STARTUP TAXATION AND INCENTIVES IN BANGLADESH
A Short Guide to Eligibility, NBR Registration, Income Tax Sandbox Benefits, and VAT Exemptions
Income Tax Act 2023 & SRO 147-Law/2026 | Updated: August 2026
Prepared by ACE Advisory

REGISTRATION REQUIREMENT
Registration with the National Board of Revenue (NBR) as a Startup is a mandatory precondition to access both income tax sandbox benefits and VAT exemptions. Unregistered entities meeting the definition do not qualify.

1. What is a "STARTUP"?

Under the Income Tax Act 2023 (8th Schedule, Part 2), an entity qualifies as a Startup if it is incorporated under the Companies Act 1994, was not created through an amalgamation or demerger scheme, maintains an annual turnover not exceeding BDT 100 crore in any income year, and falls under one of the following two categories:

Note on "Innovation": Refers to the development or meaningful improvement of a product, service, process, business model, or technology that increases capability, quality, or utility, providing a better solution to an existing problem.

2. Registration and Maintenance

Startup registration is not permanent. The NBR may cancel a Startup's registration, provided it first discloses adequate cause and grants the entity an opportunity of a hearing.

• Register with the NBR as a Startup to unlock tax and VAT benefits.
• Maintain ongoing compliance with the turnover cap (≤ BDT 100 crore).
• Ensure original setup remains non-merger and non-demerger in origin.
• Continuously demonstrate operations under the assigned category classification.

3. Income Tax Benefits ("Growth Years")

"Growth years" refers to the 9-year period following the end of the income year in which the Startup was incorporated. Registered Startups enjoy the following tax relief during this period:

4. VAT Benefits (1 JULY 2026 – 30 JUNE 2035)

Under SRO 147-Law/2026 (dated 7 June 2026), registered Startups are granted specific VAT exemptions and procedural relaxations:

• Local Supplies: Exempt from all VAT chargeable on local-level supplies.
• Service Imports: Exempt from all VAT chargeable on imported services.
• Rent Exemption: Exempt from VAT on rent paid for office spaces and premises.
• No VDS Deducted: VAT-withholding entities purchasing from a registered Startup are not required to deduct VAT at Source (VDS).
• Electronic Records: Accounts and tax documents maintained via ERP or NBR-specified VAT software (under section 107(2ka) of VAT Act 2012) are legally acceptable evidence.

INPUT TAX CREDIT NOTE
The SRO provides an exemption on output VAT liability, not zero-rating. Under standard VAT rules, exempt supplies typically do not carry the right to claim input tax credit on related purchases.

5. At a glance - Compliance Checklist

Source: Income Tax Act 2023 (8th Schedule, Part 2) & SRO 147-Law/2026 (Value Added Tax and Supplementary Duty Act, 2012).

Disclaimer
This document summarizes selected statutory and regulatory provisions currently in force and is for general information only. It does not constitute tax or legal advice. Please contact ACE Advisory before acting on any matter summarized above.