The government is considering the reintroduction of a 20 per cent income tax on interest payments for offshore loans in the upcoming national budget. According to officials from the National Board of Revenue (NBR), the fiscal proposal is slated for inclusion in the forthcoming Finance Bill, which is scheduled to be presented to parliament in June.
An offshore loan refers to a cross-border financing arrangement where a domestic borrower secures capital from a lender located in a foreign jurisdiction, typically facilitated through specialized offshore banking units.
Policy Shifts and Fiscal Timeline
The 20 per cent withholding tax on foreign loan interest was originally enacted in the fiscal year 2023–24 budget. However, following sustained pressure from commercial bankers and domestic business leaders, the executive branch reversed the policy. The exemption was formally granted via a Statutory Regulatory Order (SRO) published on 22 April 2024.
A senior NBR official involved in the budget formulation process confirmed, on the condition of anonymity, that the proposal to reinstate the tax has obtained formal approval from the Finance Minister. The official noted that the previous exemption was implemented when Bangladesh faced severe foreign exchange reserve pressures, and the state aimed to stimulate the inflow of overseas capital.
The historical timeline and operational parameters of the offshore loan interest tax are outlined in the table below:
| Fiscal Period / Date | Regulatory Action / Policy Status | Primary Economic Objective |
| FY 2023–24 Budget | Introduction of 20% tax on offshore loan interest. | Revenue generation and domestic credit equity. |
| 22 April 2024 (SRO) | Total tax exemption granted on foreign interest payments. | Relieving foreign exchange reserve pressure. |
| June (Proposed) | Reintroduction of the 20% withholding tax. | Minimising disparities between local and foreign borrowing. |
Expert Support and Equity Arguments
Financial analysts and tax experts have endorsed the proposed reinstatement, citing the need for structural equity within the national credit market. Snehasish Barua, a tax expert and the managing director of SMAC Advisory Limited, stated that interest payments made on domestic loans are subject to taxation, whereas offshore equivalents currently enjoy a tax-free status.
“From an equity perspective, offshore loan interest should be taxed,” Barua noted. “Otherwise, it creates a distinct disparity between local and foreign borrowing.”
Barua further explained that because Bangladesh maintains active Double Taxation Avoidance Agreements (DTAA) with various foreign nations, international lenders can frequently credit the withholding taxes paid in Bangladesh against their tax liabilities in their home jurisdictions.
Industry Pushback and Cost Concerns
Conversely, commercial bankers and industrial leaders have expressed strong reservations, warning that the policy shift could escalate borrowing costs and disincentivise international financiers. MA Jabbar, the managing director of DBL Group—a prominent domestic industrial conglomerate holding nearly $200 million in offshore debt—argued against the measure.
“Lenders would likely raise interest rates if the tax is imposed,” Jabbar stated. “As a result, project costs for businesses will increase. This tax should not be imposed.”
Echoing these concerns, Syed Mahbubur Rahman, the managing director of Mutual Trust Bank, cautioned that the fiscal measure could compress the liquidity of foreign funds available to domestic markets. Rahman observed that if the tax is re-enacted, international lenders may show less interest in extending credit facilities, and those who continue to do so will likely pass the tax burden onto domestic borrowers through higher interest rates.