2020 Bangladesh Investment Incentive Complete Guide: Optimal Utilization for Korean Companies
Bangladesh offers some of Asia's most generous tax and tariff incentives to attract foreign investment. Three agencies — BIDA (Bangladesh Investment Development Authority), BEZA (Bangladesh Economic Zones Authority), and BEPZA (Bangladesh Export Processing Zones Authority) — operate differentiated incentives by investment sector, location, and scale. Companies in Special Economic Zones (SEZ) receive 10-year corporate tax exemption plus full import duty exemption, while even in general areas, 5–7 year corporate tax exemptions apply by sector and location. Under the Korea-Bangladesh Double Taxation Avoidance Agreement (DTA), withholding taxes on dividends, interest, and royalties are reduced by up to 50% vs domestic rates.
In 2020, Bangladesh further strengthened investment incentives to aid COVID-19 recovery. BIDA shortened investment registration via One-Stop Service (OSS) to 3 days, and BEZA designated 3 new SEZs (including Bangabandhu Hi-Tech Park). Korean companies that systematically design Bangladesh investment incentives can dramatically reduce their effective corporate tax rate from 20–25% to 0–5%.
BIDA, BEZA, and BEPZA Detailed Incentive Comparison
Bangladesh investment incentives vary greatly depending on which agency channels the investment. BEPZA (export processing zones) requires an 80%+ export obligation but provides the strongest incentives, while BEZA (economic zones) allows domestic sales while offering equivalent incentives to BEPZA. BIDA (general areas) offers relatively weaker incentives but allows free location choice. Korean export manufacturers are best suited for BEPZA or BEZA, while domestic-focused companies are better served by BIDA or BEZA.
| Incentive Item | BIDA (General) | BEZA (Economic Zone) | BEPZA (Export Processing Zone) |
|---|---|---|---|
| Corporate Tax Exemption | 5–7 years (by region) | 10 years | 10 years |
| Import Duties | SRO items — partial | Machinery and raw materials — full exemption | Machinery and raw materials — full exemption |
| Dividend Tax | Exempt | Exempt | Exempt |
| VAT | Partial exemption | Exports — full exemption | Exports — full exemption |
| Re-export Duties | Standard rate | Exempt | Exempt |
| Foreign Technical Workers | Standard visa | Simplified work permit | Simplified work permit |
| Land Lease | Intermediary support | 30–99 year direct lease | Allocated then leased |
| Export Obligation | None | Conditional for some zones | 80%+ mandatory |
| Profit Repatriation | 100% guaranteed | 100% guaranteed | 100% guaranteed |
| OSS Service | Investment registration and licensing | Full zone one-stop | Full EPZ one-stop |
Sector-Specific Special Incentives (2020)
| Investment Sector | Corporate Tax Benefit | Additional Incentives | Korean Company Application |
|---|---|---|---|
| Garments (RMG) Exports | 12% preferential CIT rate | Certificate of Origin GSP benefits | Korean fashion OEM and ODM |
| IT and Software | Tax-exempt until 2024 | Workforce training subsidies | IT outsourcing and app development |
| Pharmaceuticals | 5-year exemption (new entrants) | Raw material import duty exemption | Korean pharma local production |
| Power (IPP) | 15-year exemption | Foreign currency borrowing guarantee | Korean power EPC projects |
| Renewable Energy | 15-year exemption | Customs and VAT exemption | Solar and wind investment |
| Infrastructure PPP | 10-year exemption | Government guarantee | Bridge, road, and port investment |
| Agriculture and Food | Sector exemption | Export incentives | Korean food local production |
| Tourism and Hotels | 5–10 year exemption | SEZ land support | Resorts and business hotels |
4 Core Incentive Optimization Strategies for Korean Companies
The core to maximizing Bangladesh investment incentives is designing the optimal structure before the investment stage. Once investment is executed, structural changes are difficult and costly. Use KOTRA Dhaka Trade Office, local accounting firms (Big 4 Bangladesh branches), and BIDA investment consulting services to finalize the optimal incentive structure at the early entry stage. Since Bangladesh NBR tax policy changes with the annual budget announcement (every June), building a system to continuously monitor the latest SROs and notices is also important.
The benefit most often missed by Korean companies utilizing Bangladesh investment incentives is the IT and software income tax exemption. With 100% income tax exemption on software exports and IT services until 2024, establishing an IT development center in Bangladesh offers 0% corporate tax as an additional benefit beyond local development cost savings. The structure of Korean IT companies establishing software development subsidiaries in Bangladesh and providing development services to the parent company is the optimal model for simultaneously achieving labor cost savings and tax benefits.
Among Bangladesh's BEZA economic zones, the most suitable for Korean companies is Bangabandhu Sheikh Mujib Shilpa Nagar (BSMSN). BSMSN near Chittagong, spanning 30,000 acres as Bangladesh's largest SEZ, has excellent port access and transportation infrastructure with a Korean company-dedicated zone also under consideration. BSMSN residents receive 10-year corporate tax exemption, raw material import duty exemption, and 30-year land lease. With Korea E&C, Korea Steel, and Korea C&T already operating construction projects in Bangladesh, formation of a Korean company cluster at BSMSN is expected to accelerate.