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Last updated: 5th March 2017

Fiscal and Non Fiscal Incentives

Investing in Bangladesh: Incentives

Fiscal Incentives

• Corporate tax holiday: 5 to 7 years for selected sectors and areas

• Tax holiday for infrastructure investment: upto 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

• Permanent resident permits on investing US$ 75,000

• And many more .....

 

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.

 

Investing in Bangladesh: Tax-related benefits

Question-1: What are the privileges and opportunities for the foreign investors from NBR.

Customs

  1. 0% and 1% customs duty rate is in force for the import of industrial capital machinery and spare parts. (SRO-135 of 2015)
  2. Special concessionary customs duty rate applies to the import of raw materials for industrial sectors like Ship-Building Industry (SRO-150 of 2013 and 137 of 2015), Pharmaceuticals Industry (SRO-122 of 2014 and 140 of 2015), Textile Industry (SRO-178 of 2010 and 159 of 2015), Toys Manufacturing Industry (SRO-145 of 2015), Telecommunication Industry (SRO-158 of 2008 and 143 of 2015), and Handloom Industry (SRO-146 of 2015).
  3. Raw materials, machinery and spare parts of poultry and dairy farms are exempted from customs duty. (SRO-160 of 2012, and 147 of 2013, SRO-138 and SRO 139 of 2015)
  4. Raw materials, machinery and spare parts of Solar Panel Manufacturing Plants are exempted from customs duty.(SRO-155 of 2004)
  5. Import of raw materials by Generator Producing and Assembling Industry is exempted from customs duty.(SRO-80 of 2007)
  6. Raw materials, machinery and spare parts imported by power generation plants are exempted from customs duty. (SRO-73 of 1997 and SRO-144 of 2015)
  7. Exemptions from customs duty are in force for raw materials, machinery and spare parts imported by Oil and Gas exploration and extraction companies, and also by CNG filling station. (SRO-146 of 2009 and SRO 176 of 2012)
  8. Medical equipments and medication materials are exempted from customs duty. (SRO-137 of 2009)
  9. Technical grades imported by the pharmaceutical raw materials producing industries are exempted from customs duty (SRO-261 of 2009).
  10. Specific utility goods imported by textile industry are exempted from customs duty. (SRO-145 of 2014 and 148 of 2015).
  11. Import of De-inking chemicals and waste paper by newsprint paper manufacturing industries is exempted from customs duty. (SRO-325 and 326 of 2000, and SRO-147 of 2015).
  12. Special concessionary customs duty rate is in force for the machineries and materials imported for the construction of residential hotels for the development of tourism sector. (SRO-50 of 2014 and 157 of 2015).
  13. Special concessionary customs duty rate is in force for the import of chemical materials by the leather industries. (SRO-169 of 2005 and 156 of 2015).
  14. Imports undertaken by 100% export-oriented industries are exempted from customs duty (First Schedule: Bangladesh Customs Tariff).
  15. Exports from Bangladesh are free from customs duty (First Schedule: Bangladesh Customs Tariff).
  16. Bonded facilities are available for 100% export-oriented industries, Deemed export-oriented industries, 100% Export-Oriented and Deemed export-oriented industries located within the limits of Govt. and Non-Government Export Processing Zones. (Bonded Warehouse Licensing Rules-2008).
  17. Apart from the cases mentioned above, all kinds of industrial imports enjoy special concessionary tax rates compared to commercial imports where a higher duty rate is in force. (First schedule: Bangladesh Customs Tariff)
  18. Government may offer other Customs duty related incentives to the investors by Gazette Notification.

 

VAT (Value Added Tax)

  1. Import of industrial capital machinery is exempted from VAT. (Customs SRO-135 of 2015)
  2. VAT exemptions are in force for the import of raw materials and machineries used in the production of Refrigerators, Freezers, and Motor Cycles. (VAT SRO-213 of 2010 and VAT SRO-332 of 2013).
  3. Glass tubes, Power saving bulb and its raw materials are exempted from VAT at the production stage. (VAT SRO-214 of 2010 and SRO-127 of 2015).
  4. VAT exemption is in force for raw materials and machineries of air-conditioners at the production stage.
  5. Iron materials imported by LP Gas cylinder manufacturing industries are exempted from VAT. (Customs SRO-179 of 2014)
  6. VAT is exempted on the import of raw materials for industrial sectors like Ship-Building Industry (Customs SRO-150 of 2013 and 137 of 2015), Textile Industry (Customs SRO-178 of 2010 and 159 of 2015), Toys Manufacturing Industry (Customs SRO-145 of 2015), and Handloom Industry (Customs SRO-146 of 2015).
  7.  Raw materials, machinery and spare parts of poultry and dairy farms are exempted from VAT. (Customs SRO-160 of 2012, and 147 of 2013, Customs SRO-138 and SRO 139 of 2015)
  8. Raw materials, machinery and spare parts of Solar Panel Manufacturing Plants are exempted from VAT.( Customs SRO-155 of 2004)
  9. Raw materials, machinery and spare parts imported by power generation plants are exempted from VAT. (Customs SRO-73 of 1997 and Customs SRO-144 of 2015).
  10. Exemptions from VAT are in force for raw materials, machinery and spare parts imported by Oil and Gas exploration and extraction companies, and also by CNG filling station. (Customs SRO-146 of 2009 and Customs SRO 176 of 2012).
  11. Medical equipments and medication materials are exempted from VAT. (Customs SRO-137 of 2009).
  12. VAT exemption is in force for the machineries and materials imported for the construction of residential hotels for the development of tourism sector. (SRO-50 of 2014 and 157 of 2015).
  13. Export-oriented industries are entitled to draw back the amount of VAT paid at the import stage of raw materials (The Value Added Rules, 1991).
  14. 0% VAT rate is applicable to exports from Bangladesh (Article-3 of Value Added Tax, 1991).
  15. Government may offer other VAT related benefits to the investors by Gazette Notification.

 

Income Tax

  1. Exemption from tax of newly established industrial undertakings set up between the period of July, 2011 and June, 2 [2019], etc. in certain cases. ( as per SECTION  46B of the Income Tax Ordinance, 1984)

Income, profits and gains from an industrial undertaking set-up in Bangladesh between the first day of July, 2011 and the thirtieth day of June, 2019 (both days inclusive) shall be exempted from the tax payable under this Ordinance for the period, and at the rate, specified below:

if the said undertaking is set-up in-

  1. Dhaka and Chittagong divisions, excluding Dhaka, Narayanganj, Gazipur, Chittagong, Rangamati, Bandarban and Khagrachari districts, for a period of five years beginning with the month of commencement of commercial production of the said undertaking:

Period of Exemption

Rate of Exemption

For the first and second year

100% of income

For the third year

60% of income

For the fourth year

40% of income

For the fifth year

20% of income

 

  1. Rajshahi, Khulna, Sylhet, Barisal and Rangpur divisions (excluding City Corporation area) and Rangamati, Bandarban and Khagrachari districts, for a period of ten years beginning with the month of commencement of commercial production of the said undertaking:

 

Period of Exemption

Rate of Exemption

For the First and second year

100% of income

For the third year

70% of income

For the fourth year

55% of income

For the fifth year

40% of income

For the sixth year

25% of income

For the seventh to tenth year

20% of income

 

“Industrial undertaking” means an industry engaged in production of –

  1. active pharmaceuticals ingredient industry and radio pharmaceuticals industry;
  2. automobile manufacturing industry;
  3. barrier contraceptive and rubber latex;
  4. basic chemicals or dyes and chemicals;
  5. basic ingredients of electronic industry (e.g. resistance, capacitor, transistor, integrator circuit);
  6. bi-cycle manufacturing industry
  7. bio-fertilizer;
  8. biotechnology;
  9. boilers;
  10. brick made of automatic Hybrid Hoffmann Kiln or Tunnel Kiln technology;
  11. compressors;
  12. computer hardware;
  13. energy efficient appliances;
  14. insecticide or pesticide;
  15. petro-chemicals;
  16. pharmaceuticals;
  17. processing of locally produced fruits and vegetables;
  18. radio-active (diffusion) application industry (e.g. developing quality or decaying polymer or preservation of food or disinfecting medicinal equipment);
  19. textile machinery;
  20. tissue grafting;
  21. tyre manufacturing industry; or
  22. any other category of industrial undertaking as the Government may, by notification in the official Gazette, specify.

 

  1. Exemption from tax of newly established physical infrastructure facility set up between the period of July, 2011 and June, 2 [2019], etc. in certain cases. (as per SECTION 46C of the Income Tax Ordinance, 1984 )

Income, profits and gains from physical infrastructure facility, set up in Bangladesh between the first day of July, 2011 and the thirtieth day of June, 2019 (both days inclusive) shall be exempted from the tax payable under this Ordinance for ten years beginning with the month of commencement of commercial operation, and at the rate, specified below:

Period of Exemption

Rate of Exemption

For the first and second year

100% of income

For the third year

80% of income

For the fourth year

70% of income

For the fifth year

60% of income

For the sixth year

50% of income

For the seventh year

40% of income

For the eighth year

30% of income

For the ninth year

20% of income

For the tenth year

10% of income

 

"physical infrastructure facility" means,-

  1.  deep sea port;
  2.  elevated expressway;
  3. export processing zone;
  4. flyover;
  5. gas pipe line;
  6. Hi-tech park;
  7. Information and Communication Technology (ICT) village or software technology zone;
  8. Information Technology (IT) park;
  9. large water treatment plant and supply through pipe line;
  10. Liquefied Natural Gas (LNG) terminal and transmission line;
  11. mono-rail;
  12. rapid transit;
  13. renewable energy (e.g energy saving bulb, solar energy plant, windmill);
  14. sea or river port;
  15. toll road or bridge;
  16. underground rail;
  17. waste treatment plant; or
  18. any other category of physical infrastructure facility as the Government may, by notification in the official Gazette, specify.

 

Other Taxes

  1. No other taxes like ATV (Advanced Trade VAT) and SD (Supplementary Duty) are due to be paid by industrial importers (including those of 100% export-oriented industries) on the import of industrial raw materials and machineries. (VAT SRO—124 of 2015)

Qusetion-2: What are the legal frameworks for the foreign investors?

Ans: Customs, VAT and Income Tax related laws and regulations.

Question-3:  With how many countries Bangladesh has Double Treaty Agreement? How does this treaty help the investors?

Ans: Bangladesh has had Double Treaty Agreement with 32 countries of the world. Under this agreement, investors will not be required to pay taxes in their home countries with applicable taxes being paid in Bangladesh.

Fiscal and Non Fiscal Incentives Fiscal and Non Fiscal Incentives

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