Bangladesh Offers Tax Incentives to Boost Tech Startups and Entrepreneurship

The National Board of Revenue (NBR) of Bangladesh has announced tax exemptions and rebates for investments in specific sectors to encourage entrepreneurship and startups. The move aims to support the growth of the country's technology sector and draw more investment.

Tech entrepreneurs in Bangladesh have voiced apprehension about the sustainability of their businesses once the current tax break for the IT sector expires in June 2024. They are calling for an extension of this exemption until 2041 to align it with the government's 'Digital Bangladesh' vision. The entrepreneurs argue that the tax break does not cause massive revenue loss compared to the benefits it generates, such as job creation and investment.

According to industry leaders, if Bangladesh withdraws the tax exemptions, it could lead to a loss of the $1 billion in investment attracted over the past five years and discourage software developers from repatriating their export earnings. Tax experts and the Bangladesh Association of Software and Information Services (BASIS) have echoed these concerns, stating that neighboring countries are offering tax incentives to encourage investment in tech startups.

Why this matters: The growth of Bangladesh's technology sector is crucial for achieving the government's vision of building a 'Smart Bangladesh' by 2041. Extending the tax incentives could help maintain the competitiveness of local firms and support the sector's contribution to employment generation and investment outputs.

The government has implemented a safe and friendly investment ecosystem with attractive incentives for investors and entrepreneurs in the ICT industry. These include 10-12 years of corporate tax exemption, exemption from import duties, VAT, stamp duty, and profit repatriation facilities. As a result, Bangladesh's ICT sector has seen rapid growth, with over 2,500 startups established in the last 5 years and 200 new ICT startups entering the market annually.

The NBR held a pre-budget meeting with the Foreign Investors' Chamber of Commerce and Industry (FICCI) to discuss proposals for the National Budget 2024-25. FICCI President Zaved Akhtar highlighted the need to increase Bangladesh's tax-to-GDP ratio from the current 8.74% to 22% to achieve Vision 2041. FICCI proposed simplifying the taxation system, eliminating manual processes, and integrating with government agencies to expand the tax net.

The government has been urged to conduct surveys at the company level to determine the profitability of businesses in the technology sector and to consider extending the tax benefits to support its growth. Startup founders have called for making tax policies and a tax collection process suitable for supporting the sector's development, as it has attracte

Key Takeaways

• NBR announces tax exemptions to boost Bangladesh's tech sector and startups.
• Tech entrepreneurs seek extension of tax break beyond 2024 to align with 'Digital Bangladesh'.
• Withdrawal of tax exemptions could lead to $1B investment loss and discourage software exports.
• Extending tax incentives could maintain competitiveness and support employment, investment.
• FICCI proposes simplifying taxation, expanding tax net to achieve 22% tax-to-GDP ratio by 2041.