The National Board of Revenue (NBR) is preparing to reintroduce a 20 per cent income tax on interest payments derived from offshore loans in the upcoming fiscal budget. According to senior revenue officials, this regulatory shift is expected to be incorporated into the proposed Finance Bill, which is scheduled for formal submission to parliament in June.
An offshore loan constitutes a cross-border financial mechanism whereby a domestic enterprise secures debt capital from an overseas financial institution, a transaction typically managed via dedicated offshore banking units (OBUs).
Policy Evolution and Market Context
This fiscal measure was originally enacted during the fiscal year 2023–24 budget cycle. However, following strong representations from commercial banking executives and industrial conglomerates, the previous administration repealed the tax, formalising a comprehensive exemption via a Statutory Regulatory Order (SRO) issued on 22 April 2024.
An anonymous senior NBR official closely associated with the budget drafting process confirmed that the proposal has already received executive clearance from the Finance Minister. The official explained that the 2024 exemption was a temporary tactical measure designed to alleviate acute pressure on the central bank’s foreign exchange reserves by stimulating the inflow of external capital. The official noted that the present economic environment has changed, justifying the policy reversal.
The structural impact and operational timeline of the offshore loan interest tax framework are outlined in the table below:
| Timeline / Fiscal Phase | Regulatory Status of Interest | Impact on Cross-Border Capital Costs |
| FY 2023–24 Enactment | 20% withholding tax applied | Increased gross financing costs for domestic borrowers. |
| 22 April 2024 (SRO) | Fully exempt from taxation | Encouraged foreign currency inflows to stabilise reserves. |
| June Budget (Proposed) | 20% tax to be reinstated | Standardises tax obligations between local and foreign debt. |
Market Disparity and Fiscal Equity
Financial and tax consultants have expressed support for the change, framing it as a necessary step to restore competitive equilibrium between domestic and international debt instruments. Snehasish Barua, a prominent tax analyst and the managing director of SMAC Advisory Limited, pointed out that the current exemption creates an uneven playing field.
“From an equity perspective, offshore loan interest should be taxed,” Barua stated. “Otherwise, it creates a disparity between local and foreign borrowing.”
Barua further observed that since Bangladesh maintains Double Taxation Avoidance Agreements (DTAA) with numerous sovereign states, international lenders can frequently offset the withholding tax paid in Bangladesh against their domestic corporate tax liabilities at home.
Corporate Discontent and Interest Rate Pressures
In contrast, industrial leaders and commercial bankers have warned that the proposed tax could restrict access to international credit and raise project costs. MA Jabbar, the managing director of DBL Group—a leading industrial conglomerate with an offshore loan portfolio valued at nearly $200 million—strongly opposed the initiative.
“Lenders would likely raise interest rates if the tax is imposed,” Jabbar cautioned. “As a result, project costs for businesses will increase. This tax should not be imposed.”
Syed Mahbubur Rahman, the managing director of Mutual Trust Bank, echoed these concerns, noting that the levy would diminish the availability of foreign funds. He warned that international lenders would either reduce their exposure to the Bangladeshi market or increase their net-of-tax pricing to pass the fiscal burden directly onto local corporate borrowers.