2021 Bangladesh Investment Incentive Analysis: COVID Recovery and Expanded New Incentives
In 2021, the Bangladesh government maintained the existing incentive framework while adding new incentives to aid COVID-19 economic recovery and attract FDI. The major changes in 2021 include BIDA One-Stop Service (OSS) 2.0 upgrade, BEZA new SEZ designations, Korea Special Economic Zone (KSEZ) feasibility study completion, and IT income tax exemption extension (until 2024). In the Bangladesh national budget (FY2021–2022), incentives in manufacturing, exports, IT, and renewable energy were strengthened, and temporary tax installment and deferral systems were also introduced for COVID-19-affected companies.
The most notable incentive change in 2021 is the full-scale launch of Bangabandhu Hi-Tech Park (BHTP). BHTP is a 355-acre IT-specialized complex near Gazipur, offering resident IT companies a package of corporate tax exemption, one-stop services, high-speed internet, and UPS power supply. Korean IT companies entering BHTP can simultaneously target Bangladesh software outsourcing and domestic IT service markets.
2021 Major Incentive Changes
The major incentive changes announced in Bangladesh's FY2021–2022 national budget directly affect Korean company investment strategies. The cash incentive applicable sectors for export companies were expanded, strengthening support for leather, footwear, plastics, and jute exporters. Corporate tax exemption (15 years) and VAT exemption for renewable energy investment were confirmed, improving the entry environment for Korean solar and wind energy companies. BIDA's online One-Stop Service 2.0 launch enabled 30 types of licenses and permits to be processed online.
| Incentive Item | BIDA (General) | BEZA (Economic Zone) | BEPZA (Export Processing Zone) |
|---|---|---|---|
| Corporate Tax Exemption | 5–7 years (by region) | 10 years | 10 years |
| Additional Tax Reduction | None | 50% reduction for following 5 years | 50% reduction for following 5 years |
| Import Duties | SRO items — partial | Machinery and raw materials — full exemption | Machinery and raw materials — full exemption |
| Dividend Tax | Exempt | Exempt | Exempt |
| Re-export Duties | Standard rate | Exempt | Exempt |
| Land Lease | Intermediary support | 30–99 year contract | Allocated then leased |
| Export Obligation | None | Zone-specific conditions | 80%+ mandatory |
| Profit Repatriation | 100% | 100% | 100% |
| Foreign Workers | Standard procedures | Simplified work permit | Simplified work permit |
| OSS Service | BIDA OSS 2.0 | Full zone one-stop | Full EPZ one-stop |
2021 Sector-Specific Special Incentives
| Investment Sector | Corporate Tax Benefit | Additional Incentives | 2021 Notable Changes |
|---|---|---|---|
| IT and Software | Tax-exempt until 2024 | BHTP entry support | BHTP full-scale operation, 100+ companies entered |
| Renewable Energy | 15-year exemption | VAT exemption expanded | 2021 budget added solar and wind benefits |
| Power (IPP) | 15-year exemption | Foreign currency borrowing guarantee | Continued IPP demand due to power shortage |
| Garments (RMG) | 12% preferential CIT rate | Cash incentives | Post-COVID export surge |
| Pharmaceuticals | 5-year exemption (new entrants) | Raw material duty exemption | Domestic vaccine and drug production expanded |
| Agriculture and Food | Sector exemption | Export support expanded | Halal food export incentives added |
| Infrastructure PPP | 10-year exemption | Government guarantee | 5th–8th PPP projects issued |
| Tourism and Hotels | 5–10 year exemption | SEZ land support | COVID-affected companies: tax installment permitted |
4 Core Incentive Utilization Strategies for Korean Companies in 2021
The core keywords of Bangladesh's 2021 investment incentives are digital, IT, and renewable energy. BHTP IT park entry, KSEZ preparation, and renewable energy incentives precisely align with Korea's areas of strength. As Bangladesh approaches LDC graduation in 2026, some tax benefits may be reduced — making 2021–2025 the golden window for maximizing incentive utilization. Deciding on investment now and locking in the incentive structure determines medium- to long-term investment returns.
The most critical step in actually utilizing Bangladesh investment incentives is prior consultation with the NBR (National Board of Revenue). Before submitting incentive applications, consult thoroughly with the NBR tax officer to clearly confirm the applicable conditions, scope, and duration. In Bangladesh's tax practice, different officers may interpret the same statute differently — making it essential to obtain approved items in writing. Engaging Big 4 accounting firms (KPMG, PwC, Deloitte, EY) Bangladesh offices or local tax firms improves the accuracy of incentive applications and management.
The foreign companies that most aggressively utilized incentives in Bangladesh in 2021 were Chinese and Japanese firms. China participated in priority development of 7 BEZA SEZs and utilized the 10-year corporate tax exemption at scale, while Japan received 10-year exemption benefits through infrastructure PPP projects linked to JICA ODA. Korean companies need to accelerate KSEZ progress through the KOTRA-BIDA cooperation channel and build a Bangladesh incentive utilization framework on par with Japan and China.