Investment Incentives in Bangladesh

In order to encourage the inflows of FDI the government of Bangladesh offers one of the most liberal investment policies and attractive packages of fiscal, financial and other incentives to foreign entrepreneurs in South Asia. Major incentives to stimulate private sector direct investment are listed below.

Ownership & Stock Market

Foreign investors can set up ventures, either wholly owned or in joint collaboration, with local partners. They are allowed to participate in initial primary offerings (IPOs) without any regulatory restrictions. Also, incomes from dividends are tax-exempt for investors.

Incentives and Facilities for the Investors

Industries are eligible for tax holidays for the following periods according to the location of the establishment:

• The period of tax holiday is calculated from the month of commencement of commercial production. Eligibility is determined by the National Board of Revenue (NBR).
• The tax holiday facility is applicable to industries set up in Bangladesh before June 30, 2012.
• Accelerated depreciation in lieu of a tax holiday is allowed at the rate of 80% of actual cost of machinery for the first year and 20% for the following years.

Concessionary Duty on Imported Capital Machinery

Import duty at the rate of 3% ad valorem is applicable on capital machinery and spares imported for initial installation or for BMR/BMRE of existing industries. The value of spare parts must not exceed 10% of the total CIF value of the machinery.

100% Export Oriented Industries

No import duty is charged on capital machinery and spares as per NBR notification. However, the applicable 3% duty is secured as a bank guarantee or indemnity bond, which is refunded after installation of the machinery.

Minimum 70% Export Oriented Industries (Under-Developed Areas)

Import duty at 2.5% is payable. An additional 5% duty is secured through bank guarantee or cash deposit and refunded after installation.

Minimum 70% Export Oriented Industries (Developed Areas)

Import duty at 5% is payable. An additional 2.5% duty is secured through bank guarantee or cash deposit and refunded after installation.

Other Industries (Outside Developed Areas)

Import duty at 5% is payable. An additional 2.5% duty is secured as bank guarantee or cash deposit and refunded after installation.

Other Industries (Developed Areas)

Import duty at 3% is payable on capital machinery and spares as per relevant NBR notification.

Value Added Tax (VAT) is not payable on imported capital machinery and spares. Duties and taxes on locally produced goods may be higher than those applicable to raw materials used for production.

Non-Resident Bangladeshis (NRBs)

Special incentives are provided to encourage NRBs. They enjoy facilities similar to foreign investors. A quota of 10% has been fixed for NRBs in primary shares (IPOs). Furthermore, they can maintain foreign currency deposits in the NFCD account.

Other Incentives

• Tax exemption on royalties and technical know-how fees for foreign collaborators.
• Tax exemption on interest earned from approved foreign loans.
• Avoidance of double taxation under bilateral agreements.
• Income tax exemption (up to 3 years) for foreign technical experts.
• Facilities for repatriation of invested capital, profits and dividends.
• 15 years income tax exemption for private power generation companies.
• Multiple-entry visa (6 months) for foreign investors.
• Citizenship by investing minimum USD 500,000 (non-repatriable).
• Permanent residency by investing minimum USD 75,000.
• Capital gains tax exemption on listed public company shares.

Additional Incentives to Export Oriented & Export Linkage Industries

To promote export-led growth, the government provides comprehensive fiscal, financial and operational incentives for export oriented and export linkage industries under the industrial and export policies.

• Concessionary or zero import duty on capital machinery and spare parts under SRO provisions.
• Full duty-free import facility for 100% export-oriented industries.
• Bonded warehouse facilities against back-to-back LC or notional import duty.
• VAT exemption facilities as per government SRO.
• Simplified duty drawback system through commercial banks.
• Bank loans up to 90% of export value against confirmed LC or sales contracts.
• Export Performance Benefit (XPB) and cash incentives reviewed periodically.
• Additional benefits for backward linkage industries using indigenous raw materials.
• Similar incentives extended to suppliers of raw materials to export industries.
• Foreign exchange allocation for overseas publicity and foreign office setup.
• 100% income tax exemption on export earnings from handicrafts and cottage industries.
• Partial to full income tax rebate (30%–100%) on export earnings of other industries.
• Duty-free import of raw materials for exportable goods under restricted lists.
• Duty-free import of samples for export production (subject to approval).
• Local supplies under international tender treated as indirect exports.
• Thrust sectors receive special cash incentives, venture capital and policy support.
• Export-oriented industries exempted from local and municipal taxes.
• Leather industries exporting 80% or more treated as 100% export-oriented.
• Cash subsidy (up to 25%) for indigenous fabric suppliers to export garment units.
• EPZ industries enjoy up to 10 years income tax exemption and capital gains benefits.

*SRO = Special Revenue Order

*NBR = National Board of Revenue

*BMR/BMRE = Balancing, Modernisation, Rehabilitation and Expansion