Understanding Bangladesh's Tax Framework in 2025

Bangladesh’s tax system continues to evolve in 2025, maintaining a strong focus on income and value-added taxes as central pillars of its fiscal policy. The National Board of Revenue (NBR), operating under the Ministry of Finance, oversees all tax administration across the country. Key legislation shaping the landscape includes the Income Tax Ordinance of 1984, the Value Added Tax Act of 1991, and the Customs Act of 1969. These laws form the backbone of compliance for both domestic and foreign investors. For comprehensive guidance, professionals often refer to official publications such as the Tax Guide for Chinese Investors in Bangladesh.

Key Taxes and Applicable Rates

The Bangladeshi government applies a diversified range of taxes designed to balance revenue generation with economic incentives, particularly in strategic sectors like manufacturing and digital services.

Corporate and Personal Income Tax

Income tax in Bangladesh is split into two major categories: corporate and individual. Corporate tax rates vary by entity type—unlisted companies face a 30% rate, while listed firms benefit from a reduced 22.5%. Financial institutions, including banks and non-banking financial companies, are taxed more heavily, ranging from 37.5% to 45%, reflecting their higher profitability and systemic role.

Certain industries receive preferential treatment to boost exports and industrial growth. Notably, garment manufacturing and textile production enjoy lower effective tax rates as part of Bangladesh’s export-led development model.

Personal income tax follows a progressive six-tier structure. Individuals benefit from tax-free thresholds: men earning up to BDT 350,000 annually, women up to BDT 400,000, and senior citizens (aged 65+) up to BDT 450,000 are exempt from income tax. This gender- and age-based differentiation supports inclusive economic participation.

Customs Duties

Customs tariffs in Bangladesh span six brackets, ranging from 0% to 25%. To promote import substitution and value-added exports, raw materials used in pharmaceuticals and industrial machinery are often granted duty exemptions. In recent years, public health priorities have also influenced customs policy—for instance, medical supplies critical during pandemics were made duty-free starting March 2020, a measure that remains influential in shaping emergency trade responses.

Value Added Tax (VAT)

VAT has been a cornerstone of Bangladesh’s indirect taxation since 1991. It applies to the import, production, and sale of goods and services. Businesses with annual turnover exceeding BDT 30 million are subject to a standard VAT rate of 15%, while smaller enterprises below this threshold pay a simplified 4% rate. This tiered system aims to reduce compliance burdens on small and medium-sized enterprises (SMEs).

Supplementary Duty

A supplementary duty is imposed on select goods and services deemed non-essential or luxury items. Rates can range from 20% to as high as 350%, particularly on imported tobacco, alcohol, and premium consumer products. This levy serves dual purposes: generating revenue and discouraging excessive consumption of harmful or imported goods.

Digital Services Tax

In alignment with global trends, Bangladesh introduced a digital services tax effective July 1, 2018. Foreign companies providing digital services—such as streaming platforms, online advertising, and cloud-based software—to Bangladeshi users must register and collect VAT at either 15% or 5%, depending on the service category. This ensures that cross-border digital transactions contribute fairly to national revenues.

Environmental Levies

To address environmental concerns, Bangladesh imposes an environmental tax on fossil fuel consumption. Rates vary between 10.2% and 15.7%, based on fuel type, encouraging cleaner energy alternatives and supporting climate resilience initiatives.

Additional Considerations for International Employers

For multinational organizations expanding into Bangladesh, understanding local payroll obligations, withholding requirements, and expatriate tax liabilities is crucial. Partnering with experienced global employment services can streamline compliance and mitigate risks. Companies like SailGlobal offer tailored solutions for overseas human resource management, ensuring smooth market entry and regulatory adherence.

As Bangladesh strengthens its position as a growing economy in South Asia, staying updated on tax reforms is essential for investors, entrepreneurs, and international employers alike.