NBR plans flat-rate VAT for small businesses from coming budget
Bangladesh’s National Board of Revenue (NBR) is preparing to bring at least 500,000 small and medium enterprises (SMEs) under a value-added tax regime for the first time, starting from the fiscal year 2026-27, under a simplified flat-rate system designed to expand the country’s notoriously narrow tax base without burdening small traders with complex compliance requirements.
Under the proposed arrangement, businesses would pay a fixed monthly VAT of between Tk 1,000 and Tk 5,000 depending on their size – and would be able to do so through mobile financial services at a time of their choosing.
NBR officials say the scheme is deliberately designed to be frictionless: small entrepreneurs will not need to hire VAT consultants or lawyers, and VAT officers will not need to visit business premises. Firms dealing in VAT-exempt goods and services will not be covered.
To participate, businesses will be required to obtain a Business Identification Number (BIN).
The initiative is part of a broader revenue push for FY2026-27, in which NBR is expected to set a total collection target of approximately Tk 6.04 lakh crore – with VAT alone accounting for more than Tk 3 lakh crore of that figure.
The SME flat-rate scheme is projected to generate an additional Tk 600 crore in VAT revenue. The scale of Bangladesh’s informal and micro-business landscape makes the ambition both significant and complicated.
According to the Bangladesh Bureau of Statistics’ (BBS) latest economic census, the number of economic units in the country crossed 1.17 crore in 2024, of which roughly 78 lakh operate in rural areas or the informal sector – largely outside the current tax net.
Under existing law, businesses with annual turnover below Tk 30 lakh are exempt from VAT entirely. Those with turnover between Tk 30 lakh and Tk 50 lakh pay a 3 per cent turnover tax, while larger businesses pay the standard VAT rate.
The proposed system would replace this structure for sub-Tk 50 lakh businesses with a location-based flat levy, according to NBR sources.
However, the SME Foundation has proposed the enactment of a separate law or statutory regulatory order to establish a dedicated Preferential Tax Regime for MSMEs ,in a proposal submitted to the National Board of Revenue (NBR) recently .
The proposed framework includes a minimum 10-year tax exemption for new SMEs to encourage business growth, along with a simplified VAT system that would replace monthly returns with an annual filing structure based on turnover thresholds.
Small traders are raising a different concern altogether. With inflation running high and consumer demand weak, many small businesses say they are already operating under significant stress.
A new mandatory VAT obligation, they warn, could push some to the edge. “We are already struggling,” said one Dhaka shopkeeper who asked not to be named. “This will just add another burden.”
NBR officials say the scheme is still being finalised and that implementation details – including the precise turnover thresholds and location-based rate tiers – will be determined before the next budget. The proposal is expected to feature in the national budget announcement for FY2026-27.
