Investment Prospects in Bangladesh

Investing in Bangladesh: Incentives

Fiscal Incentives

  • Corporate tax holiday: 5 to 7 years for selected sectors and areas
  • Tax holiday for infrastructure investment: up to 10 years
  • Accelerated depreciation on cost of machinery for new industries in lieu of tax holiday
  • Avoidance of double taxation under bilateral tax convention
  • Tariff concessions on import of capital machinery
  • Tariff concessions on import of raw materials of the export-oriented industries
  • Bonded warehousing facility

Cash & Other Incentives

  • Cash incentives and export subsidies ranging from 5% to 20% on the FOB value of selected products.
  • Funds for export promotion, export credit guarantee scheme, permission for domestic sales up to 20% by export-oriented companies outside EPZ.
  • Remittance of royalty, technical know-how and technical assistance fees
  • Citizenship by investing a minimum of US$ 5,00,000 or by transferring US$ 1,000,000 to any recognized financial institution (non-repatriable).
  • Permanent resident permits on investing US$ 75,000 (non-repatriable).
  • Special facilities and venture capital support will be provided to export-oriented industries under “Thrust sectors”. Thrust Sectors include Agro-based industries, Artificial flower-making, Computer software and information technology, Electronics, Frozen food, Floriculture, Gift items, Infrastructure, Jute goods, Jewellery and diamond cutting and polishing, leather, Oil and gas, Sericulture and silk industry, Stuffed toys, Textiles, Tourism.

Financial incentives

  • Businesses exporting 80% or more of goods or services
  • Reduced import duty on machinery & spares
  • (1% for export-oriented industries and 3% for other industries)
  • Export credit guarantee scheme
  • Domestic market sales up to 20% allowed to export-oriented companies outside EPZ (relevant duties apply)
  • Cash incentives and export subsidies (on the FOB value)
  • 5% for export oriented local textiles (instead of duty drawback and custom bond), 5% in ship building, SME in textile industry, 10% on frozen shrimp, 7.5% for Jute thread, 10% for jute products, light engineering products, 10% PET flex, 15% for export of bone powder, 12.5% frozen fish, potato, 15% – 20% for hand made products using straw, sugarcane extract, 15% for leather products, and 17.5% for bicycles. 20% for agro-processing and agricultural produce, 20% on potato export, handicrafts made of straw sugarcane straw0, 20% for halal meat.

Why Bangladesh?

Bangladesh is a winning combination with its competitive business-friendly environment and cost structure that can give you best returns:

  • Industrious low-cost workforce
  • Strategic location, regional connectivity and worldwide access.
  • Strong local market and growth
  • Low cost of energy
  • Proven export competitiveness
  • Competitive incentives
  • Export and Economic Zones
  • Positive investment climate.

The Package of incentives is listed below:

Tax Holiday and Tax Exemption

  • 5 to 10 years of Tax Holiday and reduced tax depending on area
  • Dhaka and Chittagong divisions, excluding Dhaka, Mymensingh, Narayanganj, Gazipur, Chittagong, Rangamati, Bandarban and Khagrachari districts, for a period of five years
  • Rajshahi, Khulna, Sylhet, Barisal and Rangpur divisions (excluding City Corporation area) and Rangamati, Bandarban and Khagrachari districts, for a period of ten years
  • 100% tax exemption on income and capital gain for certain projects under Public Private Partnership (PPP) for 10 years.
  • 100% tax exemption from software development, Nationwide Telecommunication Transmission Network or Information Technology Enabled Services.
  • 50% of income derived from export is exempted from tax
  • Tax exemption on interest paid on foreign loan
  • Conditions: To enjoy tax exemption or benefits, i) register investments with BIDA, ii) apply to National Board of Revenue (NBR), and iii) receive a certificate from NBR within 45 days of the application.
  • For further information please visit: https://bida.gov.bd/incentives#list-item-1

Accelerated Depreciation

  • Accelerated depreciation for machinery and plants which do not enjoy tax holiday Exemption on Import Duties

Exemption of customs duties

  • Exemption of customs duties on capital machineries
  • Exemption of import duties on raw material used for producing export goods

Incentives and facilities for export-oriented industries

Export-oriented industries (exporting more than 80% of their goods and services) regardless of their locations (i.e., within or outside EZ/ EZ) can benefit from the following privileges and facilities:

  • Eligible to be exempted from income tax for 50% earnings from export (unless paying tax at reduced rate)
  • No duty on export except for tobacco products
  • Bonded warehousing facilities
  • Duty drawback facilities
  • Exporters of certain sectors enjoy additional benefits in the form of a subsidy or cash incentive based on some conditions

Public-Private Partnership (PPP) Projects

The following incentives and facilities are provided for certain Public Private Partnership (PPP) projects.

  • The business income is 100% exempted from income tax for the next 10 years from the date of commercial operation
  • The capital gains from transfer of share capitals, royalty, technical know-how and technical assistance fee paid by such companies are 100% exempted from Income tax for the next 10 years from the date of commercial operation.
  • Income Tax exemption for foreign technicians employed in PPP Project Company: The foreign technicians appointed in PPP Project Company will get 50% tax exemption for next 3 years from the date of appointment subject to such company does not cross 5 years from the date of commercial operation i.e. the company who has crossed 5 years from the date of commercial production, their foreign technicians can not avail this benefit.
  • List of physical infrastructure facility eligible for Tax exemption under section 46CC of Income Tax Ordinance: (10 years)
  • deep sea port
  • elevated expressway
  • export processing zone
  • flyover
  • gas pipe line
  • Hi-tech park
  • Information and Communication Technology (ICT) village or software technology zone
  • Information Technology (IT) park
  • large water treatment plant and supply through pipe line
  • Liquefied Natural Gas (LNG) terminal and transmission line
  • mobile phone tower or tower sharing infrastructure
  • mono-rail
  • rapid transit
  • renewable energy (e.g. solar energy plant, windmill)
  • sea or river port
  • toll road or bridge
  • underground rail
  • waste treatment plant

Tariff Refund

  • Tariff (if paid) refund on import of raw materials for export

Double Taxation Prevention

  • Once tax paid benefits’ for countries with double taxation avoidance treaty.

Bonded warehousing Facilities

  • For export oriented industries
  • For large import for local selling in certain items

Ownership

  • 100% ownership is allowed

Repatriation of invested capital and dividend

  • Full repatriation of capital invested from foreign sources will be allowed. Similarly, profits and dividends accruing to foreign investment may be transferred in full. If foreign investors reinvest their dividends and or retained earnings, those will be treated as new investment.

Other facilities relevant to foreign investors

  • No restrictions on issuance of work permits to project related foreign nationals and employees
  • Facilities for repatriation of invested capital, profits and dividends
  • Provision of transfer of shares held by foreign shareholders to local investors
  • Reinvestment of remittable dividends would be treated as new investment
  • Remittance of royalty, technical know-how and technical assistance fees
  • The Foreign Private Investment (Promotion & Protection) Act. 1980 ensures legal protection to foreign investment in Bangladesh against nationalization and expropriation
  • Equal treatment of both local and foreign investment.
  • Bilateral and multilateral investment agreements ensure protection of investment
  • 100% FDI, Joint Ventures, Partnerships, PPPs, Non-equity mode (Technology transfer, licensing Franchising, contracting etc.), and Foreign Lending are allowed
  • 100% FDI or Joint Venture FDIs are allowed to participate in the primary and secondary stock markets.
  • Foreign Investors are allowed to have access to local banks for working capital requirements.
  • Intellectual Property right is protected by Law.

Tax holidays from 5 to 7 years in the following sectors:

  • API industry and radio pharmaceuticals industry;
  • barrier contraceptive and rubber latex;
  • basic chemicals or dyes and chemicals;
  • basic ingredients of electronic industry (e.g resistance, capacitor, transistor, integrator circuit);
  • bio-fertilizer;
  • biotechnology;
  • boilers;
  • brick made of made of automatic hybrid Hoffmann kiln technology;
  • compressors;
  • computer hardware;
  • energy efficient appliances;
  • insecticide or pesticide;
  • petro-chemicals;
  • pharmaceuticals;
  • processing of locally produced fruits and vegetables;
  • radio-active (diffusion) application industry (e.g. developing quality or decaying polymer or preservation of food or disinfecting medicinal equipment);
  • textile machinery;
  • tissue grafting; or
  • any other category of industrial undertaking as the Government may, by notification in the official Gazette, specify.

Taxation

A competitive corporate tax structure
Status

Corporate Tax: (on net profit)

Publicly Traded Company 25%

Non-Publicly Traded Company 35%

Bank, Insurances, Financial Institutions (listed) 40%

Bank, Insurances, Financial Institutions (not-listed) 42.5%

Bank, Insurances, Financial Institutions (registered after 2013)) 40%

Merchant Banks 37.5%

Cell Phone Company (40% if listed) 45%

Cigarette Producing Companies 45%
Personal taxes (based on defined slabs) 10%-25%