Bangladesh: Income tax and VAT proposals in Finance Ordinance 2025

Finance Ordinance 2025 includes several changes to income tax and value added tax (VAT) regulations. These proposals may be amended before the effective date of July 1, 2025.

Income tax

• Tax rates for individuals:
  • For assessment year 2025-2026: Income up to Taka 350,000 is tax-exempt, with rates increasing progressively to 30% for income above Taka 2,000,000
  • Proposed rates for 2026-2027 and 2027-2028: Initial exemption increased to Taka 375,000, with similar progressive rates
• Corporate tax rates:
  • Publicly traded companies listing more than 10% of their paid-up capital through IPO are taxed at 20%
  • Non-listed companies' tax rate proposed to increase to 27.5% from 25%
• Minimum Tax: Minimum tax rates adjusted based on taxpayer location, with a new minimum tax of Taka 1,000 for new taxpayers in assessment years 2026-2027 and 2027-2028
• Surcharge: Rates based on net worth remain unchanged across proposed assessment years.
• Environmental surcharge: Rates depend on engine capacity of motor vehicles, with a proposal to withdraw surcharge for electric vehicles from assessment year 2026-2027
• Investment tax rebate: Rebates are available based on taxable income, actual investment, or a cap of Taka 1 million

VAT

• Advance tax rates: Reduced for import of raw materials by manufacturers from 3% to 2% and increased for commercial importers from 5% to 7.5%
• VAT rate adjustments:
  • Increased VAT rates for online goods sales and certain manufacturing stages
  • VAT exemptions introduced for liquefied natural gas (LNG), computer monitors, aircraft lease rent, and packaged liquid milk
• Excise duty adjustments: Positive changes for bank account balances up to Taka 5 lakh, with unchanged rates for higher balances
• Industry-specific vat exemptions: Various industries like mobile phone manufacturing and pharmaceutical ingredients receive VAT exemptions until June 2030

Read a June 2025 report prepared by the KPMG member firm in Bangladesh