Bangladesh's 2026-27 budget will introduce unprecedented tax relief across import-export sectors, consumer goods, and emerging entrepreneurs, while raising levies on tobacco, steel, and select commodities. The sweeping measures include slashing advance income tax on mobile phone inputs to 1%, eliminating taxation for freelancers and businesses below set turnover thresholds, and extending incentives for renewable energy investments until 2035—though officials warn some essential items will become costlier to offset revenue losses.
The Bangladesh government is preparing sweeping tax cuts across multiple sectors in its upcoming 2026-27 budget, designed to make Bangladesh a more attractive investment destination. The push includes reduced advance income tax (AIT) rates, slashed withholding taxes, and comprehensive exemptions for emerging entrepreneurs—measures officials describe as unprecedented in scale.
Sweeping tax reductions across import and export
Advance income tax on computer equipment will drop from 5% to 2%, while AIT on 22 categories of inputs for local mobile phone manufacturing will fall to just 1%.
The withholding tax on export cash incentives will be halved from 10% to 5%. Industrial raw material imports will see AIT reduced from 5% to 4%, with the same cut applied to local supplies.
For electric vehicles, authorities plan to scrap the existing 5% AIT on imports entirely and slash registration fees in half—from BDT 2 lakh to BDT 1 lakh.
Gold and ornament imports will see dramatic relief, with AIT slashed from 5% to 0.5%, aimed at bringing jewellery traders into the tax net. Renewable energy investments will receive full tax exemptions until 2035.
A 10-year tax holiday will be introduced for edible oil producers using locally produced oilseeds.
Withholding taxes will be reduced across sectors: machinery from non-residents cut by half (from 15%), insurance premiums by 50%, and offshore loan interest from 20% to 10%.
Fuel supply withholding tax will drop from 1.5% to 1%, mobile network services from 12% to 10%, transport and rental services from 5% to 2%, and packaging materials from 5% to 3%. To promote recycling, raw material supplies will see tax reduced from 3% to 1%.
Electric vehicles and EV charging systems may also qualify for reduced taxes, supporting the government’s sustainability objectives. Live fish and animals would benefit from lower duties.
Consumer goods and home appliances get relief
Air conditioning units and refrigerators stand to benefit substantially. VAT at the production stage would fall from 15% to 7.5%, with the incentive extended through 2030. This reversal of last year’s duty increase—which had pushed the rate to 15%—is intended to boost domestic manufacturing, particularly as imports have grown over 10% since the higher levy took effect.
Other household items may also see relief. Mobile phones could become cheaper if advance income tax on raw materials drops from 5% to 2% or 1%.
Washing machines, dishwashers, geysers, and kitchen appliances may retain existing tax benefits. Healthcare equipment, including cardiac stents, eye lenses, and dialysis equipment, would face lower VAT and taxes.
Foods, medicines, and valuables
Import duties on infant formula raw materials would decrease from 15% to 10%, potentially lowering prices.
The government may withdraw the existing 5% regulatory duty on date imports entirely.
Import duty exemptions are being considered for raw materials used in 68 medicine categories. Gold faces an unusual adjustment: rather than a 5% VAT, a fixed amount of BDT 2,500 per bhori would apply. Gold jewellery source tax would decline from 5% to 0.5%.
Regulatory duty on date imports may be withdrawn entirely, while VAT on mobile SIM card sales would shift from a fixed BDT 300 to 15% of the transaction price.
Industrial and manufacturing support
Tax benefits for emerging semiconductor industries may be extended until 2031. VAT at the import stage may be removed on more than 30 raw materials used in pesticide and crop protection chemical manufacturing. The duty on zinc ash, the primary raw material for zinc sulphate fertiliser, may be fully withdrawn.
Several other manufacturing sectors would benefit from reduced duties and VAT: float glass, solar equipment, locally produced edible oil, packaging materials, and imported fabrics designated for domestic consumption.
Tobacco items, steel to become pricier
Tobacco items face approximately 15% price increases. Nicotine pouches would attract 40% additional supplementary duty. Steel products, including rods, would see VAT rise from BDT 150 to BDT 350. Domestically produced alcoholic beverages would face BDT 500 per litre VAT.
Import duty on cashew nuts would jump from 5% to 25%.
Revenue adjustments
VAT on mobile SIM card sales may be shifted from a fixed Tk300 to 15% of the sale price, representing a revenue-generation measure to offset some of the tax concessions announced.
Special incentives for emerging entrepreneurs
Freelancers and content creators will be fully exempt from income tax. Small and medium enterprises with annual turnover up to BDT 50 lakh will escape taxation entirely, while women entrepreneurs can operate tax-free up to BDT 70 lakh.
Startups and technology-focused ventures will receive nine-year tax exemptions. Businesses outside Dhaka and Chattogram will benefit from favourable depreciation treatment.
Streamlined compliance and dispute resolution
New measures include a mobile application for tax return submissions, with filers meeting deadlines receiving rebates equal to 10% of tax payable (or BDT 5,000, whichever is lower). For the first time, a refund mechanism will be introduced for excess deducted taxes, while the minimum tax system is expected to be abolished. The government will also set time limits for resolving revenue cases and relax alternative dispute resolution conditions.
