Bangladesh eases proposed tax hike for listed companies in FY26 budget

The revision follows lobbying from business leaders, who argued that increasing the tax burden without condition would erase the incentive to list on the stock exchange

In the face of mounting pressure, the Advisory Council of the interim government has offered a conditional relief to the corporate tax rate proposed in the FY2025-26 budget for publicly listed companies that floated 10 percent or less of their paid-up capital via IPOs.

In the budget, approved by the Advisory Council on Sunday, these companies will be taxed at 25 percent, down from the initially proposed 27.5 percent, if they route all income through banking channels, the finance ministry said in a statement.

The initial budget proposal, presented on Jun 2 in the absence of a functioning parliament, had recommended a flat 27.5 percent tax rate for such firms.

It suggested eliminating the preferential rate they previously enjoyed and aligning their tax burden with unlisted companies.

In the outgoing fiscal year, these companies were subject to a 25 percent corporate tax, with an additional 2.5 percentage point rebate available for conducting all transactions through the banking system.

Following Sunday’s revisions, companies must now only ensure that all income is transferred through banks -- rather than all transactions -- to qualify for the reduced rate. Failure to meet this condition will leave them subject to the higher 27.5 percent rate.

The adjustment follows lobbying from business leaders, who argued that increasing the tax burden without condition would erase the incentive to list on the stock exchange, effectively putting listed and unlisted firms on equal footing.

“We have addressed the concerns appropriately,” said NBR Chairman Md Abdur Rahman Khan in a post-meeting briefing.

“Previously, the condition required companies to float more than 10 percent of their capital via IPO. Now, even companies listing less than 10 percent will qualify for the tax benefit.

“This is good news, especially for state-owned firms considering direct listings.”

The approved budget maintains a 22.5 percent tax rate for listed firms that floated more than 10 percent of their capital through IPOs or direct listings, with the option to lower it to 20 percent if all income is channelled through banks.

The budget also proposes tax cuts for private educational institutions. Private universities, medical, dental, and engineering colleges, as well as institutions solely dedicated to IT education, will see their tax rate reduced from 15 percent to 10 percent, the finance ministry said.