Transfer pricing in Bangladesh requires transactions between associated enterprises, such as a local subsidiary and its foreign parent, to be priced at arm's length. The Income Tax Act 2023 carries forward the rules first introduced in 2014: taxpayers must use an accepted method, keep contemporaneous documentation, report international transactions with the return, and obtain an accountant's report where the transaction value exceeds the prescribed threshold.
A transfer pricing policy sets out how a group prices goods, services, loans, royalties and cost allocations between related companies. In Bangladesh, the NBR's interest is straightforward: it wants to ensure that profit earned here is not shifted abroad through prices that independent parties would not accept. Getting it wrong can mean additional tax, penalties and long disputes.
Exposure is highest for subsidiaries of multinationals, buying houses linked to foreign brands, garment exporters selling through group trading companies, IT firms providing services to a foreign parent, and companies paying management fees or royalties offshore. A written policy, supported by benchmarking and documentation, is the strongest defence if the transfer pricing officer reviews your file. It also makes conversations with your group's head office easier, because everyone works from the same pricing rules.
On this page
Who is covered by transfer pricing rules?
The rules apply to international transactions between associated enterprises. Association is defined broadly: it covers direct or indirect shareholding above set limits, common control of management, dependence on the other party for financing, raw materials or intellectual property, and other relationships listed in the Act.
- Purchase or sale of goods and raw materials with a foreign group company
- Provision of services, including IT, back-office and engineering support
- Royalties, technical know-how fees and trademark licences
- Intra-group loans, guarantees and interest
- Management fees and head-office cost allocations
- Reimbursements and cost-sharing arrangements
Accepted transfer pricing methods
Bangladesh follows methods familiar from the OECD Guidelines. The taxpayer must pick the most appropriate method for each transaction and explain why the others were rejected.
- Comparable Uncontrolled Price (CUP) method
- Resale Price Method
- Cost Plus Method
- Profit Split Method
- Transactional Net Margin Method (TNMM)
- Any other method the Act allows where none of the above gives a reliable result
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Transfer pricing documentation and reporting
Documentation must be prepared at the time the transactions take place and kept for the period specified by law. It typically includes a description of the group and the local entity, a functional analysis of functions, assets and risks, the intercompany agreements, the method selected, comparables and the arm's length calculation.
With the annual return, the company files a statement of international transactions. Where the aggregate value of international transactions exceeds the threshold prescribed in the Act, a report from a chartered accountant or cost and management accountant is also required. The threshold and penalty amounts are set in law and revised from time to time, so we confirm them for each year.
Building a practical transfer pricing policy
A good policy is short and operational. It tells the finance team how to price each intercompany flow, how often prices are reviewed, which documents are kept, and who signs off year-end adjustments. It should also connect to customs valuation for imports, VAT on imported services, and withholding tax on outward payments, because the same transaction is often tested by more than one authority.
Common transfer pricing risks in Bangladesh
- No signed intercompany agreement for management fees or royalties paid abroad
- Using foreign comparables without adjusting for Bangladesh market conditions
- Loss-making local service companies that should earn a routine cost-plus return
- Inconsistent values declared to customs and to income tax
- Missing the statement of international transactions with the return
- Year-end adjustments made without documentation of why they were needed
How the process works
- Transaction mappingWe identify every associated enterprise and every intercompany flow for the income year.
- Functional analysisWe interview management to document functions, assets and risks for each party.
- Method and benchmarkingWe select the most appropriate method and test pricing against comparable data.
- Policy and agreementsWe draft or review the transfer pricing policy and intercompany agreements.
- Documentation and filingWe prepare the TP study, the statement of international transactions and coordinate the accountant's report.
- Review supportWe support you if the NBR refers the file to the transfer pricing officer.
Typical timeline: A first-year transfer pricing study usually takes three to six weeks depending on the number of transactions and access to group data; annual updates are typically faster.
How Tax & VAT Associates helps
- Bangladesh-specific transfer pricing policy for your group
- Functional analysis and benchmarking studies
- Intercompany agreement drafting and review
- Statement of international transactions for the annual return
- Coordination with customs valuation and VAT on imported services
- Support during transfer pricing review and appeal
Frequently asked questions
When did Bangladesh introduce transfer pricing rules?
Transfer pricing rules were first introduced in Bangladesh through the Finance Act 2012 and took effect from 2014 under the old Income Tax Ordinance 1984. The Income Tax Act 2023 carries the same core framework forward, including the arm's length principle, documentation and reporting duties, and the powers of the transfer pricing officer.
Do transfer pricing rules apply to domestic related-party transactions?
The framework is mainly aimed at international transactions between associated enterprises. Domestic related-party transactions can still be scrutinised under general provisions on reasonable expenses and income, and specific domestic rules may apply in particular cases. If you have significant local group transactions, it is worth reviewing them with the same discipline.
What happens if transfer prices are not at arm's length?
The tax authority can adjust the income of the Bangladesh entity to the arm's length level and assess additional tax. The Act also provides penalties for failing to keep documentation, failing to file the statement of international transactions or the accountant's report, and for incorrect information. Penalty amounts are set by law.
Is a transfer pricing study needed every year?
Documentation must reflect each income year. In practice, a full study is prepared in the first year and then updated annually with current financials, refreshed comparables where needed, and any new transactions. A material change in the business model or the group structure requires a fresh analysis.
Are management fees paid to a parent company deductible?
They can be, provided they are at arm's length, supported by a written agreement and evidence that services were actually received, and within any limits set by the Act. Withholding tax must be deducted on the remittance, and VAT on imported services may also apply. Undocumented head-office charges are a frequent audit target.
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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.