Transfer Pricing in Bangladesh 2026: Associated Enterprises, Methods, Documentation and Audits

Transfer pricing Bangladesh rules in 2026: what groups must know

Transfer pricing Bangladesh rules now sit in Part 15, Chapter II of the Income Tax Act 2023, sections 233 to 239. They require any income or expenditure from an international transaction between associated enterprises to be determined by reference to the arm's length price, regardless of what the parties actually charged.[1] The Finance Act 2026 widened the associated enterprise test, set a 12% floor on interest charged to associated enterprises and removed the NBR approval step for related-party interest. Bangladesh Bank has also reissued its rules on royalty and service remittances.[2] [6]

This guide is for groups that price goods, services, intangibles or money across the Bangladesh border. It covers who is caught, the five methods and the 30th to 70th percentile range, documentation and penalties, Transfer Pricing Officer audits, and how intra-group services, royalties and loans interact with the foreign exchange rules. The filing calendar and withholding rates are covered in companion TRW guides.

Summary: Bangladesh applies the arm's length principle to international transactions between associated enterprises where either or both parties are non-resident. Taxpayers must keep prescribed records, file a statement of international transactions with the return, and on notice furnish an accountant's report where transactions exceed Tk 3 crore. Adjustments can only increase taxable income. Penalties are calculated on the value of each transaction, not on the tax. There is no advance pricing agreement programme, so the documentation file is the main defence.

Key point: Penalties under sections 276 to 278 are set as a percentage of the value of each international transaction, up to 1% for failing to keep records or comply with a notice and up to 2% for failing to file the statement of international transactions. A group with Tk 100 crore of related-party purchases can face a penalty exposure of Tk 2 crore for a missing statement alone, before any pricing adjustment.[1]

At a glance

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Table of Contents

The legal framework for transfer pricing Bangladesh law applies in 2026

Bangladesh first legislated transfer pricing through Chapter XIA of the Income Tax Ordinance 1984, inserted by the Finance Act 2012 and brought into force from 1 July 2014 by SRO No 161 of 2014, applying from assessment year 2015-16.[12] The Income Tax Act 2023 repealed the Ordinance and re-enacted the rules as Chapter II of Part 15, headed "Transfer Pricing", within the Part on prevention of tax avoidance.[1]

Section 233 holds the definitions, section 234 the charging rule, section 235 the methods and range, section 236 the Transfer Pricing Officer and sections 237 to 239 the compliance duties; penalties sit in sections 276 to 279.[1]

Rules carried over from the 1984 regime

Records, forms, method application and retention are left to be "prescribed", and section 344 keeps consistent rules under the repealed Ordinance in force until replaced.[1] Rule 73 of the Income Tax Rules 1984 therefore remains the practical benchmark for the contents of a file.[12]

The neighbouring anti-avoidance rules

Sections 230 to 232 let the Deputy Commissioner of Taxes (DCT) counteract a tax benefit obtained through an "abuse of tax arrangement", and section 240 lets the DCT attribute ordinary profits to a resident whose business with a closely connected non-resident is arranged to produce little or no profit.[1] An arm's length file is the best answer to both.

Under section 345 the Bangla text prevails over the English text, so check any threshold against the Bangla text as amended in 2026.[1]

Associated enterprises: who the rules catch

Transfer pricing Bangladesh rules apply only between "associated enterprises". Section 233(2) starts with a general test: an enterprise that participates, directly or indirectly or through one or more intermediate entities, in the management, control or capital of another. It then lists specific relationships that qualify.[1] An "enterprise" includes a permanent establishment, so a Bangladesh branch or project office and its foreign head office are within scope.[1]

Ownership and board control

• Common participation: the same persons, including a spouse, successors or predecessors, participate in the management, control or capital of both enterprises.[1]
• Voting power: one enterprise holds more than 25% of the voting power in the other, or the same persons hold more than 25% in both.[1]
• Board appointments: one enterprise appoints more than half the board of the other, or any executive director, or the same persons do so for both.[1]
• Group membership: both are members, subsidiaries or concerns of the same parent company or group.[1]
• Practical control: one enterprise has the practical ability to control the decisions of the other.[1]

Financial dependence

Two tests catch lenders and guarantors without any shareholding. The enacted text treats enterprises as associated where one's cumulative borrowings from the other exceed 50% of the book value of the lender's total assets, or where guarantees given by one exceed 10% of the book value of the other's total borrowings.[1] The Finance Act 2026 lowered the borrowing threshold from 50% to 35% and clarified how the book value of total assets is measured.[2] [5] A foreign lender that is otherwise independent can now become an associated enterprise through the size of its exposure alone.

Transactions routed through a third party

The definition of "international transaction" also reaches a deal between B and an unrelated C where A, an associated enterprise of B, controls the transaction.[1] Back-to-back sales and supply contracts negotiated by a group procurement hub should be mapped against it.[4] Our guide to holding and subsidiary companies in Bangladesh covers the corporate side of these group structures.

What counts as an international transaction

An international transaction is any transaction between associated enterprises, "either or both of which is non-resident". It covers the purchase, sale or lease of tangible or intangible property, the provision of services, lending or borrowing, and any other transaction bearing on profit, income, loss, assets, financial position or economic value.[1] "Transaction" includes an arrangement, understanding or action, whether or not it is final, written or legally enforceable.[1] A group policy applied by email is enough.

"Property" is defined widely. It includes patents, know-how, copyright, trademarks, brand names, franchises, software, databases, customer lists, technical data, "any aspects of advertising and marketing" and any other intangible.[1]

Is there domestic transfer pricing in Bangladesh?

Not formally. An international transaction needs a non-resident party, so sections 233 to 239 do not reach dealings between two resident companies.[1] Section 55 disallows specified expenses above fixed caps, and the general anti-avoidance rule in sections 230 to 232 has no cross-border limitation.[1] For VAT, supplies between associated entities made free or below fair market value are valued at fair market value where the recipient cannot claim input credit.[3]

The 2026 commentaries describe the new 12% interest floor by reference to associated enterprises generally, so domestic group lending should be reviewed against it.[2] [3]

Choosing the method: CUP, resale price, cost plus, profit split and TNMM

Section 235(1) requires the arm's length price to be determined by the "most appropriate method or methods". The choice depends on the nature of the transaction, the availability of reliable information, the functions performed, assets employed and risks assumed, and any other prescribed factor.[1] There is no statutory hierarchy, but the method must be justified on those factors. PwC describes the Bangladesh rules as largely based on the OECD guidelines.[4]

Comparable uncontrolled price (CUP)

CUP compares the controlled price with the price charged between independent parties for the same or a closely similar product in comparable circumstances. It is the most direct method and the most demanding on comparability, and works best for quoted commodities, loan interest and in-house comparables.

Resale price method

The resale price method deducts an arm's length gross margin from the distributor's resale price to independent customers. It suits buy-sell distributors of imported goods that add little value.

Cost plus method

Cost plus adds an arm's length mark-up to the supplier's costs. It is used for contract manufacturing and routine services, such as back-office and software work done in Bangladesh for group companies abroad, and needs a consistently defined cost base.

Profit split method

The profit split method divides combined profits between associated enterprises according to their relative contributions. It is reserved for highly integrated operations or where both sides contribute unique intangibles. Section 235(2) does not apply the percentile range to it.[1]

Transactional net margin method (TNMM)

TNMM compares a net profit indicator, such as operating margin or mark-up on total costs, with that of comparable independent companies. It tolerates product differences better than CUP or resale price, so it is the method most used in practice, but it depends on reliable databases and careful screening.

Other methods

Section 235(1)(f) permits any other method where none of the five can reasonably be applied and the result is consistent with the arm's length price, for example a valuation of an intangible on a one-off transfer.[1] The table below summarises typical uses. On a phone, scroll it sideways.

The arm's length range and the no-downward-adjustment rule

Section 235(2) contains Bangladesh's distinctive range rule. Where the method is not profit split or the residual method, and the dataset has six or more entries, an arm's length range is constructed from the 30th to the 70th percentile.[1] If the actual price falls within the range, it is deemed to be the arm's length price. If it falls outside, the arm's length price is the median of the dataset. With fewer than six entries, the arm's length price is the arithmetical mean of all values.[1] [4]

The range is narrower than the interquartile range used in many countries, so a global benchmark may need re-running for Bangladesh. And a result outside the range goes to the median, not the nearest edge, so a small miss can produce a large adjustment.

Adjustments only go one way

The proviso to section 235(3) states that the arm's length price "shall not result in total income lower than" the income computed on the actual price.[1] KPMG summarises it as a bar on downward adjustment of income from international transactions.[3] A Bangladesh entity that overpaid a foreign affiliate cannot use transfer pricing to reduce its own taxable profit. Year-end true-ups therefore need care: an upward true-up to the local entity is accepted, while a downward one may be ignored for tax.

Exempt and reduced-rate income

Under section 236(4), an adjustment following a Transfer Pricing Officer's order is taxed at the regular rate even for an exempt or reduced-rate business, so tax-holiday and zone enterprises are not sheltered.[1] Our guide to tax incentives for foreign investors explains those regimes.

Transfer pricing Bangladesh documentation: records, statement and accountant's report

Three separate duties apply, and each carries its own penalty. Our tax compliance checklist for Bangladesh places them in the annual corporate calendar; this section explains what each requires.

Records under section 237

Every person with an international transaction must keep the prescribed records and furnish them within the period in a DCT notice.[1] Under rule 73 of the 1984 Rules the file covers group ownership, each associated enterprise's profile, a functional analysis of functions, assets and risks, transaction details and contracts, financial results, the tested party, comparables and screening, and the method and calculation.[12]

The file is not lodged with the return but must be ready when the notice arrives. The Act has no master file or country-by-country reporting requirement.[1]

Statement of international transactions under section 238

Every person that has entered into an international transaction must furnish a statement of international transactions with its return of income, in the prescribed form.[1] Section 169(3) repeats the duty in the return provisions.[1] There is no de minimis threshold. A subsidiary that paid its parent a single software licence fee must file one. KPMG lists the statement as a standard component of the corporate return pack.[3]

Accountant's report under section 239

Where the aggregate value of international transactions recorded in the books exceeds Tk 3 crore in an income year, the DCT may by written notice require a report from a chartered accountant or a cost and management accountant on all or part of the section 237 records.[1] PwC's 2026 summary treats the report as required above that threshold.[4] Groups above Tk 3 crore should commission it with the year-end file.

Consistency with the rest of the return

From 2026-27 a company must also file a certified computation of income with its audited accounts and keep records for the Companies Act 1994 period.[2] The statement, the audited related-party note, withholding returns and remittance records will be read together, and figures that do not reconcile invite questions.

Transfer pricing Bangladesh penalties

The penalties in Part 17 are calculated on the value of transactions, which makes them severe for high-volume groups:[1]

• Section 276: failure to comply with a notice or requisition under section 235, up to 1% of the value of each international transaction.[1]
• Section 277: failure to keep, maintain or furnish section 237 records, up to 1% of the value of each international transaction.[1]
• Section 278: failure to comply with section 238 on the statement of international transactions, up to 2% of the value of each international transaction.[1]
• Section 279: failure to furnish the section 239 accountant's report, up to Tk 3 lakh.[1]

Section 280 requires a hearing, but section 281 lets the DCT impose these penalties without the Inspecting Additional Commissioner's approval.[1]

The Transfer Pricing Officer and the audit process

A transfer pricing audit can start in two ways. Under section 235(4), during an assessment the DCT may determine the arm's length price if the taxpayer did not apply the methods correctly, failed to keep section 237 records, or relied on unreliable or incorrect data. A show cause notice under section 235(5) must come first.[1] Under section 236, the DCT may, with prior NBR approval, refer the determination to the Transfer Pricing Officer, or the Transfer Pricing Officer may proceed directly, again with NBR approval.[1]

How the Transfer Pricing Officer works

A Transfer Pricing Officer is any income tax authority the NBR authorises for the function, and the statutory definition of DCT includes one.[1] The officer serves a notice to produce the evidence behind the taxpayer's computation, may require evidence from any other person, and determines the arm's length price by written order, which the DCT must follow in computing income. Mistakes apparent from the record can be rectified.[1] [3]

Enforcement in practice

Enforcement was slow for a decade. In 2019 the NBR reported that more than 100 multinationals had filed statements and that voluntary compliance had yielded about Tk 10 crore in a year.[13] Its first full transfer pricing audit began in October 2024, covering Daraz, Heidelberg Materials Bangladesh and Procter & Gamble Bangladesh, after the eight-member Transfer Pricing Cell gained access to an international comparables database; officials said high-volume taxpayers would be prioritised.[10] Comparables-based challenges are now realistic, and a group benchmark the local team cannot explain is exposed.

Intra-group services, management fees and head office charges

Management fees are the most frequent transfer pricing Bangladesh dispute. The test asks whether the Bangladesh entity received a service an independent company would pay for, and at what price. Shareholder activities, duplicated services and vague "global support" allocations fail however carefully they are priced.

The tax caps

Two caps in section 55 apply on top of the arm's length test. Section 55(f) disallows head office or intra-group expenses, by whatever name, above 10% of disclosed net profit for a company not incorporated in Bangladesh. That catches branches of foreign companies.[1] KPMG's 2026 guide confirms the 10% limit for such companies.[3] An arm's length charge above the cap is still disallowed. A charge within the cap can still be adjusted if it is not arm's length.

The Bangladesh Bank route for subsidiaries

Bangladesh Bank's consolidated FEPD-1 Circular No 40 of 30 September 2026 lets authorised dealers remit payments by subsidiaries for services from parent or group companies without prior approval. The services must not be available locally, the parent must hold more than 50%, and the gross amount must not exceed 10% of net profit in the accounting year.[6] Banks must obtain the contracts and invoices, be satisfied the price is competitive and confirm tax and VAT compliance, "including transfer pricing".[6]

Above 10%, the subsidiary must apply to Bangladesh Bank with draft agreements, evidence of price competitiveness, justification that the service cannot be sourced locally and an auditor's tax certificate.[6] That evidence is largely the same as a transfer pricing benefit analysis. One file should serve both. Separately, training and consultancy fees, audit, certification, testing and valuation fees may be remitted up to the higher of 1% of the previous year's declared sales or USD 100,000.[6]

Royalties, technical fees and the 2026 Bangladesh Bank circulars

Royalties and technical fees must pass the arm's length rule, the section 55 cap and the remittance rules. Our guide to intellectual property law in Bangladesh covers registration of the underlying rights.

The deduction cap

As enacted, section 55(e) disallows royalties, licence fees, technical service, know-how and assistance fees and similar fees for the use of intangibles above 10% of the net business profit disclosed in the financial statements.[1] KPMG's 2026 guide, reflecting later amendments, describes the cap as the lower of 15% of disclosed net profit or 6% of disclosed turnover.[3] A loss-making or low-margin licensee will hit the profit-based cap quickly. In that situation the deduction is limited even where a benchmark supports the rate.

Invest Bangladesh Authority approval and the 6% guideline limits

Circular No 40 records that section 27 of the Invest Bangladesh Act 2026 requires approved industrial enterprises to apply to the Invest Bangladesh Authority, formerly BIDA, to pay royalty, technical knowledge or assistance fees and franchise fees abroad.[6] The Authority's guidelines of 3 March 2021 continue to apply, with a schedule of amounts remittable without its approval. Authorised dealers must confirm the source tax, VAT and other levies.[6]

When issued, those guidelines capped royalties and technical fees at 6% of the previous year's sales for operating projects, or 6% of imported machinery value for projects under implementation.[9] A global royalty rate of 8% will need approval or restructuring before it can be paid in full.

Economic zones and Hi-Tech Parks in 2026

Enterprises in the Authority's export processing areas and in Hi-Tech Parks may remit these fees from foreign currency accounts without prior approval within 6% of imported machinery cost for new projects, or 6% of the previous year's declared sales for ongoing concerns.[6] FEPD-1 Circular Letter No 15 of 3 September 2026 let Hi-Tech Park enterprises without foreign currency income remit from Taka accounts within the same limits, and a July 2026 circular let domestic processing area enterprises exceed the ceiling with zone authority approval.[7] [8] [14]

Withholding and treaty limits

Payments to non-residents also carry withholding under section 119, covered in our guide to withholding tax in Bangladesh. Treaty relief can be limited to the arm's length amount: the UK treaty applies its royalty and interest articles only to the amount payable absent the special relationship.[11]

Intra-group financing after the Finance Act 2026

As enacted, section 53 allowed interest above Tk 15 lakh a year paid to an associated enterprise only within NBR-prescribed limits.[1] The Finance Act 2026 removed that approval mechanism, which KPMG describes as part of a package removing the earnings-stripping rule and related-party interest cap.[2] [3]

The 12% floor on interest charged

The other side of the change is a statutory minimum. Where interest on loans to associated enterprises is charged at less than 12% a year, the difference is taxed as business income of the lender; banks, finance and leasing companies are excluded.[2] [3] KPMG adds that where the condition is met, interest on borrowed funds passed through to associated enterprises for business purposes remains deductible.[3] The floor operates independently of any benchmark. An interest-free advance from a Bangladesh company to its foreign parent will attract deemed income even if the group argues it is a capital contribution.

Inbound loans and debt-equity

Inbound shareholder loans still need an arm's length rate. There is no specific thin capitalisation rule, though PwC notes the investment authority's recommended 70:30 debt-to-equity ceiling.[4] Our analysis of equity or parent loan funding for a Bangladesh subsidiary compares the routes. Guarantees deserve separate attention: a parent guarantee above 10% of the subsidiary's borrowings creates association on its own.[1]

Finance Act 2026: what changed for transfer pricing

The Finance Act 2026 left sections 234 to 239 intact but changed the ground around them. Beyond the 35% association test, the 12% interest floor and the removal of interest approval discussed above, it:[2]

• Created a digital permanent establishment for non-residents with 100,000 or more Bangladeshi online customers or subscribers, bringing them within the enterprise definition.[2] [3]
• Reclassified royalty income earned in the regular course of business as business income.[2]
• Cut appeal pre-deposits to 1%, 3% and 10% before the Commissioner (Appeals), Tribunal and High Court Division, and ended waivers.[2]

APAs, tax treaties and relief from double taxation

The Income Tax Act 2023 contains no advance pricing agreement mechanism, so certainty must come from documentation and, in a dispute, the treaties made under section 244.[1] Our double tax treaty planning practice advises on the network, which is summarised in our cross-border acquisition guide.

Corresponding adjustments are not automatic

Older Bangladesh treaties may not oblige the other state to give relief. Article 9 of the 1979 UK–Bangladesh convention allows each state to adjust profits between associated enterprises but contains no paragraph requiring the other state to make a corresponding adjustment.[11] The remedy is the Article 24 mutual agreement procedure, under which the competent authority "shall endeavour" to resolve the case but need not reach a result.[11] Price to avoid an adjustment rather than rely on relief.

Challenging a transfer pricing adjustment

Disputes over international transactions follow a dedicated appellate path. Section 286(2)(c) requires any appeal against an order of adjustment or penalty involving international transactions to go to the Commissioner of Taxes (Appeals).[1] From there the taxpayer may appeal to the Taxes Appellate Tribunal under section 291, and a reference on questions of law lies to the High Court Division under section 293.[1]

Alternative dispute resolution

Sections 296 to 308 provide a facilitated alternative dispute resolution process whose agreed outcome binds both sides.[1] The Finance Act 2026 extended it to orders already decided by the Tribunal.[2] Our tax disputes practice handles audits, appeals and ADR.

Arguments that carry weight

The strongest challenges show that section 235 was not followed: the taxpayer's method rejected without reasons, a range applied to fewer than six comparables, or an adjustment to a point other than the median. Missing show cause notices, NBR approvals or hearings are equally challengeable.[1]

Building a defensible transfer pricing Bangladesh position step by step

Most adjustments are lost before the audit starts, through agreements that do not match conduct or benchmarks never tested against the Bangladesh range. We use the sequence below.

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Mistakes to avoid

• Filing no statement: the section 238 statement is due whenever any international transaction exists, and the 2% penalty applies to each transaction's value.[1]
• Importing a group royalty rate: a rate that is arm's length for the group may still breach the section 55 cap or the 6% remittance limits.[3] [6]
• Interest-free group loans: the 12% floor now creates deemed income on any shortfall.[2]
• Separating tax and remittance files: Bangladesh Bank asks for the same evidence of benefit and price competitiveness as a transfer pricing audit.[6]

Dividend and capital remittances are covered in our guide to capital repatriation from Bangladesh.

What to watch in 2026-27

Three developments will shape transfer pricing Bangladesh practice over the next year. First, whether the NBR issues fresh rules under the 2023 Act on documentation, the statement form and retention, replacing the carried-over 1984 Rules.[1] Second, how far the audit programme that began in 2024 expands, and whether its results are published.[10] Third, how the 12% interest floor and the 35% association test are applied in the first assessments of 2026-27 returns.[2]

Groups should align intercompany agreements, Bangladesh benchmarks and remittance files into one position. TRW's international tax practice prepares transfer pricing documentation, reviews royalty, service and financing arrangements and defends audits, or you can contact TRW to discuss your group's position.

Frequently asked questions

Which law governs transfer pricing in Bangladesh?

Sections 233 to 239 of the Income Tax Act 2023, in Chapter II of Part 15, with penalties in sections 276 to 279. They replaced Chapter XIA of the Income Tax Ordinance 1984.[1]

Do the rules apply to transactions between two Bangladeshi companies?

Not directly. An international transaction requires at least one non-resident party. Domestic dealings remain subject to the section 55 expense caps, the general anti-avoidance rule and, for loans, the 2026 interest floor.[1] [2]

What shareholding makes two companies associated enterprises?

More than 25% of voting power, directly or indirectly. Board control, common group membership, practical control, large loans and guarantees can also create association.[1]

Which transfer pricing methods are accepted?

Comparable uncontrolled price, resale price, cost plus, profit split and transactional net margin, plus any other method where none of those can reasonably be applied.[1]

How is the arm's length range calculated?

With six or more comparables, from the 30th to the 70th percentile. A price outside the range is adjusted to the median. With fewer than six, the arithmetical mean applies.[1]

Must the statement of international transactions be filed every year?

Yes, with the return of income for every year in which the taxpayer has any international transaction. There is no minimum value.[1]

When is an accountant's report needed?

Where international transactions exceed Tk 3 crore in an income year, the DCT may require a report from a chartered accountant or cost and management accountant. Failure to furnish it carries a penalty of up to Tk 3 lakh.[1]

Can Bangladesh reduce my income through a transfer pricing adjustment?

No. The arm's length price cannot produce total income lower than the income computed on the actual price.[1] [3]

Does Bangladesh offer advance pricing agreements?

No. The Act contains no APA mechanism. Treaty mutual agreement procedures are available after a dispute arises but do not guarantee relief.[1] [11]

Can a subsidiary pay its parent for services without Bangladesh Bank approval?

Yes, if the services are not available locally, the parent holds more than 50% and the gross amount is within 10% of net profit, subject to contracts, competitive pricing and tax compliance including transfer pricing.[6]