Transfer Pricing in Bangladesh

The legal framework

The Finance Act 2012 inserted Chapter XIA (sections 107A to 107J) into the Income Tax Ordinance 1984, with effect from 1 July 2014 under SRO 161-Law/Income Tax/2014. The rules passed largely intact into Chapter II of the anti-avoidance Part of the Income Tax Act 2023 as sections 233 to 239, with penalties at sections 276 to 279; commentary placing the chapter at sections 108 to 117 is wrong, as the authentic English text published under SRO 404-Law/2025 confirms. That text stops at the Finance Act 2024, and section 345(2) gives the Bangla text priority.

Section 234 requires income or expenditure from an international transaction to be computed by reference to the arm's length price, which section 233(1) defines against a comparable uncontrolled transaction between independent parties. "Associated enterprise" (section 233(2)) rests on participation in management, control or capital, with bright-line tests: more than 25 per cent of voting power, appointment of over half the board, borrowings from the other enterprise above 50 per cent of the book value of the lender's total assets, or guarantees above 10 per cent of the other party's borrowings. The Finance Act 2026 left these untouched; the 35 per cent loan limb some commentators attribute to the chapter belongs to a new general definition in section 2(86ka). "International transaction" (section 233(5)), as substituted from 1 July 2026, covers any dealing between associated enterprises where at least one is non-resident, expressly including purchase, sale, lease or exchange of tangible or intangible property, services and lending or borrowing, and reaches a third-party transaction whose terms an associated enterprise controls.

Bangladesh is neither an OECD member nor in the Inclusive Framework, has no OECD transfer pricing country profile, and the Act never mentions the OECD Guidelines, which carry persuasive weight only.

Methods, comparables and benchmarking

Section 235(1) lists comparable uncontrolled price, resale price, cost plus, profit split and transactional net margin, and any other method where none can reasonably be applied. There is no hierarchy; section 235(3) selects the most appropriate method on the nature of the transaction, data reliability, and functions, assets and risks.

Section 235(2) legislates the range. For any method other than profit split or the residual method, a dataset of six or more observations gives a range from the 30th to the 70th percentile, with a price outside it adjusted to the median, not the nearest edge; fewer than six gives the arithmetic mean. The proviso to section 235(3) makes adjustments one-directional: the arm's length price can never reduce Bangladesh taxable income below what the actual price produces.

The statute is silent on local comparables, multi-year data and tested-party selection. Bangladeshi listed-company data is thin, and NBR only obtained a commercial global database in 2024, so regional Asian sets are the norm; TNMM dominates for routine distribution and services, CUP for royalties and intercompany interest. There is no statutory thin capitalisation ratio (the 70:30 debt-equity ratio is only a BIDA recommendation). From 1 July 2026 section 53, as substituted by the Finance Act 2026, makes interest paid by a resident other than a bank, finance or leasing company on a loan from an associated enterprise deductible without the former Board-prescribed limit and Tk 15 lakh de minimis, and new section 46(11ka), read with the proviso to section 52(2), deems the shortfall business income where such a lender charges an associated enterprise less than 12 per cent a year.

Documentation: what the NBR expects

Section 237 obliges every person with an international transaction, at any value, to keep the prescribed records, producible on Deputy Commissioner of Taxes (DCT) notice within the period the notice states; the Act fixes no day-count. The content, carried over from Rules 70 to 75A of the Income Tax Rules 1984, spans group and entity profiles, financial statements, economic analyses, forecasts, transaction schedules and contracts. There is no master file, local file or country-by-country reporting; Bangladesh has not signed the CbC Multilateral Competent Authority Agreement.

Section 238 requires a statement of international transactions, in the prescribed form (historically Form 1AA), to accompany the return of income, with no de minimis. "Tax Day" in section 2(23) was repealed by the Finance Ordinance 2025; since 1 July 2026 section 170(2), as substituted by the Finance Act 2026, fixes the company due date at the 15th day of the ninth month after the income year end, or 15 September following the income year where that 15th day falls earlier. Filing at least two months early earns a rebate of 5 per cent of tax payable (capped at Tk 25,000), late filing within the tax year attracts additional tax of 2 per cent (minimum Tk 25,000), and NBR's power to extend the date by a month has gone.

Under section 239, where aggregate international transactions exceed Tk 3 crore (BDT 30 million) in the income year, the DCT may require a report from a chartered accountant or cost and management accountant in the prescribed form (historically Rule 75, Form 1BB) certifying that proper documentation has been kept. It is treated in practice as an annual filing and as the trigger for full documentation, although section 237 itself has no threshold.

There is no statutory language rule; English is used in practice. The Act never uses the word "contemporaneous", but section 235(4)(b) lets the DCT substitute its own price wherever section 237 records were not maintained.

Audits, penalties and the enforcement climate

NBR's Transfer Pricing Cell existed from 2012 but lacked staff and a database budget. In October 2024, after gaining access to a global transaction database with UK and EU support, it opened Bangladesh's first transfer pricing audits, of Procter & Gamble Bangladesh, Daraz and Heidelberg Materials Bangladesh. NBR's July 2025 revenue strategy concedes that no fully specialised unit yet exists and commits to building one and to joint income tax, customs and VAT audits. Since the Finance Ordinance 2025 replaced section 182, self-assessment returns are audited under NBR audit guidelines on selection by the tax authority with NBR approval; a return may be selected within two years after the end of the assessment year, and the audit must be completed within twelve months after the end of the assessment year in which it was selected.

Section 235(4) to (6) lets the DCT substitute an arm's length price after a show-cause notice where the taxpayer's method, documentation or data is deficient, or, with Board approval, refer the case under section 236 to a Transfer Pricing Officer whose written determination binds the DCT. Section 236(4) is a trap for tax-holiday companies: any adjustment is taxed at the regular rate.

Penalties are transaction-value based: up to 1 per cent of the value of every international transaction for failing to answer a section 235 notice or to keep or produce section 237 records (sections 276 and 277), up to 2 per cent for omitting the section 238 statement (section 278), and up to Tk 3 lakh for failing to furnish the accountant's report (section 279). A hearing is mandatory (section 280), but sections 276 to 279 are carved out of the Inspecting Additional Commissioner's prior approval under section 281, so the DCT imposes them on its own authority. There is no documentation-based penalty protection and no secondary adjustment mechanism. Limitation for a section 235 assessment, three assessment years until 30 June 2026, is now five assessment years after the end of the relevant assessment year under section 197(1) as substituted by the Finance Act 2026, against a general twelve-month limit; escaped-income notices under section 212 still reach back six years.

Dispute resolution and advance certainty

There is no advance pricing agreement programme and no APA provision in the Act. Mutual agreement procedure exists only through the MAP article of Bangladesh's treaties, given domestic effect by section 244; NBR publishes no MAP guidance, competent-authority contact or statistics, and faces no Action 14 peer review.

An adjustment follows the ordinary appeal ladder: Commissioner (Appeals) within 45 days of the demand notice (sections 286 and 287), then the Taxes Appellate Tribunal (section 291), whose order is final on fact and deemed allowed if not decided within 180 days (240 for a three-member bench), then a reference on a question of law to the High Court Division within 90 days (section 293) and onward to the Appellate Division (section 295). Alternative dispute resolution under sections 297 and 298 is available. The Finance Act 2026 cut pre-deposits to admitted tax plus 1 per cent of disputed tax at the Commissioner (Appeals), 3 per cent at the Tribunal and 10 per cent at the High Court Division, replacing the earlier 10, 15 and 25 per cent tiers.

No reported decision applies the chapter; with the first audits opened only in late 2024, disputes remain at DCT and Commissioner (Appeals) level.

Pillar Two and what changes in 2026

Bangladesh has not enacted or announced an income inclusion rule, undertaxed profits rule or qualified domestic minimum top-up tax, and does not appear in the OECD central record of Pillar Two legislation. Nor has it taken a position on Amount B; distributors are benchmarked under section 235 in the ordinary way.

The Finance Act 2026 (Act No. 96 of 2026), gazetted on 30 June and effective 1 July 2026, is explained in NBR's Income Tax Paripatra 2026-27. Within the transfer pricing chapter its only amendment is the substituted section 233(5) definition; section 233(2) was not amended. Changes outside the chapter matter more: the replacement of section 53 on interest paid to associated enterprises, the 12 per cent on-lending floor in sections 46(11ka) and 52(2), the five-assessment-year limitation for section 235 assessments in section 197(1), the substituted section 170 on return due dates, and a new section 200Ka on mandated digital data sharing.

The Finance Ordinance 2025, re-enacted as the Finance (FY 2025-26) Act 2026, had already capped royalty and technical fees at the lower of 6 per cent of turnover or 15 per cent of net profit and replaced section 182. The separate 2025 ordinance splitting NBR into policy and management divisions lapsed in April 2026 for want of parliamentary ratification; NBR remains a single board while a nine-member committee formed on 26 April 2026 redrafts it as a bill.

How practitioners should respond

First, treat Tk 3 crore as the documentation trigger but file the section 238 statement regardless, because the 2 per cent penalty has no threshold and the DCT can impose it without a supervisor's sign-off. Second, re-run group benchmarking against the 30th-to-70th percentile and median rule in section 235(2): a distributor at the 27th percentile is compliant under an interquartile range and exposed in Bangladesh. Third, map every intra-group loan and guarantee to the section 233(2) tests, since a loan above half the lender's total assets or a guarantee above 10 per cent of borrowings alone creates an associated enterprise relationship, price outbound lending to associated enterprises at no less than the 12 per cent statutory floor that applies from July 2026, and have tax-holiday entities price section 236(4) into any adjustment scenario. With the audit programme now live, a five-year assessment window and no APA or reliable MAP route, English-language documentation aligned to the prescribed record list, plus a chartered accountant's report obtained before rather than after a notice, remain the only real protection.