Bangladesh's historic BDT 9.38 lakh crore budget promises sweeping deregulation, a massive SME stimulus, and bold foreign investment incentives — but businesses and overseas investors must weigh those gains against a punitive tax structure, a fragile banking sector, and the ever-present gap between fiscal ambition and delivery.

RF Report

Bangladesh’s Finance Minister Amir Khosru Mahmud Chowdhury presented the National Budget 2026-27 today, 11 June 2026, after his cabinet endorsed the proposed budget on the same day.

The total outlay of the FY27 budget is set at BDT 9.38 lakh crore — the largest national budget in Bangladesh’s history. The theme of the budget is “Economic Democratisation and Deregulation: Bangladesh’s Journey Towards a Trillion-Dollar Economy.”

The key measures are as follows:

Tax landscape

The minimum tax problem: A double burden on business

Bangladeshi businesses have been heavily burdened by the combined impact of minimum tax and tax deducted at source (TDS), prompting calls for urgent reform in the upcoming budget. The current minimum tax regime operates on two parallel systems, including a turnover-based tax that applies to gross receipts regardless of whether a business is profitable.

Companies and institutions exceeding BDT 50 lakh in turnover and individuals exceeding BDT  4 crore are subject to this tax, with rates ranging from 0.1% to as high as 3% depending on the sector — tobacco and soft drink manufacturers face a 3% rate, mobile operators 1.5%, and most other sectors around 1%.

Modernising tax administration

Beyond rates, the government is overhauling how taxes are collected altogether. The NBR is moving toward full automation — online corporate filing, direct e-refunds to bank accounts, and a mobile app for returns.

Compliance is being incentivised through a carrot-and-stick approach, with rewards for early filers and higher rates for late ones.

Tax dispute resolution is also being streamlined across tribunals, appellate bodies, and ADR channels, targeting a backlog that has long undermined business confidence.

Investment incentives

A record stimulus for small business

At the heart of the package is an unprecedented commitment to the country’s engine of employment: the cottage, micro, small, and medium enterprises (CMSME) sector.

The government has taken an initiative to form a BDT 5,000 crore stimulus fund to boost the cottage, micro, small, and medium enterprises sector, a key driver of the country’s economy and employment generation.

Additionally, a proposal will be placed to allocate a further BDT 2,000 crore in the FY 2026-27 budget for distributing low-interest loans through the Infrastructure Development Company Limited (IDCOL), Bangladesh Infrastructure Finance Fund Limited (BIFFL), and the SME Foundation.

Bangladesh Bank has announced a BDT 60,000 crore “Stimulus Package 2026”, of which BDT 41,000 crore will come from refinancing schemes and BDT 19,000 crore from the central bank’s own funds.

The package spans the breadth of the economy: BDT 20,000 crore for large industries and the service sector, BDT 10,000 crore for agriculture and rural economic activities, BDT 5,000 crore for the CMSME sector, BDT 3,000 crore for export diversification, and BDT 3,000 crore for developing high-value agricultural hubs.

To keep interest rates affordable, the government will provide a 6% interest subsidy on loans disbursed under the refinancing scheme, with estimates suggesting the comprehensive programme could create more than 25 lakh new employment opportunities.

Banking sector

The FY27 budget takes direct aim at Bangladesh’s fragile banking sector — prioritising recapitalisation, introducing risk-based oversight, and restructuring management where needed.

Twenty banks carry a combined capital shortfall of BDT 2.78 lakh crore, with a sector-wide CRAR of negative 2.64% against an international floor of 12.5%.

BDT 40,000 crore has already been committed this fiscal year, backed by legal amendments to curb political interference and efforts to recover funds allegedly moved abroad illegally.

The foreign investment play: Commission, deregulation, and a new openness

Anyone who brings foreign investment into Bangladesh will be entitled to a 1.5% consultancy fee or commission as an incentive under a newly approved scheme designed to boost foreign direct investment in the country. Speaking in parliament, the PM said the initiative would encourage expatriate Bangladeshis to invest in the country while also enabling skilled and qualified individuals to attract foreign investors.

The cabinet also approved the Foreign Direct Investment (FDI) Incentive Scheme Policy 2026 on 4 June 2026, aimed at encouraging Bangladeshi citizens, including expatriates, to bring foreign direct investment into the country.

On the regulatory side, trade registration is moving online, non-tariff barriers on export-bound imports are being removed, and the Letter of Credit requirement has been dropped for all importers — collectively lowering the friction that has historically kept foreign investors at arm’s length.

Key reforms improving Bangladesh’s investment climate for foreign investors

  • FDI commission incentive: A 1.5% consultancy fee or commission is now payable to anyone — including expatriate Bangladeshis — who successfully brings foreign investment into the country.
  • Dividend repatriation: Legislation has been passed to allow foreign investors to repatriate dividends — removing a long-standing barrier that had historically deterred foreign capital from entering Bangladesh.
  • One-stop service platform: A unified “Banglabiz” digital platform is being launched to centralise licensing, certification, and approvals — cutting face-to-face contact with regulatory bodies.
  • Faster trade registration: Import and export registration certificates are now being issued online within shorter timeframes. The Import Policy Order 2026–2029 is being revised to ease market entry for foreign participants.
  • Non-tariff barrier removal: Steps are being taken to remove non-tariff barriers on imports intended for export production, and all importers can now transact through contracts without requiring Letters of Credit (L/C).
  • Massive stimulus pool: Bangladesh Bank’s BDT  60,000 crore Stimulus Package 2026 — spanning large industry, agriculture, SMEs, and export diversification — creates a credit-rich environment for investment partners.
  • Bank sector stabilisation: Recapitalisation of distressed banks is a priority, with legal amendments to reduce political interference and international standards in risk management and corporate governance being adopted.

Friction points in Bangladesh’s investment environment

  • Punitive minimum tax: Even loss-making companies must pay a turnover-based minimum tax — ranging from 0.1% to 3% depending on the sector — regardless of profitability. This can make early-stage investment extremely costly. Up to 3% on turnover
  • TDS as a final tax trap: Tax Deducted at Source frequently cannot be adjusted against final liabilities, effectively becoming a non-refundable charge. Businesses can face effective tax rates 5–10 times the statutory rate.
  • No loss carry-forward: There is no mechanism to carry forward excess minimum tax paid during loss-making periods, which amounts to an element of double taxation — particularly harmful for capital-intensive projects with long payback periods.
  • High inflation environment: Point-to-point inflation stood at 9.42% in May 2026 — significantly above the government’s own 7.5% target. This compresses real returns and increases operational costs for foreign-funded ventures. 9.42% inflation
  • Fragile banking system: The capital shortfall of 20 banks stands at BDT  2.78 lakh crore, with a sector-wide CRAR of negative 2.64% — well below the international minimum of 12.5%. Foreign investors relying on local bank credit face a constrained and uncertain lending environment.

Key risks to investment delivery and returns

  • Implementation gap: The gap between budget promises and on-the-ground delivery is a persistent structural risk. Deregulation and one-stop systems depend on institutional capacity that Bangladesh has historically struggled to build at pace.
  • Fiscal tightening spillover: Bringing inflation from 9.42% down to 7.5% will likely require monetary and fiscal tightening. This could suppress consumer demand, slow credit growth, and dampen returns for investors in consumer-facing sectors.
  • Banking sector contagion: Despite the recapitalisation effort, 20 banks remain critically undercapitalised. If stabilisation efforts stall, the resulting credit contraction could choke private investment and weaken the financial infrastructure foreign investors depend on.
  • Borrowing and crowding out: The government plans to borrow BDT  1.20 lakh crore from the domestic banking system to finance its deficit. Heavy public borrowing risks crowding out private sector credit and pushing up lending rates. BDT  1.20 lakh cr domestic borrowing.
  • Global economic uncertainty: Bangladesh’s export-oriented growth model remains exposed to global demand shocks, supply chain disruptions, and currency volatility — factors the domestic budget cannot control, but which directly affect investor returns.
  • Tax reform not yet enacted: The TDS and minimum tax reforms being called for by the business community are proposals, not yet law. Foreign investors entering now must do so under the current punitive tax structure until legislation is formally amended.

Corporate and other taxes

Corporate taxation

  • Standard rates: Publicly traded companies (with at least 10% IPO shares) will face a 22.5% rate, which can be further reduced to 20% if all transactions are conducted via bank transfers. Non-publicly traded companies are set at 27.5% (reducible to 25%).
  • High-tax sectors: Publicly traded banks and insurance companies remain at 37.5%, while tobacco manufacturers face the highest burden at 45% plus a 2.5% surcharge.
  • Green and essential incentives: To bolster food security, local edible oil producers using home-grown seeds will enjoy a 100% tax exemption for their first five years. Additionally, the solar power sector will benefit from a 0% tax rate until 30 June 2035.

VAT and digital transformation

The budget aggressively targets the “Digital Economy” by removing barriers for startups and freelancers, while simplifying the system for small retailers.

  • The “Startup” boost: Registered startups are now 100% exempt from VAT on their services, premises rental, and even imported services until 30 June 2035. Content creators and freelancers also receive a full VAT exemption to encourage youth self-employment.
  • Cheaper connectivity: In a major move for digital inclusion, the specific tax of BDT 300 per mobile SIM card has been completely withdrawn.
  • Simplified retail tax: Small businesses can now opt for a fixed “Turnover Tax” based on their location, removing the heavy burden of maintaining complex VAT records and filing monthly returns.

Customs, duties, and trade logistics

  • Electric vehicle (EV) revolution: To discourage fossil fuels, the total tax incidence (TTI) on imported EVs priced under USD 25,000 has been slashed from 93% to 64%. Furthermore, EV chargers and charging stations are now completely duty-free (0% TTI).
  • Tariff rationalisation: While the 8-tier import duty structure remains, duties on 69 products have been reduced. Regulatory duties (RD) were also fully withdrawn from 113 products to lower the cost of raw materials.
  • Jewellery sector: The existing 5% VAT on jewellery services is being replaced by a more predictable specific tax of BDT 2,500 per Bhori.

Excise duties and financial oversight

The budget introduces measures to protect small savers while tightening the net on tax evasion through better data integration.

  • Bank deposit relief: The threshold for excise duty on bank deposits has been raised from BDT 300,000 to BDT 400,000. Additionally, to prevent double taxation, excise duty will only be charged once per loan facility, regardless of how many auxiliary accounts are linked to it.
  • Transparency and transfer pricing: While specific transfer pricing rate changes were not detailed, the government is introducing a Withholder Identification Number (WIN) and integrating the NBR database with banks and utility providers. This is designed to identify revenue leakages and ensure that international transactions reflect fair market values.
  • Health sector concessions: To lower treatment costs, the 15% VAT and 5% Advance Income Tax on kidney dialysis filters have been abolished, which is expected to save patients roughly BDT 800 per session.

Personal income tax

To help citizens navigate rising living costs, the government has moved away from short-term fixes by introducing a five-year progressive tax roadmap. This provides long-term predictability for individual taxpayers.

  • Raising the tax-free bar: The general tax-free income threshold is proposed to increase from BDT 350,000 to BDT 375,000 for the assessment years 2026–27 and 2027–28. This limit will gradually climb to BDT 450,000 by the 30 June 2031 tax year.
  • Support for special groups: Enhanced thresholds have been set for specific categories for the upcoming year:
    • Women and seniors (65+): BDT 425,000.
    • Third-gender and disabled Persons: BDT 500,000.
    • War-wounded and “July Fighters”: BDT 525,000.
  • New tax slabs: For the immediate fiscal year, the tax rates start at 10% for the first BDT 300,000 of taxable income, peaking at a 30% rate for income above BDT 3.57 million. By 30 June 2031, a new 35% top tier will be introduced for those earning over BDT 30 million.