Sole proprietorship or company in Bangladesh: tax comparison
Taxes and contributions for a sole proprietor under each available system and for your own company, for a resident of the chosen country with the same profit.
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Sole proprietor
Sole proprietorSole proprietorship (একক মালিকানা ব্যবসা) — Income-tax Act 2023
Profit is taxed at the personal slab rates: 0% up to Tk 400,000, then 10–30%; minimum tax Tk 5,000. If the tax is less than 1% of gross receipts, 1% is paid instead (turnover tax).
Conditions
Income from software development and ITES listed in the Sixth Schedule (Part 1) is exempt until 30 June 2027 if the statutory conditions are met; from 2026-27 freelancing and content creation are exempt too. Income tax is then 0 and turnover tax is reduced proportionally. The calculation does not apply this exemption.
Turnover tax paid in excess of income tax is carried forward and set off against tax of later years.
A wealth surcharge (10–35% of tax) applies if net assets exceed Tk 4 crore; it is not included.
VAT: registration is required above Tk 5 million turnover (from Tk 3 million — enlistment for VAT turnover tax); VAT is not included in the calculation.
CompanyOne Person Company / private limited company (Companies Act 1994) — Income-tax Act 2023
The company pays 27.5% of profit (25% if every transaction in the year goes through the bank), but not less than 1% of gross receipts. Dividends are added to the owner's income at the slab rates; 15% is withheld on payment.
Conditions
A single owner registers a One Person Company; a private limited company needs at least two shareholders. The tax is the same.
The 25% rate instead of 27.5% applies if all of the company's transactions in the year are made by bank transfer; the calculation uses 27.5%.
The 15% withheld from dividends is an advance: it is credited against the owner's tax, and any excess is refunded or carried forward.
Income from software development and ITES listed in the Sixth Schedule (Part 1) is exempt until 30 June 2027 if the statutory conditions are met; from 2026-27 freelancing and content creation are exempt too. Income tax is then 0 and turnover tax is reduced proportionally. The calculation does not apply this exemption.
VAT: registration is required above Tk 5 million turnover (from Tk 3 million — enlistment for VAT turnover tax); VAT is not included in the calculation.
Business activity: IT and consulting services for business clients
One owner, resident of Bangladesh, no employees, no other income, no children; full tax year 2026-27 (1 July 2026 – 30 June 2027); general tax-free threshold of Tk 400,000 (not a woman, under 65).
No investment rebate and no ITES / freelancing exemption; net assets under Tk 4 crore (no wealth surcharge); there are no state social contributions; VAT is not included.
Company: the owner takes no salary; rate 27.5%; profit after tax is either fully paid out as dividends (taxed in the owner's hands at the slab rates) or retained.
DoubleTaxation