Bangladesh

Corporate - Deductions

Last reviewed - 03 January 2025

Expenses that are revenue in nature are, by and large, allowed as a deduction to businesses and professionals if they are:

incurred wholly and exclusively for the purpose of the business or profession
not in the nature of a personal expense, and
not in the nature of a capital expense.

Depreciation

Depreciation rates in respect of any capital asset, works, or physical infrastructure owned by a taxpayer used for agricultural purpose are listed below:

Sl. No.	Class of assets	Depreciation rate (%)
1	Buildings or structures of constructed of brick, concrete, steel, or similar materials	5
2	Houses constructed of tin, bamboo, thatch, or similar materials	10
3	Permanent fences	10
4	Tube wells	10
5	Tanks	10
6	Irrigation wells and channels pipes	10
7	Agricultural implements made of wood or bamboo	20
8	Weighing machines	10
9	Tractors, oil machines, and light machineries	10
10	Trucks, delivery vans, and other motor vehicles	10
11	Piper pumping equipment	20
12	Non-mechanised vans	15
13	Steam engines	10
14	Factory machinery	15
15	Any physical asset other than mentioned above in this table	10

Depreciation rates in respect of any capital asset, works, or physical infrastructure owned by a taxpayer used for purposes other than agricultural purposes are listed below:

Sl. No.	Class of assets	Depreciation rate (%)
1	Buildings (not otherwise specified in this table)	5
2	Factory buildings	10
3	Furniture and fittings	10
4	Office equipment	10
5	Machinery, plant, and equipment (unless otherwise specified in this table)	10
6	Seagoing ship:
	New	5
	Old at the time of purchase whose age is:
	More than ten years	10
	Ten years or more	20
7	X-ray, electrotherapeutic, and other medical equipment, including spare parts	20
8	Battery-operated apparatus and rechargeable batteries	30
9	Equipment used for production and display of audio-visual products	20
10	All types of motor vehicles except those driven on hire	10
11	All types of motor vehicles driven on hire	20
12	Computer hardware, including printers, monitors, and ancillary items	25
13	Professional and reference books	25
14	Aircraft, aeroengines, and aerial photographic equipment	30
15	Molds used for making glass or plastic products or concrete pipes	30
16	Related to mineral oil:
	Equipment installed underground	100
	Other above-ground equipment, including portable boilers, drilling rigs, wellhead tanks, and rigs	25
17	Bridges	2
18	Roads	2
19	Flyovers	2
20	Pavement runway and taxiways	2.5
21	Aprons and tarmacs	2.5
22	Boarding bridges	10
23	Communication and search and other tools	5
24	All such physical resources that are not mentioned in this table	10

Determination of purchase price of asset for depreciation

The purchase price of a motor vehicle shall be deemed to be not more than BDT 3 million. This limit is not applicable to buses or minibuses used for the transportation of students, teachers, or employees of the taxpayer.
The value of allowance, subsidy, rebate, or commission and assistance received from the government or any other taxpayer shall be excluded.
Acquisition value of used assets (except motor vehicle) is not to exceed the FMV.
In case of foreign currency loan or foreign currency exposure, the purchase price is to be calculated after making the following adjustments:
- Exchange rate fluctuation losses or exchange rate hedging expenses to be added.
- Foreign exchange gain to be deducted.

Amortisation

Amortisation is calculated on a straight-line basis.
Pre-commencement expenditure is amortised at the rate of 20%.
Research and development (R&D) expenses are amortised at the rate of 10%.
Computer software and application shall be amortised at the rate of 20% if developed in Bangladesh and 10% if developed outside Bangladesh.
Any expenditure disallowed during the course of tax assessment that is capital in nature shall be amortised at the rate of 10%.
Amortisation of license fee paid by a cellular mobile phone operator shall be allowed at a proportionate rate up to the last year of the license period.

Start-up expenses

With a view to providing impetus to start-ups and to facilitate their growth in the initial phase of their business, the minimum tax rate for registered start-ups in a growth year is set at a nominal 0.1%. A ‘start-up’ is characterised as a company with an annual turnover not exceeding 100 crore of rupees in any financial year; incorporated under the Companies Act, 1994; engaged in innovation or technology-driven new products, processes, or services; and not formed by amalgamation or demerger.

Start-ups granting permanent access to their systems or accounts to the income tax authorities are relieved from reporting duties; however, income tax returns are required to be filed. Start-ups registered under the Act will benefit from tax exemptions in their growth years, as certain specified disallowances and provisions of special business income do not apply when determining their ‘income from business’. In case a registered start-up faces losses during a growth year that are not compensated for in that tax year, these losses can be carried forward and adjusted over the subsequent nine years.

Start-ups must register with the Board to utilise the benefits. New start-ups are required to be registered within the same financial year. (i.e. by 30 June following the year of incorporation). Growth years are the first five years after the year of incorporation.

Interest expenses

Interest expenses incurred for the purpose of business and profession are allowed as tax-deductible expenditure.

Bad debt

The amount of any debt or part thereof that has become irrecoverable and has been written off in the books of accounts of the taxpayer is allowed as tax-deductible expenditure.

Charitable contributions

The amount donated to specified institutions or funds and for specified purposes are allowed as a deduction for income-tax purposes.

Expenditure incurred on corporate social responsibility (CSR) activities

CSR expenditure is allowable, subject to certain limits and fulfilment of specified conditions.

Allowable limit: The maximum limit of allowable expenditure under the head CSR is 20% of the total income or BDT 120 million, whichever is lower.

Tax rebate: Tax rebate will be computed at 10% on such expenditure for CSR within the maximum limit.

Pension expenses

Any sum paid by the employer as contribution towards an approved pension fund is allowed as tax deductible expenditure.

Payments to directors

Payment of any commission or discount by a company to a shareholder director is not allowed while computing business income and is taxable at the regular rate of tax.

Research and development (R&D) expenses

Any expenditure incurred for the purpose of scientific research in Bangladesh and related to the business carried on by the taxpayer is allowed as deduction. Moreover, any sum paid to a scientific research institute, association, or other body carrying out scientific research, or university, college, technical school, or other institution, for the purpose of scientific research or technical training relating to the class of business of the taxpayer is allowed as a deduction.

Note that R&D expense is amortised at the rate of 10% (see above).

Bribes, kickbacks, and illegal payments

Expenditure incurred by a taxpayer that is illegal is deemed to have not been incurred for the purposes of the business or profession. Hence, such expenses are not deductible.

Fines and penalties

There are various procedural compliances (viz. submission of tax returns, disclosure of particulars of income, etc.) that taxpayers must comply with by the respective due dates prescribed therein. Non-compliance or delayed compliances with these procedures attract interest and penal consequences. There are prosecution provisions as well for certain offences.

Penalties and fines paid for infraction of, or non-compliance with, any law is not deductible as business expenditure.

Net operating losses

Losses can be carried forward and set off against income from subsequent year(s) for certain periods and as mentioned below:

Speculation business loss can be set off or carried forward for set off only against speculation business income.
Set off of capital loss can be made only with capital gains.
Loss from any exempted source cannot be set off or carried forward for set off against any income.
Carry forward and set off of loss is denied if minimum tax, on the basis of WHT, is applicable.
Loss of business in the tobacco business can only be set off from the income of the tobacco business.
Business loss and capital loss may be carried forward for six successive AYs.
Unabsorbed depreciation may be carried forward perpetually.

There are no provisions in Bangladesh for carrying back losses to earlier years.

Payments to foreign affiliates

Payments to foreign affiliates are allowed as a deduction if these are incurred for the purpose of business transactions, which are being transacted at arm’s-length and are not of capital nature. In case taxes are not withheld as per the laws or exceed the permissible threshold limits, such payments are disallowed.

Interest exceeding BDT 1.5 million payable by a resident person (other than banks and financial institutions) to an associate enterprise requires approval from the Board to be eligible for deduction.

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