New Tax Law in Bangladesh Disrupts Corporate Incentives for Publicly Traded Companies

The government of Bangladesh has introduced a new law, the Finance Ordinance 2025, which may squeeze fiscal incentives for many publicly traded companies in the country. Analysts argue that this change makes listed companies comparable to non-listed firms, potentially discouraging companies from going public and reducing investor appetite in the absence of distinct fiscal advantages for listed entities. The new law eliminates tax incentives for complying with cashless-transition requirements, except for companies that are already listed and have offloaded more than 10 per cent of their shares. Starting from the assessment years 2026-2027 and 2027-2028, listed companies with less than 10 per cent of their shares issued through an IPO will face a corporate tax rate of 27.5 per cent, compared to 22.5 per cent for those that maintain cashless-transition compliance.

Key Takeaways:

• The Finance Ordinance 2025 introduces a new tax law that removes fiscal incentives for complying with cashless-transition requirements for many publicly traded companies in Bangladesh.
• Only companies that have floated more than 10 per cent of their shares through IPOs will be eligible for the reduced tax rate of 22.5 per cent, subject to a condition that all income must be received through banking channels.
• The ordinance allows the reduced tax benefit only for a one-time IPO floatation, meaning companies cannot claim the pared-down taxing multiple times by offloading shares in phases.
• Industry insiders caution that the withdrawal of the mandatory cashless-transaction condition could potentially encourage informal financial activities.
• Market analysts fear that publicly listed firms now facing tighter scrutiny and diminishing tax incentives could prove to be disservice to longstanding government efforts to deepen the country's capital market.
• Tax incentives for one-person companies did not match global standards, says a senior NBR official.
• A tax analysts and managing director of SMAC Advisory Services Ltd states that companies that pay an extra 2.5 per cent in the 2025-2026 tax year and 7.5 per cent in the subsequent two years will face excessive tax burdens.
• The absence of provisions for Rights Public Offering (RPO) may subject companies to discrimination, notes the analyst.
• The policy changes may impact local and global investors' confidence, and further increase their concerns, warns a policy analyst at the Policy Exchange of Bangladesh.

Statistics:

• 27.5 per cent: The new corporate tax rate for listed companies with less than 10 per cent of their shares issued through an IPO, starting from the assessment years 2026-2027 and 2027-2028.
• 22.5 per cent: The reduced tax rate for listed companies that have floated more than 10 per cent of their shares through IPOs, subject to a condition that all income must be received through banking channels.
• 10 per cent: The minimum share offloading threshold required for companies to be eligible for the reduced tax rate.
• 2025-2026: The tax year in which companies will face an additional 2.5 per cent tax.
• 2026-2027 and 2027-2028: The assessment years in which listed companies with less than 10 per cent of their shares issued through an IPO will face a corporate tax rate of 27.5 per cent.

Sources:

• Finance Ordinance 2025
• Bangladesh Securities and Exchange Commission (BSEC) website
• DSE Brokers Association of Bangladesh (DBA) statement
• Saiful Islam, President of DBA (2023)
• Snehasish Barua, Tax Analyst and Managing Director of SMAC Advisory Services Ltd (2023)
• M Masrur Reaz, Chairman at the Policy Exchange of Bangladesh (2023)
• FICCI statement (2023)
• Berger Paints and Unilever Bangladesh IPO documents (2020)
• Walton Hi-Tech Industries IPO document (2020)