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Bangladesh
Corporate - Significant developments
Last reviewed - 03 January 2025- The New Income-tax Act, 2023 (the Act) replaced the existing Income-tax Ordinance, 1984 (the Ordinance), inter-alia, aiming to simplify and clarify the provisions relating to accounting methods, depreciation and amortisation rules, earnings stripping rules, capital gains, income from intangible assets, transfer pricing, alternative dispute resolution, etc., in addition to easing compliance burdens and reducing the discretionary power of officials.
- The Act has introduced the General Anti-Avoidance Rules (GAAR), which require commercial substance in business arrangements. The Commissioner of Taxes has been conferred the power to invoke GAAR. There are no threshold limits or grandfathering provisions.
- Income earned by real-estate investment trusts, exchange-traded funds, and mutual funds is exempted from tax.
- Demergers may also avail tax neutral status in addition to amalgamations.
- Interest exceeding 1.5 million Bangladeshi takas (BDT) to associated enterprises (AEs) requires approval from the National Board of Revenue (Board).
- Transactions (whether domestic or international) with AEs enjoying a tax holiday or relief will attract additional tax and penal consequences if the transfer pricing mechanism to determine the arm’s-length pricing is not applied.
- Provisions of the proof of submission of return (PSR) are widened to include all suppliers of goods and services as well as all taxpayers. All those who are covered within the purview of the PSR obligation must obtain tax registration and file a return of income.
- The carry forward and set off of loss is to be denied if minimum tax, on the basis of withholding tax (WHT), is applicable.
- Commercial reasonableness is to be considered for the allowance of business expenditure.
- ‘Advertisement expenses’ are excluded from the ambit of ‘sales promotion’ for the purpose of disallowance.
- Presumptive tax is enhanced for the tobacco and carbonated or sweetened beverages industry.
- Shareholder directors are mandatorily required to file a statement of living expenses along with the return of income.
- Approved provident and gratuity funds are taxable and liable to file returns.
- Reduced tax rate of 15% for employee-related funds, including recognised provident funds, approved gratuity funds, approved superannuation funds, and approved pension funds.
- Reduction of additional levy in respect of a belated return reduced from 4% to 2%. Credit of advance income tax and WHT permitted to arrive at the base amount for calculation for such additional levy.
- The deadline for filing monthly WHT returns has been extended by ten days (i.e. from the 15th to the 25th of each month).
- New conditions introduced for availing tax exemption in economic zones and hi-tech parks (HTPs). A grandfathering clause has been enabled to ensure the status quo for certain benefits of existing entities.
- Corporate income tax (CIT) rates for unlisted companies and one person companies have been reduced by 2.5% for assessment years (AYs) 2024/25 and 2025/26.
- The ambit of deemed dividend is expanded to cover specified advances or loans to shareholders from accumulated profits of all types of companies (earlier applicable to private companies).
- Exemption for prescribed Information Technology enabled Services (ITeS) (list of services modified) extended to 30 June 2027. All income, expenses, and investment to be undertaken through bank transfer to avail the exemption.
- Tax to be levied at the rate of 20% on the gross income of companies not obligated to file a return. Such tax does not apply in respect of the following:
- Exempted income.
- Donations or grants.
- Taxes or duties.
- Companies not having a permanent establishment (PE) in Bangladesh.
Bangladesh contacts
Bangladesh contacts
Bangladesh News
Sushmita Basu
Member of the Board of Directors / Tax and Regulatory Practice Leader, PwC Bangladesh
+91 98 3005 1065