Government Proposes Reintroducing Offshore Loan Tax

The National Board of Revenue (NBR) is evaluating a fiscal proposal to reintroduce a 20 per cent income tax on the interest accrued from offshore loans. According to internal sources within the revenue authority, the statutory amendment is expected to be integrated into the upcoming Finance Bill, which will be placed before parliament during the national budget session in June.

An offshore loan represents an external credit facility whereby a domestic corporate entity borrows capital from an overseas financial institution, with the capital deployment and repayments typically routed through specialized offshore banking units.

Policy Shifts and Macroeconomic Adjustments

The withholding tax on international loan interest was initially implemented during the fiscal year 2023–24 budget cycle. However, following strong representations from commercial banking boards and industrial trade bodies, the executive branch withdrew the levy, granting a full tax exemption via a Statutory Regulatory Order (SRO) issued on 22 April 2024.

A senior NBR official involved in the budget preparation confirmed that the proposal has received formal administrative clearance from the Finance Minister. The official explained that the 2024 tax waiver was enacted as a temporary intervention to stimulate foreign currency inflows at a time when the central bank was facing acute pressure on its foreign exchange reserves. The official noted that changing economic conditions have prompted the state to reassess the exemption.

The regulatory timeline and fiscal parameters of the offshore loan taxation framework are structured in the table below:

Arguments For Market Equity

Financial consultants and legal analysts support the proposed reinstatement, arguing that the current tax exemption creates artificial market distortions. Snehasish Barua, a tax analyst and the managing director of SMAC Advisory Limited, noted that interest payments on domestic commercial loans are subject to standard corporate tax assessments, whereas international credit remains untaxed.

“From an equity perspective, offshore loan interest should be taxed,” Barua explained. “Otherwise, it creates a disparity between local and foreign borrowing.”

Barua further observed that because Bangladesh maintains comprehensive Double Taxation Avoidance Agreements (DTAA) with various foreign nations, international financiers can frequently offset the withholding taxes paid in Bangladesh against their ultimate tax liabilities in their home jurisdictions.

Apprehensions From The Private Sector

Conversely, trade leaders and commercial bankers have expressed concern over the fiscal proposal, warning that it could escalate project financing costs and restrict international credit lines. MA Jabbar, the managing director of DBL Group—a prominent industrial conglomerate with an active offshore debt portfolio valued at nearly $200 million—urged the government to reconsider.

“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.”

Syed Mahbubur Rahman, the managing director of Mutual Trust Bank, echoed these concerns, stating that the reintroduction of the levy would diminish the appetite of international lenders to extend credit to domestic firms. He added that even if foreign capital remains accessible, global financiers will likely pass the tax burden directly to Bangladeshi borrowers by adjusting their net interest margins upward.