The fiscal year in Bangladesh runs from July 1 to June 30 of the following year. Each year, significant tax reforms that form the basis of the national budget and contribute to the calculation of tax revenues are announced in early June, with most changes taking effect on July 1. This article provides a summary of the key tax reforms that were announced alongside the 2024/2025 national budget. Effective internal audits in Bangladesh require a broad understanding of local business practices, accounting, taxation, legal frameworks, and auditing standards. We hope this summary proves helpful for those conducting internal audits within the country.

General Overview:

This year’s budget continues to focus on the promotion of the IT sector through the “Smart Bangladesh” initiative and the government’s overarching policy of encouraging foreign investment. While the budget introduces several tax reforms and incentive schemes aimed at boosting investment, it also includes measures to increase tax revenue by strengthening taxation on wealthy individuals. Below are the major amendments.

Key Amendments to Income Tax Laws:

1. Individual and Corporate Income Tax Amendments

• Increase in the Top Marginal Personal Income Tax Rate and Revisions to Progressive Tax Rates
  The top marginal personal income tax rate has been increased from 25% (for taxable income over BDT 1.65 million) to 30% for those earning over BDT 3 million.
• Increase in Capital Gains Tax Rates
  Capital gains tax rates have been raised for various categories of taxpayers as follows:
  • Individuals: Increased from 5% to 15%.
  • Corporations/Firms: Increased from 10% to 15%.
  • Trusts/Funds: Previously subject to either 15% or a progressive tax rate, now uniformly taxed at 15%.

2. Corporate Tax Rate Reductions

• Non-listed Companies: The corporate tax rate has been reduced from 27.5% to 25%.
• One Person Companies (OPC): The tax rate for OPCs has been lowered from 22.5% to 20%.

3. Tax Exemption Extension for ITES Sector

The tax exemption for the Information Technology Enabled Services (ITES) sector, first introduced in 2019, has been extended until the end of June 2027.

Amendments to VAT and Withholding Tax Provisions:

1. Expansion of Withholding Tax Obligations

Individuals and businesses with annual sales exceeding BDT 1 billion have been added to the list of entities required to withhold taxes at source.

2. Increase in VAT Rates

VAT rates for certain services and products have been increased to 15%, including services such as auctions, security services, and SIM cards.

3. VAT Exemptions

Some products, such as specific aircraft parts and industrial raw materials, have been made exempt from VAT.

Compliance and Other Measures:

4. Changes to Declaration Requirements for Assets, Liabilities, and Lifestyle

Previously, individuals with gross assets exceeding BDT 5 million were required to submit a detailed statement of assets, liabilities, and lifestyle. Under the new reform, this threshold has been lowered to BDT 4 million, expanding the number of individuals subject to this requirement.

These reforms reflect the government’s ongoing efforts to promote investment while also broadening the tax base through increased scrutiny of high-income earners and expanding compliance measures. The 2024/2025 budget is positioned to support the continued growth of Bangladesh’s economy, particularly in the IT and services sectors, while ensuring an equitable contribution from wealthier individuals and corporations.