Company Structure, Tax & VAT in Bangladesh (2025): A TRW Field Guide

Prepared by TRW for founders, CFOs, in-house counsel, and overseas investors who need a crisp, reliable picture of how to structure a business and stay compliant in Bangladesh in 2025.

At a glance

• The most practical vehicles for operating in Bangladesh remain: Private Limited Company (Ltd.), Public Limited Company (PLC), One Person Company (OPC), and foreign Branch/Liaison/Representative Offices.
• Headline corporate tax in FY 2024–25 (AY 2025–26): broadly 20% for listed companies (conditions apply), 25% for non-listed companies that meet banking-channel conditions (27.5% otherwise). From AY 2026–27, the non-listed rate converges to 27.5% regardless of conditions; OPC moves to 27.5% too.
• VAT: standard 15%; sector-specific reduced rates continue; monthly returns due by the 15th of the following month using Mushak forms. 2025 changes extend input tax credit (ITC) claim windows, rebalance Advance Tax (AT) on imports, allow half-yearly returns for some service categories, and trim certain penalties.
• Thresholds: there has been conflicting guidance across early–mid 2025 about VAT registration and turnover-tax thresholds; treat these as under review and confirm the latest SRO before acting.

Part I — Choosing (and using) the right company structure

Private Limited Company (Ltd.)

Why it’s the default. Private limited companies give limited liability, flexible shareholder arrangements, and the broadest banking and contracting footprint. The Companies Act 1994 defines a private company as one that restricts share transfers, prohibits public invitation to subscribe, and limits members to a maximum of 50 (minimum 2). Most boardrooms we advise start here.

Directors & governance. Expect a minimum of two directors for a private company. Director appointment/removal sits under statutory provisions—draft your Articles with rotation, vacancy, quorum, and reserved-matters rules that match investor expectations, banking mandates, and any ESOP.

When to prefer Ltd.

• You’re raising seed/Series A (cap table discipline, ESOPs, and drag/tag mechanics).
• You need long-term banking facilities or import LC lines.
• You’re selling to large buyers who insist on VAT registration and Mushak-compliant invoicing.

Public Limited Company (PLC)

When scale meets public markets. PLCs must have at least seven members and at least three directors; they may invite the public to subscribe and (optionally) list. If an IPO is within your strategy horizon—or you need a wider shareholder base for employee incentives—PLCs provide that runway at the cost of heavier disclosure and public-company governance.

Tax note. Listed entities benefit from a lower 20% corporate rate (conditions apply). If you cannot continually meet those conditions, model a higher effective rate.

One Person Company (OPC)

Solo founder, formalised. Bangladesh introduced OPCs to recognise single-shareholder companies. Capital and turnover gates are material: paid-up capital must be between BDT 2.5 million and 50 million, with minimum prior-year turnover of BDT 10 million; exceeding the upper bounds triggers conversion to Ltd./PLC. OPCs also require a nominated successor in the MoA.

Tax note. The corporate rate for OPCs is 20% (22.5% if conditions not met) in AY 2025–26, rising to 27.5% from AY 2026–27—practically eliminating the historic OPC tax advantage beyond 2025. Price and plan accordingly.

When to use OPC.

• A founder needs limited liability without bringing in a second shareholder.
• The business already clears the capital/turnover gates.
• Banking partners are comfortable with OPC governance and mandate.

Branch, Liaison & Representative Offices (foreign companies)

Foreign corporates can operate via branch (revenue-generating), liaison (non-commercial), or representative setups—subject to BIDA approval and post-approval registrations (TIN, VAT if applicable, bank account, etc.). Branch profits are subject to corporate tax (no separate legal person). Liaison offices must stick to non-revenue scopes and inward-remittance funding. (Sector permits and timelines vary; TRW scoping recommended.)

Non-profit / Company Limited by Guarantee

For non-distribution purposes (associations, foundations), consider a company limited by guarantee under the Companies Act. Tailor the Articles to reflect membership, dissolution, and asset-lock provisions that grantors expect.

Part II — Corporate Income Tax (CIT): What you’ll actually pay in 2025

Headline rates you can plan around

For tax year 1 July 2024–30 June 2025 (AY 2025–26), Bangladesh applies the following broad rates; banking-channel compliance still matters this year but phases out from AY 2026–27:

• Publicly traded company (listed): 20% (subject to conditions).
• Non-publicly traded company: 25% if all receipts and large payments are through banks (else 27.5%).
• OPC: 20% / 22.5% (conditions), rising to 27.5% from AY 2026–27.
• Banks/insurers/financial institutions: typically 37.5%–40% depending on listing.
• Mobile operators, tobacco, etc.: around 45% with surcharges where applicable.

What changed in 2025. Policy sets a glide path that removes the “banking-channel” incentive from AY 2026–27 for non-listed companies and brings OPCs up to 27.5%, normalising the landscape. Factor this into multi-year models and deferred-tax planning now.

The minimum tax “floor”: model it, don’t forget it

Bangladesh effectively runs a three-way test: your final tax is the highest of (i) regular tax on profits, (ii) selected WHT suffered, and (iii) minimum tax on gross receipts. The gross-receipts minimum tax commonly sits at 1% (higher in specific sectors). Start-ups in manufacturing can enjoy a 0.10% rate for the first three income years post commercial production. Excess minimum tax can be carried forward to offset future years.

Practical implication. If your margins are thin (trading, distribution, early SaaS), the minimum-tax floor often binds. Your pricing and discount policies should “clear” 1% of revenue after VAT/VDS frictions.

Withholding tax (TDS/WHT): why your payables calendar matters

Bangladesh has a broad WHT regime on payments such as supplies, services, contractor bills, rent, and others. 2025 measures tweak several rates and rationalise sections. Always map vendor onboarding to correct WHT sections and maintain a credit trail so WHT suffered is visible in your year-end reconciliation. TRW can align your chart of accounts and vendor master to the 2025 sections and automate reconciliations.

Part III — VAT & Supplementary Duty (SD): how to stay clean with Mushak

Who needs VAT registration in 2025?

• The standard threshold has long been BDT 30 million annual turnover, with enlistment (turnover tax) for BDT 5–30 million at 4%.
• However: in early 2025, government communications indicated a lower VAT registration threshold (and a different enlistment threshold) to broaden the base. Not all professional summaries show identical numbers yet. Treat thresholds as fluid in 2025 and confirm the latest SRO before you register or rely on exemptions.

Bottom line: If you’re anywhere near BDT 5–30 million turnover, get a point-in-time check; this is where 2025 policy has been most dynamic.

Rates & scope

• Standard VAT remains 15%.
• Reduced rates (for example, 5%, 7.5%, 10%) apply to specified goods/services; SD layers on top for sin/luxury categories.
• Zero-rating for exports of goods and exports of services continues with 2025 clarifications.

Sector snapshots (illustrative): ride-sharing and many IT-enabled services remain in reduced-rate baskets; excise/SD adjustments have been made across banking balances and select consumer/import categories. Always check your HS/S-code or specific service schedule before quoting customers.

2025 VAT compliance changes you’ll actually feel

• ITC claim window: extended from 4 to 6 months; mirror change for decreasing adjustments tied to VDS certificates (Mushak 6.6).
• VDS (VAT deducted at source): withholding entities may utilise accumulated ITC before depositing cash; issuance deadline for Mushak 6.6 aligned to within 3 days after VAT return submission.
• AT (Advance Tax) at import: manufacturer import AT reduced (easing cash-flow), while commercial import AT increased; commercial importers adding ≤50% value on resale can get specified relief (no rebate).
• Half-yearly returns permitted (instead of monthly) for construction service providers, procurement providers, and C\&F agents that are not withholding entities—targeted compliance ease.
• Penalties trimmed: late VAT return penalty reduced; ITC-irregularity penalty bands narrowed; arrear VAT instalments extended up to 18 months.
• Customs document alignment: “Goods Declaration” replaces “Bill of Entry” terminology under the Customs Act 2023; ITC expressly available on the basis of the Goods Declaration.

Static anchors that did not change:

• Monthly VAT return due by the 15th (Mushak 9.1) with payment evidence; Mushak 6.10 continues for large purchase/sales declarations; statutory registers (Mushak 6.1–6.8) remain core books.
• Software compliance: if your prior-year turnover exceeded BDT 50m, you must run board-approved VAT software or integrate your ERP to produce Mushak registers/returns.

Non-resident digital services: register and file (no local bank needed)

If you supply electronic services into Bangladesh to VAT-unregistered customers, you must register (via an agent) and file monthly Mushak 9.1, even without permanent establishment or a local bank account. Price in the administrative layer, set a filing calendar, and keep evidence packs.

Part IV — Putting it together: practical scenarios

1) Local B2B SaaS at ~BDT 60–80m turnover

• Structure: Private Ltd. (room for ESOP and VC).
• Tax: Model 25% CIT (AY 2025–26) assuming bank-only receipts/payments; 27.5% from AY 2026–27. Watch the 1% minimum tax bound if discounting heavily.
• VAT: Register, charge 15% unless your service clearly qualifies as export of service (now clarified), in which case zero-rate with documentation. Align billing to Mushak 6.3.
• Controls: Build VDS logic into AR—some customers will withhold VAT; reconcile with Mushak 6.6 certificates within the new 6-month adjustment window.

2) Overseas manufacturer opening a Bangladesh sales office

• Structure: If booking revenue locally, a Branch (BIDA approval); if only market research/support, Liaison (no revenue).
• Tax: Branch profits taxed at the corporate rate applicable to the sector; treat HO cross-charges carefully.
• VAT/Customs: If importing demo stock or samples, align with the Goods Declaration and valuation; if making local taxable supplies, register for VAT and transact with Mushak compliance.

3) Solo founder with strong banking and an anchor customer

• Structure: If capital/turnover gates are met, OPC gives simplicity without a nominee shareholder.
• Tax: 2025 is your window for a lower OPC rate; expect 27.5% from AY 2026–27 regardless. If you plan to bring in co-founders or investors, you’ll likely convert to Ltd.—consider starting as Ltd. to avoid re-papering.

2025 “What’s new” checklist (for your board pack)

• CIT path set: Non-listed and OPC rates converge to 27.5% from AY 2026–27; listed stays at 20% (subject to conditions).
• Minimum tax: Treat 1% of gross receipts as your effective floor unless you’re a qualifying new manufacturer (0.10%).
• VAT working-capital relief: ITC and VDS windows extended to 6 months; VDS certificate timing revised; AT re-balanced (manufacturers down, commercial importers up).
• Half-yearly VAT returns now possible for targeted service categories not designated as withholding entities.
• Terminology in Customs aligned: Goods Declaration now the basis for ITC.
• VAT thresholds: Treat as fluid in 2025—verify latest SRO before relying on legacy threshold numbers.

Compliance calendar essentials

• VAT: Monthly return by the 15th (Mushak 9.1) with payment evidence; keep Mushak 6.1–6.8 registers and file 6.10 for large transactions.
• CIT: Map your tax year to assessment year early. If you operate on a Jan–Dec financial year, plan how AY 2025–26 captures your 2024 profits for Bangladesh. Seek board resolution if you need a non-standard year to align with group reporting.
• Non-resident e-services: Agent-assisted VAT registration; monthly 9.1 filing within the same 15-day deadline.

Governance & banking hygiene (TRW’s “don’t learn this the hard way” list)

• Bank-only receipts & large disbursements: If you’re banking on reduced corporate rates in AY 2025–26, all income and large expenses/investments must move through bank channels (per-payment and annual caps apply). Even as the incentive phases out, these controls help for audit and minimum-tax reconciliations.
• VDS choreography: For government/large corporate customers, build a Mushak 6.6 tickler in finance. Without the certificate, your decreasing adjustment doesn’t land—2025 gives you six months to fix it, not forever.
• Digital services into Bangladesh: If you’re a non-resident platform or SaaS, register via agent and file monthly. Refunds aren’t a near-term story; price it in.

Structuring guidance for common goals

Maximising investor readiness (seed to IPO).
Start Ltd., bake in ESOP headroom and drag/tag, and keep bank-channel purity. If IPO becomes real, convert to PLC with pre-IPO compliance planning (internal controls, related-party policies, revenue recognition).

Protecting founders while testing product-market fit.
If you can clear the capital/turnover hurdles, OPC gives you limited liability without a second shareholder. Otherwise, a simple Ltd. with two founders (or a founder + nominee) is usually cleaner for scaling and fundraising.

Regional group with Bangladesh sales.
If local invoicing or inventory is likely, a Ltd. beats a Branch on commercial flexibility (credit terms, vendor onboarding, employment, leases). Use a Branch only if the group insists on direct foreign-entity risk.

Quick comparison table (2025)

TRW’s implementation playbook (what we do for clients)

1. Entity design — share classes, AoA vetoes, board math, and founder vesting that survive due diligence.
2. Tax mapping — rate modelling across AY 2025–26 and AY 2026–27 step-ups, minimum-tax scenarios, and WHT grid by vendor category.
3. VAT systems — Mushak-compliant invoicing, VDS automation, ITC guardrails, and inventory valuation tied to Goods Declaration.
4. Regulatory filings — RJSC, VAT (and non-resident digital VAT via agent), BIDA for foreign offices, and sector licences where needed.
5. Internal controls — banking-channel evidence packs, vendor WHT cadences, and board reporting to pre-empt audit findings.

Final word from TRW

2025 is a bridge year. The CIT incentive for clean banking flows is tapering off; minimum tax will bite thin-margin models; and VAT is becoming kinder to working capital (if you use the new ITC/VDS windows well). If you’re forming in 2025, choose a structure that lets you raise, bank, and invoice without re-papering in 12 months.

If you want this tailored to your cap table, sector codes, and customer mix, our team will build a one-page compliance map and a 12-month filing calendar you can plug straight into finance ops.

— TRW — Tahmidur Rahman Remura | Schedule a consult: tahmidurrahman.com

TRW Law Firm — Contact
Phone: +8801708000660, +8801847220062, +8801708080817
Email: info@trfirm.com, info@trwbd.com, info@tahmidur.com
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