Tax Law in Bangladesh 2026: How the Tax System Works

Tax law in Bangladesh: how the system fits together in 2026

Tax law in Bangladesh rests on three statutes and one annual cycle. The Income Tax Act 2023 governs direct tax on individuals and businesses, the Value Added Tax and Supplementary Duty Act 2012 governs consumption taxes, and the Customs Act 2023 governs duties at the border.[1] [2] Each year a Finance Act resets rates, thresholds and procedure from 1 July. The Finance Act 2026, passed by Parliament on 29 June 2026, is the first full budget law of the elected government and applies to the 2026-27 year.[6] [4]

This guide is the starting point for TRW's tax coverage. It explains how the system is built, who administers it, the income tax regulations that affect most taxpayers, the main obligations for companies, the treatment of pensions and provident funds, how disputes are resolved and how to choose advisers. Detailed topics such as corporate income tax, VAT registration and VAT deduction at source have their own TRW guides, linked throughout.

Summary: Bangladesh taxes income under the Income Tax Act 2023, consumption under the VAT and SD Act 2012 and imports under the Customs Act 2023, all administered by the National Board of Revenue. The Finance Act 2026 raised the individual tax-free threshold to Tk 400,000 for 2026-27, kept the 27.5% general corporate rate with a 25% rate where all transactions run through banks, cut appeal pre-deposits and made quarterly VAT returns the default.

Key point: The Finance Act 2026 changed how compliance failures are punished. Failing to withhold tax on business payments now triggers additional tax of 150% of the default rather than disallowance of the expense, several withholding taxes are no longer final, and the pre-deposit to appeal an income tax assessment falls to 1% before the Commissioner (Appeals), 3% before the Tribunal and 10% before the High Court Division, with no power to waive it.[4]

At a glance

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Table of Contents

The statutes that make up tax law in Bangladesh

Tax law in Bangladesh is statutory. There is no single tax code; instead, each main tax has its own Act, supported by rules, Statutory Regulatory Orders (SROs) and instructions issued by the revenue authority. In November 2025 the National Board of Revenue announced that authentic English texts of the Income Tax Act 2023, the VAT and SD Act 2012, the Customs Act 2023 and the VAT and SD Rules 2016 had been published in the official Gazette, so that foreign investors could read the law without relying on unofficial translations.[2]

Income Tax Act 2023

The Income Tax Act 2023 (Act No. XII of 2023) repealed and replaced the Income-tax Ordinance 1984.[1] It is the code for income tax, advance income tax, tax at source, minimum tax, surcharge and related administration. Its schedules carry much of the practical detail: the Sixth Schedule, for example, lists exempt income and the investments that qualify for tax rebate.[1] The authentic English text was gazetted under SRO No. 404-Law/2025 on 16 October 2025.[2]

VAT and SD Act 2012

The Value Added Tax and Supplementary Duty Act 2012 was passed in 2012, but its implementation was repeatedly deferred; the government brought it into operation from 1 July 2019 with a multi-rate structure rather than the single 15% rate originally planned.[14] It governs VAT on supplies and imports, supplementary duty on listed goods and services, turnover tax for small businesses and VAT deduction at source.

Customs Act 2023 and other levies

The Customs Act 2023 (Act No. LVII of 2023) replaced the Customs Act 1969, and references in the income tax legislation were updated to the new Act by the Finance Act 2024.[1] Duty rates sit in the customs tariff schedule by HS code. Excise duty on bank balances and air tickets continues under the Excise and Salt Act 1944.[11]

Finance Acts and SROs

Rates and thresholds change every year through the Finance Act, and many exemptions and reduced rates are delivered by SRO rather than by the parent Act. The 2025-26 budget was presented by the interim government's Finance Adviser and enacted by the Finance Ordinance 2025, with effect from 1 July 2025.[7] [8] The 2026-27 budget was presented to Parliament on 11 June 2026 by Finance Minister Amir Khosru Mahmud Chowdhury, and the Finance Bill was passed on 29 June 2026.[5] [6] Any analysis of tax law in Bangladesh must therefore start by fixing the year: the same transaction can be taxed differently in 2025-26 and 2026-27.

Who administers tax law in Bangladesh

The National Board of Revenue (NBR) is the apex authority for tax administration, established under President's Order No. 76 of 1972.[3] It administers income tax through Commissioners and Deputy Commissioners of Taxes, VAT through VAT commissionerates and customs through custom houses and stations. It also issues the SROs and guidance that turn the statutes into practice, and runs the e-return and e-VAT systems.

The planned split of the NBR

In May 2025 the interim government issued the Revenue Policy and Revenue Management Ordinance 2025, which provides for the NBR to be dissolved and replaced by a Revenue Policy Division and a Revenue Management Division under the Ministry of Finance. The ordinance was revised in August 2025 after protests by revenue officials, and in November 2025 three further ordinances amended the Income Tax Act, the Customs Act and the VAT and SD Act to align them with the new structure.[9] The organogram for the new divisions remained outstanding at that point.[9]

The elected government has kept the policy. On 18 August 2026 the Finance Minister said the NBR would be split into a policy division, consulting economists and trade bodies, and a management division responsible for collection, enforcement and administration. He also set an NBR revenue target of Tk 604,000 crore for 2026-27, alongside a move to "faceless" administration through e-tax, e-VAT, the National Single Window and risk-based audit selection.[10] Until the split takes effect, taxpayers continue to deal with the NBR and its field offices.

Direct and indirect taxes: how the system is structured

The taxation system divides into direct taxes, levied on income and wealth, and indirect taxes, levied on consumption and trade. Income tax is the main direct tax and includes a surcharge on high-net-worth individuals calculated on net wealth.[12] Indirect taxes include VAT, supplementary duty, customs duty, regulatory duty, advance tax at import and excise duty.[11] For importers the distinction matters in cash terms: customs duty, supplementary duty and regulatory duty are a cost, while VAT, advance tax and advance income tax paid at import are creditable.[11]

The table below maps the main taxes to their legal basis. On a phone, scroll it sideways.

Income tax regulations every taxpayer should understand

The income tax regulations follow a familiar common-law pattern, but several features are specific to Bangladesh. The income year generally runs from 1 July to 30 June; banks, insurers and financial institutions use the calendar year, and subsidiaries of foreign groups may align with their parent's year.[13] Residents are taxed on worldwide income, while non-residents are taxed only on income arising or received in Bangladesh.[12]

Registration and proof of return

A person must register and obtain a Taxpayer's Identification Number (TIN) under the Income Tax Act 2023, and persons liable to deduct tax at source need a Withholder Identification Number.[1] The Finance Act 2026 allows the TIN to serve as the withholder number in most cases.[4] Proof of submission of return (PSR) is required for a long list of transactions, including loans above Tk 20 lakh, urban trade licences and registration of urban property transfers above Tk 10 lakh.[1] The final Finance Act 2026 dropped proposals to require a TIN for opening most bank accounts and for registering partition deeds and mutations.[6]

Returns, advance tax and the new filing incentives

The 2023 Act fixed a "Tax Day" for filing returns: 30 November for individuals and other non-company assessees, with a separate date for companies.[1] For individuals, the Finance Act 2026 replaced a single cut-off with a sliding scale. A return filed between 1 July and 30 September earns a rebate of 5% of tax, capped at Tk 25,000; filing between 1 October and 31 December carries no adjustment; filing from January to March attracts 2% additional tax and from April to June 5%. The NBR's power to extend the filing date by one month was repealed.[4]

Companies file by the fifteenth day of the ninth month after the income year ends, or 15 September if that is later, and can earn the same 5% rebate by filing at least two months early.[13] Advance tax is paid in quarterly instalments on 15 September, 15 December, 15 March and 15 June, and the Finance Act 2026 raised the threshold for compulsory advance tax from Tk 0.6 million to Tk 1 million of estimated tax liability.[13] [4]

Withholding tax

Much of Bangladesh's income tax is collected at source by payers: on salaries, contract payments, services, rent, interest, dividends, imports and exports. The 2026 changes are significant. Withholding on savings-certificate profit and on capital gains from property transfers is no longer final tax, a new 0.2% advance tax applies to goods sold to retail traders, and withholding returns must now accompany the income tax return, without which the return is treated as incomplete.[4]

Individual tax rates and thresholds for 2026-27

For assessment year 2026-27, individual income above the tax-free threshold is taxed at 10% on the next Tk 300,000, 15% on the next Tk 400,000, 20% on the next Tk 500,000, 25% on the next Tk 2 million and 30% on the balance.[4] The general threshold is Tk 400,000; women and senior citizens aged 65 or over have Tk 450,000; persons with disabilities and third-gender taxpayers Tk 525,000; and war-wounded gazetted freedom fighters and July gazette fighters Tk 550,000.[4]

The threshold was raised in Parliament. The budget proposed Tk 375,000 for 2026-27 and 2027-28, but the Finance Bill was amended to Tk 400,000 after requests from Prime Minister Tarique Rahman, with further rises to Tk 450,000 for 2028-29 and 2029-30 and Tk 500,000 for 2030-31.[6] PwC's analysis notes that a 35% top rate is legislated from 2028-29.[4] For comparison, the threshold for assessment year 2025-26 was Tk 350,000.[7]

Non-resident individuals other than non-resident Bangladeshis are taxed at 30%, and a non-resident individual without a permanent establishment in Bangladesh is no longer required to file a return.[4] Net-wealth surcharge starts at 10% of tax where net wealth exceeds Tk 40 million.[12]

Tax law for businesses in Bangladesh

For businesses, tax law in Bangladesh operates on several fronts at once: corporate income tax, withholding as a payer, VAT, VAT deduction at source, customs and, for groups, transfer pricing. A company that manages only its own return still carries exposure for the taxes it must collect for the state.

Corporate income tax

The Finance Minister proposed keeping corporate rates unchanged in the 2026-27 budget for policy continuity.[5] The Finance Act 2026 fixes the rates for assessment years 2026-27 to 2030-31: 27.5% for ordinary companies, reduced to 25% where all transactions are made by bank transfer; 22.5% for listed companies with at least 10% of paid-up capital offered to the public, or 20% with the bank-transfer condition; 37.5% for listed and 40% for non-listed banks, insurers and finance companies; and 45% for tobacco manufacturers.[4] Private universities and specified colleges dropped from 10% to 5%.[6] TRW's corporate income tax guide covers rates, deductions and turnover tax in detail.

Turnover tax, deductions and related parties

Turnover tax operates as a floor on tax for many businesses. The 2026 Act now allows excess turnover tax to be carried forward and set against later regular tax, and narrows the gross receipts on which it is computed.[4] Interest on loans to associated enterprises charged below 12% a year is taxed on the shortfall, the debt threshold for associate status falls from 50% to 35% of total assets, and the scope of permanent establishment now extends to significant digital presence with 100,000 or more customers in Bangladesh.[4] Cross-border groups should read these rules with our international tax team.

Incentives and exemptions

Incentives are delivered mainly by schedule and SRO. The 2026 Act exempts income from freelancing and content creation, extends a startup's growth period to nine years with nil turnover tax during it, and grants solar power producers a full income tax exemption until 30 June 2035.[4] Confirm the statutory basis and expiry date of any exemption before pricing a project. Our tax incentives practice advises on eligibility and claims.

VAT, supplementary duty and customs in practice

The standard VAT rate is 15%, with reduced rates of 1.5% to 10% and specific-amount VAT on some goods.[11] Registration is required where turnover exceeds Tk 5 million (Tk 50 lakh) in twelve months, and turnover between Tk 3 million and Tk 5 million calls for enlistment for turnover tax at 4%; some activities, including importers and exporters, must register regardless of turnover.[11] TRW's guide to VAT registration for companies explains the process.

From 2026-27, quarterly VAT returns are the default for registered and enlisted persons, due by the fifteenth day after the quarter, with monthly filing optional. A Business Identification Number or enlistment certificate becomes mandatory for bank accounts, loans, trade licence renewal, utility connections and vehicle registration. Imported services remain subject to 15% reverse-charge VAT, collected by the bank at the time of remittance.[4] Payers must also manage VAT deduction at source, which is separate from income tax withholding.

Supplementary duty is charged at the first stage of supply on goods and services listed in the Third Schedule, at rates generally from 10% to 67% and higher in some cases.[11] On customs, the Finance Act 2026 amended the Customs Act 2023 to introduce Free Trade Zones and to raise automated green-channel clearance percentages for Authorised Economic Operators.[4] Importers can get help from our customs and trade compliance team.

Pensions, provident funds and retirement savings

Retirement savings are treated favourably under tax law in Bangladesh, but only through approved or recognised vehicles. The Sixth Schedule to the Income Tax Act 2023 excludes from total income any pension received from the Government or from an approved pension fund, and gratuity from the Government Gratuity Fund up to Tk 2.5 crore.[1] Contributions received by a recognised provident fund, approved superannuation fund or pension fund, and income distributed to beneficiaries that has already been taxed in the fund, are also excluded, with gratuity from an approved gratuity fund capped at Tk 2.5 crore.[1] Income of a provident fund governed by the Provident Fund Act 1925 is exempt.[1]

On the contribution side, employee and employer contributions to a recognised provident fund and contributions to the Universal Pension Scheme qualify as investments for the general tax rebate, and pension under that Scheme is exempt.[1] The Finance Act 2026 tightened this: a provident fund must now be recognised for contributions to qualify, premature withdrawal from eligible investments triggers pro-rated additional tax, and the rebate falls from 15% to 10% of actual investment, with the cap cut from Tk 1 million to Tk 0.75 million.[4]

An unrecognised fund loses these benefits. Approval of a superannuation or pension fund requires, among other conditions, an irrevocable trust connected with a business in Bangladesh, employer contributions and benefits payable only in Bangladesh.[1] Take advice before the trust deed is signed, not after the first audit.

The FY2026-27 budget and Finance Act 2026: what changed

The 2026-27 budget aimed at stability, simplification and a wider base. The Finance Minister promised simpler corporate compliance, online filing and payment, more allowable business expenses, removal of the rule disallowing costs where tax was not withheld, and transparent automated audit selection.[5] In the final Act, an investment disclosure provision aimed at land registered below market value was withdrawn.[6]

Key changes for 2026-27, drawn from PwC's analysis of the enacted law, include:[4]

• loans, advances and deposits above Tk 0.5 million received outside banking channels taxed as income from other sources;
• "capital asset" extended to gold, jewellery, antiques and club memberships;
• automated refunds for individuals with salary, financial-asset and agricultural income, processed within 120 days of filing;
• withholding verification limited to the current and previous two income years;
• VAT penalties for irregular input-tax credit reduced to between 30% and 50%, and labour removed from the negative list for input credit;
• a six-month interest-waiver scheme from 1 July 2026 for specified legacy VAT demands.

The excise duty threshold on bank balances rose from Tk 300,000 to Tk 400,000 from 1 July 2026.[4] Background on the earlier VAT amendments is in our note on the VAT and SD amendment ordinance 2025.

Audits, assessments and tax disputes

Disputes are a routine part of tax law in Bangladesh. Most income tax returns are accepted on self-assessment, but the NBR selects returns for audit under published guidelines. The Board has two years from the end of the assessment year to issue an audit selection notice, and the audit must be finished within a year of the end of the year in which the notice was issued.[13] Assessment is mandatory for delayed returns and returns filed after selection for audit.[4]

Appeals

An assessee aggrieved by an assessment, penalty or refund order may appeal to the appellate income tax authority, generally within 45 days and on payment of a Tk 200 fee.[1] The next stage is the Taxes Appellate Tribunal, and either side may then refer a question of law to the High Court Division within 90 days of receiving the Tribunal's order, with a further appeal to the Appellate Division.[1] The Finance Act 2026 reset income tax pre-deposits to 1%, 3% and 10% at those three levels and abolished waiver; for VAT, the pre-deposit falls from 10% to 1% before the Commissioner (Appeals) and the Appellate Tribunal and to 2% before the High Court Division.[4]

Alternative dispute resolution

Part of the Income Tax Act 2023 allows any dispute pending with an income tax authority, the Tribunal or a court to be resolved through alternative dispute resolution, subject to NBR conditions.[1] From 2026-27 ADR is also available against orders already disposed of by the Tribunal, with stricter recovery of tax agreed in ADR.[4] The government has said it will institutionalise ADR and publish a taxpayer service charter with binding timelines.[10] Our tax disputes practice handles appeals, references and ADR.

A compliance roadmap for businesses

A business should build its tax position in a fixed order. The sequence below reflects the obligations most often missed in practice; it does not replace a review of the sector rules and SROs that apply.

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Choosing tax lawyers, consultants and advisory firms

Advice on tax law in Bangladesh is split between accountants, income tax practitioners and lawyers, and the statute sets out who may appear. Under section 327 of the Income Tax Act 2023, an assessee may appear before any income tax authority or the Appellate Tribunal through an authorised representative: a close family member, a full-time employee or a "tax lawyer".[1] A tax lawyer is an advocate enrolled with the Bangladesh Bar Council, a practising chartered accountant, cost and management accountant or chartered secretary, a former income tax authority of at least five years' standing at Deputy Commissioner rank or above, or a person certified as a tax lawyer by the Board, and must belong to a Taxes Bar Association registered with the Board.[1]

Certification work is also regulated. From 2026-27 every company, and firms and associations above Tk 10 million turnover or Tk 5 million capital, must file financial statements audited by a chartered accountant together with an income computation statement certified by a chartered accountant, a cost and management accountant or an income tax practitioner.[4] That means a business usually needs both an auditor and an adviser who can defend the position.

When choosing tax consultants or a tax advisory firm, test four things. First, scope: can the firm cover income tax, VAT and customs together, since most disputes cross all three? Second, forum experience: has it argued before the Commissioner (Appeals), the Tribunal and the High Court Division, which hears references on points of law? Third, structuring capability for cross-border payments, treaties and double tax treaty planning. Fourth, independence from the audit, so that the adviser can challenge an assessment without a conflict.

TRW's role is the legal end of that spectrum: structuring, opinions, tax compliance reviews, responses to audit notices, appeals, references and writ challenges where an authority acts outside its powers. We work alongside clients' auditors and in-house finance teams rather than replacing them.

Where to go next in TRW's tax coverage

This hub gives the framework of tax law in Bangladesh; the detail sits in topic guides. For company tax, start with corporate income tax in Bangladesh. For indirect tax, read VAT registration for companies and VAT deduction at source. For bank-balance and airline levies, see our note on 2025 excise duty changes. Investors setting up a local entity should also read our guide to foreign company registration, because tax registration follows incorporation.

What to watch in 2026-27

Three developments will shape tax law in Bangladesh over the coming year. The first is the NBR split: legislated and reaffirmed, but with no settled date for transferring functions.[9] [10] The second is digitisation: fully automated VAT registration with immediate BIN issue, ERP records accepted as valid documents and automated individual refunds will change how audits begin and how evidence is produced.[4] The third is enforcement: with a revenue target of Tk 604,000 crore for the NBR and a stated plan to phase out legacy exemptions for mature sectors, taxpayers should expect more data matching and audits built on BIN and TIN linkages.[10]

The practical response is the same for every taxpayer: confirm which year's law applies, keep digital records, reconcile withholding and VAT deduction certificates quarterly and act within appeal deadlines.

Frequently asked questions

What are the main laws that make up tax law in Bangladesh?

The Income Tax Act 2023 for income tax, the VAT and SD Act 2012 for VAT and supplementary duty, and the Customs Act 2023 for import and export duties, updated each year by a Finance Act and supplemented by rules and SROs.[1] [2]

Who administers taxes in Bangladesh?

The National Board of Revenue, established under President's Order No. 76 of 1972.[3] A 2025 ordinance provides for its replacement by separate policy and management divisions, which the government reaffirmed in August 2026 but has not yet completed.[9] [10]

What is the tax-free income threshold for 2026-27?

Tk 400,000 for general individual taxpayers, Tk 450,000 for women and senior citizens aged 65 or over, and higher amounts for persons with disabilities, third-gender taxpayers and gazetted freedom fighters.[4] [6]

What is the corporate tax rate in Bangladesh?

For assessment year 2026-27 most companies pay 27.5%, or 25% where all transactions are made by bank transfer. Listed companies, financial institutions, mobile operators and tobacco businesses have their own rates.[4]

When must an individual file an income tax return?

Under the Finance Act 2026 a return can be filed during the tax year, with a 5% rebate for filing by 30 September, no adjustment to 31 December, and additional tax of 2% from January to March and 5% from April to June.[4]

Is pension income taxable in Bangladesh?

Pension from the Government or an approved pension fund, and pension under the Universal Pension Scheme, is excluded from total income under the Sixth Schedule to the Income Tax Act 2023.[1]

Do provident fund contributions reduce tax?

Contributions to a recognised provident fund count as eligible investment for the general tax rebate. From 2026-27 the fund must be recognised, and the rebate is 10% of actual investment, capped at Tk 0.75 million.[1] [4]

What is the VAT rate and when must a business register?

The standard rate is 15%. Registration is required above Tk 5 million annual turnover, with turnover tax enlistment between Tk 3 million and Tk 5 million, and some activities must register regardless of turnover.[11]

How do I appeal an income tax assessment?

Appeal first to the appellate income tax authority, generally within 45 days, then to the Taxes Appellate Tribunal, with a reference on law to the High Court Division within 90 days of the Tribunal's order.[1] Pre-deposits from 2026-27 are 1%, 3% and 10%.[4]

Who can represent me before the tax authorities?

Under section 327 of the Income Tax Act 2023, a close relative, a full-time employee or a "tax lawyer", which includes advocates, practising chartered and cost and management accountants, chartered secretaries, qualifying former tax officials and NBR-certified practitioners.[1]