This document outlines proposed changes and continuations of tax policies and financial incentives for the 2026-2027 fiscal year.
Key Changes and Reductions:
- Reduced Income Tax on Cash Assistance: The income tax rate on cash assistance will be reduced from 10% to 5%.
- Source Tax Rate: The source tax rate will remain at 1%.
- Corporate Tax Rate: The corporate tax rate will remain unchanged.
Incentives for Business and Export Growth:
- SRO Issuance for Direct Exporters: To enhance the capacity of small and medium enterprises and facilitate exports, a SRO (Statutory Regulatory Order) will be issued to allow direct exporters to procure raw materials from domestic suppliers. This aims to streamline the supply chain for export-oriented businesses. (SRO No. 196-Law/2026/51/Customs, dated 08/06/2026).
- Continuous Bond Facility: Eligible units of the same establishment, even if they are separate entities, can receive the Continuous Bond facility if they are located within a 60 km radius of the main establishment.
- Import Duty/Tariff Exemptions for Solar Power: To promote the solar power sector, crucial equipment for solar power generation will be exempt from import duties, supplementary duties, and advance taxes until June 30, 2031.
- Incentives for Battery Components: Import facilities for mounting structures, cell components, battery packs, and related systems for battery manufacturing will continue until June 30, 2028.
- New Battery Technologies: To encourage the production of Sodium-ion and Lithium-ion batteries, import duty and tax exemptions on necessary components will be extended until June 30, 2030.
- Effluent Treatment Plant Chemicals: Existing duty exemptions on chemicals required for operating Effluent Treatment Plants will be extended until June 30, 2027.
- Reduced Raw Material Import Duty: The standard rate for imported raw materials for industries will be reduced from 5% to 4%.
- Synthetic Woven Fabrics: The 10% supplementary duty on imported Synthetic Woven Fabrics will be withdrawn, making it 0% to prevent misuse of benefits.
Changes in Tax Procedures and Compliance:
- Reduced Utility Permit Time: The time limit for obtaining utility permits within factory premises will be reduced from 48 hours to 24 hours.
- VAT Return Filing: Taxpayers will have the option to file VAT returns at the beginning of the year.
- Increased Allowable Expenses: Proposals include increasing the limits for business expenses, such as perquisites, entertainment, sample costs, and promotional expenses, to reduce the tax burden on taxpayers.
- Bonded Warehouse Raw Material Import: For raw material imports under a bonded warehouse without a bank guarantee, a minimum value addition of 30% for re-export will be proposed.
- Quarterly VAT Return Filing: The existing system of monthly VAT return filing will be shifted to a quarterly system.
- Reduced Import Duty on Polyester Staple Fiber: To support the domestic production of polyester spun yarn, a 5% import duty will be imposed on imported Polyester Staple Fiber.
Specific Tax Rate Adjustments:
- Reduced Tax on Electricity Purchase: The source tax rate on electricity purchased from power producers will be reduced from 4% to 3%.
- Reduced Source Tax on Fuel: The source tax rate on fuel supplied to the dyeing industry will be reduced from 1.5% to 1%.
- Reduced Tax on Recycled Materials: The tax rate on recycled and recyclable raw materials will be reduced from 3% to 1%.
- Reduced Withholding Tax for Non-Residents: The withholding tax rate for non-resident taxpayers on dividend income will be reduced from 15% to 7.5% for easier remittance abroad.
- Reduced Withholding Tax on Re-insurance Premiums: The withholding tax rate on re-insurance premiums for resident taxpayers will be reduced from 10% to 5%.
Other Proposed Measures:
- Accelerated Depreciation for Garments and Sports: A proposal to provide accelerated depreciation benefits of 60% in the first year and 40% in the second year on the construction and machinery of production facilities and sports facilities outside the Dhaka and Chittagong metropolitan areas.
- Single Window System for Business Setup: A Single Window system will be made mandatory for online business setup and licensing, with the process to be completed within 7 days.
- Expedited Approval Process: For all approved permits, if the relevant authority does not provide feedback within the stipulated time, the permit will be considered approved on the day the application is submitted.
- Company Registration Time: Company registration will be completed within 48 hours.
- Plug and Play Facilities: Plug and Play type facilities will be launched in designated industrial and economic zones.
- Government Laboratory Testing: In addition to government laboratories, ISO-accredited private laboratories will also be utilized for testing.
Mohiuddin Rubel
Additional Managing Director, Denim Expert ltd
Former Director, BGMEA
