DHAKA
Trade & Business

Bangladesh Export Incentives 2020: Cash Incentive Programs and Tax Benefits Analysis

Overview of Bangladesh's Export Incentive Framework

The Bangladeshi government administers a comprehensive suite of export incentive programs to support its export industries. Total Cash Incentive disbursements in 2020 reached approximately USD 1.5 billion — roughly 0.5% of GDP. The core instruments include Cash Incentives (export subsidies), corporate income tax exemptions, the Bonded Warehouse scheme, Duty Drawback, and preferential terms in EPZs and Economic Zones (EZs). Together, these programs form a critical pillar of Bangladesh's export competitiveness.

$1.5B
Total Incentives
2020
2–20%
Cash Incentive
by product
12%
RMG Tax Rate
vs. standard 25%
10 years
EPZ Tax Holiday
corporate tax
4,000+
Bonded Factories
duty-exempt
Calculated
Duty Drawback
on export record

Cash Incentive Rates by Product Category

Bangladesh Cash Incentive Rates (2020)
Product CategoryCI RateAnnual PayoutBeneficiariesNotes
Agro-processed goods20%$300M800 firmsHighest rate
Leather products15%$100M500 firmsPost-Savar relocation
Diversified jute12%$50M200 firmsEco-friendly products
IT services10%$80M1,000 firmsSoftware exports
New market exports4%$200MMultipleIncl. RMG
General exports2–4%$700MMultipleRMG baseline

The Cash Incentive scheme pays exporters a set percentage of their FOB export value in cash. The highest rate of 20% applies to agro-processed goods, functioning as a policy tool to promote export diversification beyond the RMG sector.

EPZ vs. Economic Zone: A Comparison

EPZ (Export Processing Zone)
AuthorityBEPZA
Tax Holiday10 years
Customs100% duty-free on raw materials
Key ZonesDhaka, Chattogram, Comilla EPZ
EZ (Economic Zone)
AuthorityBEZA
Tax HolidayUp to 10 years
CustomsExempt on construction materials & inputs
Key ZonesMirsarai, Bangabandhu Shilpa Nagar
01
Bonded Warehouse Scheme
The bonded warehouse system is the cornerstone of Bangladesh's export incentives. Export factories that are members of BGMEA or BKMEA obtain a bonded license, which exempts all customs duties and VAT on imported raw materials. (1) License issuance: BGMEA/BKMEA endorsement + customs review. (2) Condition: 100% of imported inputs must be processed for export. (3) Audit: annual usage verification (UD/UP). (4) Penalty: retroactive duty assessment and license revocation for violations. When Korean companies export raw materials to bonded factories in Bangladesh — yarns, chemicals, accessories — the transaction is duty-free for the buyer.
02
Corporate Tax Reductions and Fiscal Benefits
(1) RMG exporters: corporate tax rate of 12% (vs. standard 25%). (2) 100% export-oriented companies: 50% corporate tax reduction. (3) IT/software exports: corporate tax exemption until 2024. (4) Agro-processing: 5–10-year corporate tax exemption. (5) EPZ tenants: 10-year corporate tax holiday + 50% reduction for the following 10 years. (6) EZ tenants: up to 10-year tax holiday. (7) Green Factory certification: additional 2% corporate tax reduction.
03
How Korean Companies Can Leverage Incentives
(1) Supply to bonded buyers: Korean raw materials — yarns, chemicals, accessories — can be supplied duty-free to bonded factories in Bangladesh. (2) Invest in EPZs/EZs: 10-year corporate tax holiday plus duty exemptions provide a strong foundation for local production. (3) Cash Incentive eligibility: Korea–Bangladesh joint ventures exporting from Bangladesh can receive 2–20% Cash Incentives. (4) Double Taxation Avoidance: utilize the Korea–Bangladesh Double Tax Avoidance Agreement (DTAA). (5) Caution: some Cash Incentive programs are scheduled to be phased out after LDC graduation under WTO subsidy rules.
04
LDC Graduation and the Changing Incentive Landscape
(1) Cash Incentives: export subsidies will be prohibited under the WTO SCM Agreement after LDC graduation — phase-out planned. (2) EU EBA termination: duty-free access to the EU for bonded-manufactured goods will end. (3) Corporate tax: preferential rates may be adjusted under international harmonization pressure. (4) Alternative: BEZA's development of 100 Economic Zones is intended to strengthen investment incentives going forward. (5) Industrial upgrading: a shift from incentive dependency toward productivity- and quality-driven competitiveness will be essential.

Trend in Export Incentive Disbursements

2015
$800M
↓
2016
$900M
↓
2017
$1.0B
↓
2018
$1.2B
↓
2019
$1.4B
↓
2020
$1.5B
Bangladesh Trade Agreements 2020FTA and preferential tariffs
Bangladesh Bonded Warehouse System 2020Detailed bonded warehouse guide

Bangladesh's export incentive framework is multi-layered — encompassing Cash Incentives, bonded warehouses, corporate tax reductions, and EPZ/EZ preferences — and forms a vital element of the country's export competitiveness. Korean companies can maximize these benefits by supplying bonded factory buyers, investing in EPZs or EZs, and positioning for Cash Incentive eligibility.

Export IncentiveCash IncentiveEPZ2020Tax Benefits
Bangladesh Export Incentives 2020: Cash Incentive Programs and Tax Benefits Analysis | Dhaka Trade Portal