Capital asset management in Bangladesh is the control of a company's fixed assets, such as plant, machinery, vehicles, IT equipment and fit-outs, across their life: capital expenditure approval, recording in a fixed asset register, depreciation under IAS 16 and tax depreciation under the Income Tax Act 2023, VAT input credit on capital machinery, physical verification, impairment, and documented disposal.
Capital asset management is a weak spot in many Bangladeshi companies. Machinery is imported, installed and used for years, but the fixed asset register is a spreadsheet updated once a year by the auditor's request. Assets are scrapped without records, tax depreciation is calculated on numbers that no longer match the accounts, and VAT credit on capital machinery is missed or claimed incorrectly.
This service is for manufacturers, factories in EPZs and economic zones, hospitals, logistics firms and any company with significant equipment. It focuses on movable capital assets and the accounting and tax around them. Land and buildings held as real estate are covered in our asset and property management page.
On this page
The capital asset lifecycle
- Capex planning and approval with a business case and budget
- Acquisition: local purchase or import with customs and VAT documentation
- Capitalisation: deciding which costs, including installation and freight, form part of the asset
- Recording in the fixed asset register with tag number, location and custodian
- Depreciation, maintenance, revaluation or impairment over the asset's life
- Disposal, sale or scrapping with approval, accounting entries and tax treatment
Accounting depreciation vs tax depreciation
Under IAS 16, as adopted in Bangladesh, depreciation reflects the asset's expected useful life and residual value, chosen by management. For tax, the Income Tax Act 2023 prescribes its own depreciation allowances by asset category, and the tax computation replaces accounting depreciation with these allowances. The difference creates deferred tax under IAS 12.
Keeping two parallel schedules, one for the accounts and one for tax, reconciled to the same register, is the simplest way to avoid errors in the corporate tax return and in audited statements.
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VAT and customs on capital assets
Imported capital machinery may benefit from reduced customs duty under the applicable SROs, subject to conditions such as use in the declared industry. Under the VAT and SD Act 2012 and VAT Rules 2016, input VAT on capital machinery may be creditable, with timing and conditions set by the rules. Proper bills of entry, Mushak 6.3 invoices and evidence of use should sit in the asset file so claims hold up in a VAT audit.
Physical verification and tagging
A register is only useful if it matches reality. We help set up asset tagging, plan a full physical verification, investigate differences and record transfers between sites or departments. Annual or rolling verification gives auditors, lenders and insurers confidence and supports insurance claims after fire or flood.
Common capital asset problems
- Register totals that do not agree with the general ledger
- Fully depreciated assets still in use with no record, or scrapped assets still on the books
- Repairs capitalised or capital items expensed, distorting profit and tax
- Tax depreciation claimed on assets not actually in use
- No board approval or documentation for asset sales to related parties
- Capital machinery imported under concessional duty later used for other purposes
How the process works
- Review current recordsWe assess the existing register, ledger balances, policies and asset files.
- Design policy and registerWe set capitalisation thresholds, asset classes, useful lives and register structure.
- Verify and tagWe plan and support a physical count, tagging and reconciliation of differences.
- Build depreciation schedulesWe prepare reconciled accounting and tax depreciation schedules and deferred tax workings.
- Embed controlsWe set approval workflows for purchases, transfers and disposals, with periodic reporting.
Typical timeline: Cleaning up and rebuilding a fixed asset register typically takes three to eight weeks, depending on the number of assets, sites and the quality of historical records; ongoing maintenance then follows the monthly or quarterly close.
How Tax & VAT Associates helps
- Fixed asset policy and capitalisation guidelines
- Clean, reconciled fixed asset register with tagging
- Parallel IAS 16 and Income Tax Act depreciation schedules
- Deferred tax workings for the financial statements
- VAT and customs documentation checklist for capital machinery
- Disposal and transfer procedures with approval forms
Frequently asked questions
Why does tax depreciation differ from book depreciation?
Accounting depreciation follows management's estimate of useful life under IAS 16. Tax depreciation follows the categories and allowances set in the Income Tax Act 2023. The two rarely match, so the tax computation adds back book depreciation and deducts the tax allowance, creating a deferred tax difference.
Can we claim VAT credit on machinery we buy?
Input VAT on capital machinery can generally be claimed under the VAT and SD Act 2012 and VAT Rules 2016, subject to conditions and timing rules, and provided the machinery is used for taxable supplies. Keep the import or purchase documents and evidence of use in the asset file.
How often should we physically verify our assets?
At least once a year for most companies, often near year-end so auditors can rely on it. Large or multi-site businesses benefit from rolling counts during the year. High-value or portable items, like laptops and vehicles, warrant more frequent checks.
What happens when we sell an old machine?
The disposal must be approved, the asset removed from the register and accounts, any gain or loss recorded, and the tax effect calculated using tax written-down value. VAT may apply to the sale depending on the circumstances, so check before invoicing.
Is this service useful for EPZ and economic zone companies?
Yes. Companies under BEPZA and BEZA often import significant machinery under special arrangements and must account for it accurately for zone authorities, customs and lenders. A reconciled register supports those reporting obligations.
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Learn more →Last reviewed: . Bangladesh tax and regulatory rules change with each Finance Act, SRO and authority circular. This page is general guidance; confirm current requirements for your case before filing.