The tax authority is set to ease the burden of minimum tax on businesses in the upcoming budget by incorporating provisions for tax refunds.
Under the Finance Bill 2026, the government may allow businesses to claim refunds of the minimum tax if they fail to adjust excess payments against actual tax liabilities within three consecutive tax years.
If the minimum tax remains unadjusted after three years, companies would be eligible to seek refunds of the excess amount paid.
The minimum tax has long remained a contentious issue, as businesses claim it pushes the effective tax rate to as high as 45-50 per cent in some cases.
At present, companies paying minimum tax or tax deducted at source (TDS) are allowed to adjust the paid amount against their final tax liabilities, but they are not entitled to claim refunds of excess payments.
Distinguished corporate leader Masud Khan, chairman of Unilever Consumer Care Ltd, welcomes the proposed move, saying industries such as steel and cement often fail to adjust minimum tax payments due to low profitability.
He suggests excess taxes be refunded through banking channels to avoid unnecessary hassles at tax offices.
Tax expert Snehasish Barua says the minimum tax imposed on gross receipts under the Income Tax Act severely undermines the principle of tax equity.
The tax authority is set to ease the burden of minimum tax on businesses in the upcoming budget by incorporating provisions for tax refunds.
Under the Finance Bill 2026, the government may allow businesses to claim refunds of the minimum tax if they fail to adjust excess payments against actual tax liabilities within three consecutive tax years.
If the minimum tax remains unadjusted after three years, companies would be eligible to seek refunds of the excess amount paid.
The minimum tax has long remained a contentious issue, as businesses claim it pushes the effective tax rate to as high as 45-50 per cent in some cases.
At present, companies paying minimum tax or tax deducted at source (TDS) are allowed to adjust the paid amount against their final tax liabilities, but they are not entitled to claim refunds of excess payments.
Distinguished corporate leader Masud Khan, chairman of Unilever Consumer Care Ltd, welcomes the proposed move, saying industries such as steel and cement often fail to adjust minimum tax payments due to low profitability.
He suggests excess taxes be refunded through banking channels to avoid unnecessary hassles at tax offices.
Tax expert Snehasish Barua says the minimum tax imposed on gross receipts under the Income Tax Act severely undermines the principle of tax equity.
"By ignoring actual profitability, it drains vital working capital, discourages investment, including foreign direct investment, and stifles entrepreneurial growth - contradicting the principles of progressive and fair taxation."
Debabrata Roy Chowdhury, director of legal & corporate affairs at Nestlé Bangladesh PLC, welcomes the initiative of the NBR to allow refunds for taxpayers whose legitimate liability was lower than the minimum tax paid through the withholding mechanism or other means.
This long-standing demand from industry reflects a step toward greater fairness in the tax system, he adds.
However, a more sustainable solution lies in rationalising withholding tax rates to ensure they remain below the level of legitimate tax liability, he says.
"To achieve this, a sector-wise study of profitability and corresponding tax obligations is essential. Such an evidence-based approach will enable the NBR to align withholding rates with actual business realities, thereby eliminating the need for refunds to a much greater extent."
The NBR introduced minimum tax in 1980 on company turnover to prevent tax evasion by importers and contractors.
Following its initial success, the measure was gradually expanded to other sectors.
However, the practice of final tax settlement based on turnover began in 2011 and was later renamed minimum tax around 2016.
Under the current Income Tax Act, companies have no provision to adjust or claim refunds for minimum tax deducted on turnover or, in many cases, tax deducted at source.
As a result, when a company's profit is lower than the advance tax deducted, its effective tax rate rises sharply.
In cases of financial losses, the tax burden directly erodes corporate capital since the excess payment cannot be recovered.
In Bangladesh, companies are subject to minimum tax ranging from 1.0 per cent to 3.0 per cent of annual turnover, depending on the nature of the business.
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