NBR to ease tax burden: Advance tax set to be adjustable against future profits

Infographic: TBS

The National Board of Revenue (NBR) is considering revising advance tax rules in the FY26 budget to allow businesses to offset minimum advance taxes paid during unprofitable or low-profit years against future earnings. This move aims to ease financial burdens and address long-standing concerns of businesses.

NBR Chairman Abdur Rahman Khan shared this plan with business leaders in pre-budget meetings, including one yesterday with exporters, chaired by Finance Adviser Salehuddin Ahmed at the secretariat. "We aim to present a business-friendly budget to boost investment, GDP, and employment," Salehuddin told reporters.

Currently, Bangladesh collects around Tk5,000 crore in source tax at a 1% rate on exports. Local companies also face a minimum turnover tax of 0.6% to 3%. Business leaders argue that this non-refundable and non-adjustable system discourages investment and deviates from global tax standards.

"This kind of practice does not exist anywhere else in the world," said Bangladesh Chamber of Industries (BCI) president Anwar-Ul-Alam Chowdhury.

After the secretariat meeting, Anwar-Ul-Alam Chowdhury, and Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), shared the information with the media. Finance Division Secretary Md Khairuzzaman Mozumder was also present.

Business leaders said the NBR chairman assured them of changes to the minimum advance tax starting from the next fiscal year.

BKMEA President Mohammad Hatem criticized the current system, citing how firms paying advance tax on exports cannot claim refunds even when their final tax liability is lower. "We have been informed that changes will be made in these areas this year," he said.

FICCI welcomes proposal

The Foreign Investors' Chamber of Commerce & Industry (FICCI) welcomed the proposal, calling it a step in the right direction. Former FICCI president Rupali Chowdhury noted that businesses face inevitable profit fluctuations, and tax adjustments would provide much-needed relief. However, she warned of bureaucratic hurdles that could hinder implementation.

An NBR official confirmed that excess taxes paid in low-profit years would be adjustable against future liabilities, though no refunds would be issued.

Currently, the minimum tax on a company's turnover ranges from 0.6% to 3%. All companies are subject to a minimum tax of 0.6%, while mobile phone companies face a 2% tax, and tobacco and carbonated beverage companies are taxed at 3%.

Concerns Over Misuse

Experts worry about potential exploitation of the new system due to poor tax compliance. Former NBR official Syed Md Aminul Karim stressed the need for stricter oversight to prevent businesses from manipulating profits to evade taxes.

Additional Business Demands

During the meeting, industry leaders raised other concerns, including reducing the 8-digit HS code to 6 digits for easier customs processing. BKMEA proposed lowering the garment sector's source tax to 0.5% for five years and granting full VAT exemptions on industry-related services and materials.

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) urged stable interest rates, VAT exemptions on imported raw materials, and the elimination of rewards for tax officials detecting evasion, citing misuse of laws.

DCCI President Taskeen Ahmed called for digitising corporate tax processes and introducing a single-digit VAT. He also urged a six-month moratorium and loan restructuring to support businesses recovering from economic challenges.