Central Bank to Simplify Tax Rules for Foreign Investors

In a move to revive dwindling overseas interest in the capital market, Bangladesh Bank has signaled it will withdraw the restrictive requirement for foreign investors to obtain a tax certificate after every sale order.

Currently, foreign portfolio investors face a significant bottleneck: when they sell shares, their local custodians (such as HSBC) cannot release the funds—even for reinvestment—until a tax certificate is produced for that specific transaction. This process leaves capital idle and interest-free, a hurdle that DSE Managing Director Nuzhat Anwar notes does not exist in peer markets like India or Pakistan, where such documentation is only required during fund repatriation.

Following a meeting last week between the Dhaka Stock Exchange (DSE) and the central bank governor, the DSE is set to submit a formal proposal this week. The goal is to shift tax certification to a one-time requirement at the point of fund exit (repatriation).

Market experts, including former BRAC EPL Managing Director Ahsanur Rahman, point out that foreign investment in the Dhaka bourse plunged 70% over the last five years, reaching $914.58 million by December 2023. Proponents of the change argue that simplifying the exit and reinvestment process will not only reduce fund costs but ultimately increase government revenue through higher transaction volumes.