction documentation: Corporations with turnover exceeding BDT 10 million or capital exceeding BDT 5 million are required to **attach financial statements and a profit and loss account prepared and certified by a Chartered Accountant (CA) or a Cost Management Accountant to their tax return**.
5. Dispute Resolution and Tax Administration
| judicial level | Former tax rate | New advance tax rate |
| CT (A) (Tax Tribunal) | 0% | | 1% | |
| TAT (Tax Appeals Tribunal) | 10% | | 3% | |
| High Court | 15〜25% | | 10% | |
The advance tax rate applicable at the time of filing an objection has been reduced at all levels of appeal, thereby lowering litigation costs. However, the advance tax exemption scheme will be abolished.
6. Action required by foreign-invested enterprises
✓ Confirm BIN registration status and identify unregistered business contacts
✓ Review contract and invoicing processes relating to reverse-charged VAT (15%) on imported services
✓ Consider utilising the 2.5% corporate tax rate concession by switching all transactions to bank transfers
✓ Review WHT declaration and payment processes (to avoid the 150% additional tax penalty)
✓ Review the risk of being designated as a Permanent Establishment (including digital activities)
✓ Strengthen transfer pricing documentation (to comply with the 35% threshold for determining related-party status)
✓ Management of interest on intra-group loans and resolution of unpaid interest outstanding for over three years ✓ Adaptation of ERP and accounting systems for VAT returns (e-VAT integration) ✓ Review of business plans to utilise FTZ and manufacturing incentives ✓ Consideration of utilising investment incentives for EVs and renewable energy ## 7. Summary
The FY2026–27 budget can be characterised as one that ‘significantly raises the bar for transparency and compliance requirements for businesses’. As the drive towards digitalisation and the formalisation of the economy accelerates, it is essential for companies operating in Bangladesh to review their tax and financial processes and take prompt action. On the other hand, generous incentives are available for the EV, renewable energy and digital sectors, and new investment opportunities are emerging, particularly in the manufacturing sector.
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*This information is provided for informational purposes only and does not constitute tax or legal advice.*