The Bangladesh government is set to halve the advance income tax deducted at source on export cash incentives to 5 per cent from the existing 10 per cent in the proposed national budget for FY2026-27, according to finance ministry officials.
The move is aimed at easing the tax burden on exporters and improving their cash flow at a time when businesses are grappling with weak global demand, rising production costs, and persistent economic uncertainties.
Currently, a total of 43 sectors receive cash incentives against exports, while sectors like readymade garments, diversified jute, agro-processing, and leather products enjoy incentives of 10 per cent.
Beyond the export incentive measure, the proposed budget is also set to reduce advance income tax and source tax in a number of sectors, while introducing a series of measures to simplify business licenses, approvals, and tax services, said the officials.
Mahmud Hasan Khan Babu, president of the Bangladesh Garment Manufacturers and Exporters Association, said that the tax reduction move would help exporters remain competitive in the global market.
He, however, urged the government to completely withdraw the AIT on cash incentives, arguing that such incentives constitute policy support and should not be taxed.
He also urged the government to restore the source tax on exports to 0.5 per cent from the current 1 per cent and it should be treated as a final tax settlement.
According to the National Board of Revenue, with Tk 9,025 crore allocated for export incentives in the current fiscal year, 10 per cent AIT could generate nearly Tk 900 crore. But the proposed reduction might lower government revenue by around Tk 450 crore in the next fiscal year.
Apart from the export tax measure, the AIT on imports of computer equipment and components might be reduced from 5 per cent to 2 per cent, said NBR officials.
AIT on 22 categories of inputs used in local mobile phone manufacturing might be cut to 1 per cent.
Amid the ongoing energy crisis, the existing 5 per cent AIT on electric vehicle imports and EV charging equipment might be withdrawn entirely, and the registration fee for electric vehicles, currently as high as Tk 2 lakh, might be halved.
The AIT on gold and ornament imports might be slashed from 5 per cent to 0.5 per cent.
NBR might introduce a 10-year tax holiday for edible oil producers using locally grown oilseeds.
Moreover, the tax on raw material supplies for the recycling sector might be reduced from 3 per cent to 1 per cent.
On the entrepreneurship front, income earned by freelancers and content creators might be fully exempt from tax.
The government also stepped back from imposing taxes on motorcycles and autorickshaws in the FY27 budget, said NBR officials.
NBR also backed away from introducing a wealth tax on the super-rich and an inheritance tax, following a major backlash.
Annual turnover of up to Tk 50 lakh for small and medium enterprises might be exempt, while for women entrepreneurs, the threshold might be raised to Tk 70 lakh.
Startups, innovation ventures, and technology-based businesses might receive tax exemptions for a defined period, with similar reliefs also expected for new and young entrepreneurs.
Alongside the tax measures, the government is set to announce a broad package of deregulation reforms aimed at simplifying licensing procedures, modernising tax administration and accelerating approvals to stimulate investment and job creation.
Businesses seeking new licenses or expansion approvals would receive provisional permission within seven days of application.
The validity period of most business licenses and permits is also expected to be extended to five years, reducing the need for annual renewals.
Finance minister Amir Khosru Mahmud Choudhury’s budget speech might feature a dedicated chapter titled ‘Ease of Doing Business through Deregulation.’
On tax administration, the budget envisages full automation of the NBR and its field offices, with online corporate tax return filing, year-round submission facilities and incentives for early filers, while late filers might face higher rates.
Tax refunds would be credited directly to taxpayers’ bank accounts, and a mobile application would be launched to support e-return filing and taxpayer services.
The budget would also announce the launch of ‘Banglabiz’, an integrated one-stop service platform, and the full operationalisation of the National Single Window, through which tax residency certificates would be issued automatically, simplifying the process of availing benefits under international trade and tax treaties.
The NBR might further integrate the ASYCUDA World customs system with its e-return platform to streamline data sharing between customs and tax administrations and help curb tax evasion.
The NBR might allow businesses to submit VAT returns quarterly rather than monthly, while also introducing provisions that allow companies using NBR-approved Enterprise Resource Planning software to avoid submitting hard copies of VAT returns and audit-related documents.
Moreover, online VAT registration could be made fully automated, removing the requirement for approval from VAT officials.
NBR officials said the upcoming budget would be the most business- and investment-friendly in the country’s history.
The Bangladesh Nationalist Party-led government is set to present its first budget on June 11 at the national parliament, with a total outlay of around Tk 9.30 lakh crore.
