The compliance budget

Every budget tells a story. Some focus on spending, some on growth and some on reform. Bangladesh’s proposed fiscal framework for FY2026-27 tells a different story: one of widening the tax net, tightening compliance and pushing taxpayers, both individual and corporate, into a more transparent and increasingly digital ecosystem. At first glance, some changes appear taxpayer-friendly. The advance income tax threshold for individuals has been raised from Tk 6 lakh to Tk 10 lakh, offering breathing space for salaried professionals and small entrepreneurs battling inflation. The government has also introduced incentives for timely return filing. Those filing by September will receive a 5 percent rebate, while delays beyond December will attract penalties. Tax compliance is no longer just about how much one pays, but also when.

But beneath these relief measures lies a far stronger enforcement framework. One of the most significant changes is the expansion of audit requirements. All companies must now submit audited financial statements along with an income computation sheet certified by a chartered accountant. Firms, associations of persons and Hindu undivided families with turnover above Tk 10 crore or capital exceeding Tk 5 crore will also fall under mandatory audit, while other entities will need certification from a CA, CMA or tax lawyer. Accounting records must also be preserved in line with company law requirements, effectively for up to 12 years for many companies.

Corporate tax rates remain largely unchanged, but with a meaningful twist. While standard rates stay at 27.5 percent for private companies and 22.5 percent for publicly traded ones, companies conducting all transactions through banking channels will enjoy reduced rates of 25 percent and 20 percent, respectively. This is formalisation by incentive.

The budget also takes a stricter position on tax deducted at source (TDS). Failure to deduct, collect or deposit withholding tax will trigger recovery of the shortfall, a 50 percent penalty and even disallowance of the related expenditure. Since TDS locks up working capital while refunds take months, the promise of electronic refunds within 120 days for certain self-assessed returns is welcome, provided implementation follows. Minimum tax remains a concern. The 1 percent levy on gross receipts stays unchanged, meaning companies will continue paying tax even in loss-making years. Tax disputes are becoming costlier. An appeal before the Commissioner (Appeals) will now require payment of 1 percent of the disputed tax demand. There is relief at the tribunal stage, however, where the pre-deposit has been reduced from 10 percent to 3 percent.

The capital market faces its own recalibration. Listed companies, excluding banks and financial institutions, must distribute at least 30 percent of after-tax profits as dividends or face additional tax. Stock dividends will attract a 10 percent tax, while capital gains tax on securities has been halved from 10 percent to 5 percent. These measures may reshape dividend policy and investor expectations, while the lower gains tax could improve market participation.

Unpaid interest claimed as a business expense for three years will now be treated as taxable income, and related-party loans below 12 percent interest may trigger deemed income adjustments. On the VAT side, reverse-charge VAT on imported services has widened, raising costs for foreign software, cloud platforms, consultancy and digital advertising. VAT audits now have clear timelines: documents within two months of notice, extendable by one month, with the audit completed within a year. The VAT appeal structure also imposes pre-deposit requirements at successive stages.

Foreign digital businesses with more than 100,000 users in Bangladesh may now fall within the tax net. TIN will be required for most bank accounts, and BIN for loans, utility connections and trade licence renewals. Cigarette, brick and gold prices may rise, while exporters gain relief through lower TDS on subsidies. The message is unmistakable: Bangladesh is moving towards a data-driven tax culture. For taxpayers, compliance itself has become a financial strategy.

The writer is co-founder and CEO of Accfintax and associate director at Hoda Vasi Chowdhury and Co