In such case, VAT compliance will be ensured by such local VAT agents. Whereas the nonresident is responsible for payment of all dues including taxes, fines, penalties and interest.
Further, any person (having license) may be appointed for providing advice to a taxable person or for representing it in any proceeding.
Reverse charge. In the case of import of services, the recipient of the service is liable to pay VAT if (i) the recipient is a registered or registrable person and acquires such service in the process of economic activities and (ii) if such service is provided in Bangladesh in the process of an economic activity by a person registered/required to be registered and such service is taxable at a rate other than zero-rated. “Imported service” has been defined to mean service supplied from outside of Bangladesh.
In the case of import of services by a VAT-registered service recipient, VAT is payable by the service recipient. There is a requirement under the VAT and SD Act by which the bank/financial institution remitting payment to the foreign service provider is required to collect VAT if the VAT-registered service recipient (i.e., the remitter) does not submit proof of payment of VAT to the government treasury on such payment.
In the case of import of services by a VAT-unregistered service recipient – the bank/financial institution remitting payment to foreign service provider is required to collect VAT before such remittance.
Domestic reverse charge. In the case of certain services (like payment of rent for properties), the recipient of the service is required to deposit VAT.
Further, the withholding entity shall not receive any supply and shall not make any payment against such a supply if the supplier is not registered or enlisted and does not issue a tax invoice for it. If the recipient of a supply receives any supply from an unregistered person, the recipient of the supply shall be liable to pay VAT.
Digital economy. Nonresidents providing electronic services to VAT-unregistered customers in Bangladesh (i.e., business-to-consumer (B2C) supplies) are required to register and account for VAT on their supplies in Bangladesh.
Nonresidents providing electronic services to VAT-registered recipients (i.e., business-to-business (B2B) supplies) are not required to register and account for VAT in Bangladesh. Instead, the customer is required to self-account for the VAT by way of the reverse-charged mechanism (see the Reverse-charged subsection above).
There is no specified VAT rate for supplies of electronic services. The VAT rate depends on the particular service being supplied, and no specific clarifications have been issued by the National Board of Revenue to date.
An electronic service is defined to mean the following services, when provided or delivered on or through a telecommunications network, a local or global information network, or similar means, namely:
(a) Websites, web-hosting or remote maintenance of programs and equipment
(b) Software and the updating thereof delivered remotely
(c) Images, texts and information delivered
(d) Access to databases
(e) Self-education packages
(f) Music, films and games
(g) Political, cultural, artistic, sporting, scientific and entertainment broadcasts and telecasts and events, including telecasts
There are no specific e-commerce rules for imported goods in Bangladesh.
Online marketplaces and platforms. “Selling of goods through online” means “retail sale through online” or “marketplace,” where (1) “Retail sale through online” means using an electronic network for the purchase-sale of goods or services that have already been purchased from any manufacturer or services provider or trader on payment of VAT, and the said purchased goods shall be supplied by the retailer through online on payment of VAT and where the said online retailer does not have own sales center and (2) “marketplace” means digital commerce platform where one or more than one seller displays information related to its goods or service and supplied through platform, i.e., in such case marketplace operators do not purchase or sell any goods and those who do not have their own sales center. Such services are subject to the reduced rate of VAT at the rate of 5%.
Registration procedures. Every person required to be registered under VAT is required to make an online application with requisite documents. The only method to apply for VAT registration in Bangladesh is online. If the tax officials find the application proper after primary verification, a VAT Registration Certificate is issued, which contains a Business Identification Number (BIN/ VAT registration number). However, registrations for nonresidents are required to be made through a local VAT agent.
The list of documents required, inter alia, in the VAT registration application is as follows:
• Copy of ETIN certificate
• Copy of NID/passport of all authorized signatories
• Copy of NID/passport of all share holders
• Copy of latest bank statements (for all bank accounts to be reported at the time of EBIN registration)
• Copy of trade license and certificate of incorporation
• Copy of import registration certificate (IRC) (in the case of import)
• Copy of export registration certificate (ERC) (in the case of export)
• Copy of old BIN (11 digits) (in applicable cases)
• Copy of BIDA/BEPZA/BEZA/BSCIC registration (for industrial undertaking)
Deregistration. A registered person may apply for cancellation of VAT registration (deregistration) for the following reasons:
• Failure to commence economic activity after registration
• Closure of economic activity
• Economic activity has been declared as exempted
• Annual turnover falls below the limit of registration for two consecutive years
For the purpose of deregistration, an application is required to be made before the VAT Department. No specific time limit is prescribed for the filing of an application for cancellation of VAT registration.
Changes to VAT registration details. Every registered or enlisted person must‚ in respect of any change in the following areas relating to its economic activity‚ inform the Commissioner within such time and in such manner as may be prescribed‚ namely:
• A change in the name of such person or the type of business‚ including the name of the business or any other commercial name
• A change in the address or any other contact details of such person
• A change in the places of its economic activity
• A change in information relating to any bank account of such person
• A change in the nature of one or more of the economic activities carried on by such person
• A change in ownership or partnership
• Any other prescribed change
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.
The VAT rates are:
• Standard rate: 15%
• Reduced rates: 1.5%, 2%, 2.4%, 4.5%, 5%, 7.5%, 10%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for a reduced rate, the zero rate or an exemption or for any other rates mentioned above.
Examples of goods and services taxable at 0%
• Immovable property situated outside Bangladesh
• Goods for export
• Services directly related to land situated outside Bangladesh
• Services physically carried out on goods situated outside Bangladesh
• Services included in the customs value of an imported goods
• Supply of service outside Bangladesh
Examples of goods and services taxable at 5% rate
• LP gas
• Pickles
• Information technology-enabled services (ITES)
• Internet service
• Packing paper
• Self-copy paper
• Non-AC hotel
• Construction firm
• Electric poles
• Repair and servicing
Examples of goods and services taxable at 7.5% rate
Examples of goods and services taxable at 10% rate
• Transport contractor (except petroleum goods)
• Printing press
The term “fixed VAT amount or specific amount of tax is fixed on unit basis and not on sale value.
Examples of goods and services taxable at fixed VAT amount or specific amount of tax
• Newsprint
• Brick chips
• SIM card or e-SIM supplier
The term “exempt” refers to supplies of goods and services that are not liable to tax and that do not qualify for input tax credit.
Examples of exempt supplies of goods and services
• Prescribed basic food items for human consumption
• Supply of unprocessed agricultural, horticultural or pisciculture products, if the supplier is the producer of the goods
• Public health and medical services provided by a government entity or by private bodies
• Sale of land or transfer and its registration
Nondeductible input tax. Input tax credit is not available in the following cases:
• VAT paid on input shall be taken as credit by any registered person in the case of supply of zero-rated goods under export and standard-rated goods and services only. For supply of reduced rated or specific amount of tax or exempted goods or services, VAT shall not be taken as input tax credit.
• When the tax invoice does not contain all requisite information such as name, address and registration number of both the buyer and the seller
• Any of the specified condition (maintenance of registers, payment through banks, etc.) are not complied with
• Purchase of goods or services that don’t qualify as input as per definition of input/some goods or services are excluded from definition of input and hence not eligible for input tax credit
Further, input tax credit is also not permissible for certain procurements specified under the law. Examples of such procurement specifically not eligible for input tax credit is given below.
Examples of items for which input tax is nondeductible
• Passenger vehicle or its spare parts or repairs and maintenance of such vehicle. Input tax credit may be allowed when the economic activities of such person include dealing in vehicles, renting them out or supplying transportation services
• Entertainment or costs used for the provision of entertainment. Input tax credit may be allowed when provision of entertainment relates to such person’s economic activities and the entertainment is provided in the normal course of its economic activities
• Membership or right of entry in a club, association or society of a sporting, social or recreational nature
• Input tax credit up to 80% is allowed on transportation of goods
Examples of items for which input tax credit is allowed (if related to a taxable business use where output VAT is 15% or 0% under export)
• Imported goods for the purpose of resale or manufacture
• Locally purchased goods for the purpose of resale or manufacture
Partial exemption. Where a registered person pays or is liable to pay a part of the consideration for a taxable supply, any input tax credit to which the person is entitled must be calculated on the basis of the amount of the consideration such person pays or is liable to pay.
VAT paid on input shall be taken as credit by any registered person in the case of supply of zerorated goods under export and standard rated goods and services only. For supply of reduced rated or specific amount of tax or exempted goods or services, VAT shall not be taken as input tax credit.
If a registered person is not entitled to input tax credit in full, its entitlement to it against its total imports and acquisitions must be calculated proportionately based on a formula (IxT/A) where I is the input tax originating from imports and acquisitions; T is the value of all supply eligible for input tax credit under section 46 in any tax period, given by any registered person registered on any tax period; and A is the value of all supply given by any registered person registered on any tax period.
Approval from the tax authorities is not required to use the partial exemption standard method in Bangladesh (i.e., the above formula for input tax credit). Special methods are not allowed in Bangladesh at present, except in the cases where the NBR has the power to determine special procedure for taking input tax credit against a taxable supply made by a supplier of financial services.
H. Invoicing
Tax invoices. Every registered or enlisted person must issue, on or before the date when VAT becomes payable on the taxable supply, a fiscal-year-wise serially numbered tax invoice as prescribed (Mushak 6.3 or Mushak 6.9, respectively). Tax invoices must accompany goods during transportation. No input tax credit shall be admissible against a tax invoice if the information specified is not included in such invoice. An enlisted person must issue a serially numbered turnover tax invoice. The NBR, through an order in the official gazette, can declare an invoice or bill issued by a registered person in its own format to be treated as a tax invoice.
Credit notes. Credit notes mean a supplementary invoice based on which the registered person can make a decreasing adjustment of one or more than one invoice issued earlier that is related to the amendment. A debit note means a supplementary invoice based on which the registered person can make increasing adjustment of one or more than one invoice issued earlier that is related to the amendment.
Electronic invoicing. Invoices are generally required to be issued in printed form.
Scope of electronic invoicing Some categorized entities (defined as specified suppliers situated in city corporation areas or in district cities or selected suppliers by the respective Customs, Excise and VAT Commissionerate) are required to use an electronic fiscal device (EFD) or sales data controller (SDC) or point-of-sale (POS) software. Some of the specified or selected suppliers required to use EFD/SDC/POS are as follows:
• Residential hotel
• Restaurant and fast-food shop
• Advertisement agency
• Jewelry shop
• Health club and fitness center
• Coaching center
• Department store
• General store/supershop
• Cinema hall
• Courier and express mail service
There are two types of invoices, one is a commercial invoice issued by an entity against the supply of any goods or services and the other is a tax invoice. A tax invoice is an integral part of the VAT records. VAT records can be maintained manually or through software in applicable cases. Where it is maintained through software, a tax invoice is generated electronically and might be sent through mail for internal purpose only. But to take input tax credit, a printed, signed copy is required. Further, during transportation of goods, supplied by any VAT-registered entity, an original, signed copy of the tax invoice must accompany the vehicle. In such case where VAT records are maintained through software, a tax invoice must be printed and signed to accompany the vehicle.
Simplified tax invoices. Simplified tax invoicing is not allowed in Bangladesh. As such, full tax invoices are required. However, the NBR, through an order in the official gazette, can declare an invoice or bill issued by a registered person in its own format to be treated as a tax invoice.
Self-billing. Self-billing is only allowed for self-supplies, i.e., for own consumption of taxable goods.
Proof of exports. Supply of goods from inside to outside the geographical limits of Bangladesh in exchange of foreign currency is considered export of goods. In the case of export of goods, the following would serve as proof of export:
• Copy of bill of lading or airway bill or truck receipt
• Copy of export general manifest
• Copy of proceeds realization certificate
Export of service in exchange of foreign currency outside Bangladesh is zero-rated. To substantiate the same, a taxable person must analyze whether its supply can be classified as export of service. There is no standard prescribed document as proof of export for services. However, agreement with the foreign service recipient, availability of the invoice and proof of receipt of foreign currency would be critical documents, which may be required depending on the scenario.
Foreign currency invoices. As per the prescribed format of tax invoice, price, value and taxes must be reported in the domestic currency, which is the Bangladeshi taka (BDT). Hence, the invoices should report the BDT values. Values in a foreign currency may also be reported in the invoice, as incorporation of any additional information on a tax invoice is permissible.
Supplies to nontaxable persons. A VAT-registered person is required to issue a full tax invoice in all cases and there is no specific provision for tax invoices for supplies to non-registered persons.
Records. Businesses must keep all accounts and records so as to facilitate assessment of their tax liability and other obligations. The format of some of the records are prescribed under the law.
In Bangladesh, examples of what records that must be held for VAT purposes include:
• Books of accounts for purchase
• Books of accounts for sale
• Books of accounts for purchase – sale (for trading kind of activity)
• Tax invoice
• Invoice for contractual manufacturing (where applicable)
• Invoice for transfer of goods (under central VAT registration)
• Certificate for VAT deduction at source
• Credit note and debit note
In Bangladesh, VAT books of accounts and records can be maintained manually or through software. Where records are kept manually, such records should be held at the taxable person’s registered address. VAT records and accounts have to be preserved in the registered premise or premises on fiscal year basis in such a way that those are not destroyed, and they can be examined any time with ease. Further, any taxable person with a turnover of BDT50 million or more or for taking central VAT registration, must maintain VAT records and accounts through software, specified or approved by NBR. This is provided that the electronic information must be preserved with proper security in such a way so that those can be easily used.
Where records are kept electronically (using VAT software as prescribed by the General Order), the system must be managed with all information at the commercial premises of the taxable person. If a cloud server is used, then a database replica must be preserved in the commercial premises of the taxable person.
Record retention period. Every taxable person must maintain and keep VAT records for a period of five years. Provided that for any unfinished proceedings, VAT records are to be preserved till disposal of the proceedings.
Electronic archiving. Electronic archiving is allowed in Bangladesh. However, it is only allowed by using approved VAT software. Also, the electronic information must be preserved with proper security in such a way so that those can be easily used. If the turnover of a registered person is more than BDT50 million or for taking central VAT registration, VAT books of accounts and records should be maintained in the software from enlisted vendors. A person can also get their own software approved from the VAT Department for such purposes. Separate guideline is issued by NBR for such software.
I. Returns and payment
Periodic returns. Every registered or enlisted person must file the return for each tax period within a period not exceeding 15 days after the end of the tax period. If a VAT return filing due date is a public holiday, the next working day is to be considered as the due date. The NBR has powers to extend the due date of a VAT return filing to avoid fine and interest in the case of natural calamities, epidemic or pandemic. The tax period in the case of a VAT-registered person is one calendar month and for a turnover taxable person is three calendar months ending on 31 March, 30 June, 30 September or 31 December. A taxable person may file an application with the Commissioner to grant permission to file an amended return after removing the clerical mistakes and omissions from such return. Further, there are provisions for submission of late return subject to submission of prayer within the specified time and following the terms and conditions mentioned in the VAT and SD Act. Otherwise, there is a provision of penalty for late filing of return.
Periodic payments. Payment of VAT must be made monthly for every taxable person. Net payable VAT is required to be made on or before submission of monthly VAT return of the respective month, i.e., 15th day of the subsequent month. However, payment of VDS is required to be made within seven days of next tax period of the respective tax period. Turnover tax must be paid by the enlisted person before filing the quarterly return for the tax period. Payment of VAT of an amount of BDT5 million or above must be made through online (Automated challan) or through electronic means (e-payment). Further, for Dhaka Division, payment of VAT liability including VDS shall be made through automated challan from 1 October 2023 onward.
Electronic filing. Electronic filing is allowed in Bangladesh. Presently, the VAT-registered entity has the option to file a VAT return manually, as well as electronically. Electronic VAT returns must be submitted on the online portal of the government using the credentials of company (login ID and password). However, a VAT-certified consultant may also submit a VAT return of any VAT-registered entity through the VAT online portal, subject to the inclusion of credentials of the VAT consultant in the VAT registration application form (Form “Mushak-2.1”).
Payments on account. Payments on account are not required in Bangladesh.
Special schemes. Turnover tax. Small businesses with annual turnover from BDT5 million to 30 million have the option to pay a flat tax at the rate of 4% on the turnover, known as turnover tax. The turnover tax payable in a tax period by any enlisted person must be paid before filing the return for that period. VAT or turnover tax incurred on purchases by small businesses using the turnover tax scheme cannot be recovered as input tax.
Annual returns. Annual returns are not required in Bangladesh.
Supplementary filings. Invoice-level information. Invoice-level information relating to sales and local purchase invoices, which are of the value more than BDT 0.2 million, must be filed online in prescribed form on a monthly basis (Mushak 6.10). Further, in the case, online submission of such information is not feasible, the same must be submitted to the VAT Department in paper form. Presently, the VAT-registered entity has the option to submit such information manually, as well as electronically. Electronic submission must be submitted on the online portal of the government using the credentials of company (log-in ID and password).
Audited financial statements. Any registered limited company must submit annual audited financial statements for the preceding year to the Commissioner within six tax periods of the current financial year. Provided that, the Commissioner can, based on an application made by the limited company, extend the timeline for a further six months, taking into account the logical grounds for an extension.
Declaration of input-output coefficient. A taxable person must submit an input-output coefficient using form “Mushak-4.3” prior to the manufacture or supply of goods (except exportable or exported goods by a 100% export-oriented industrial establishment). Further in the case of changes of total input value of more than 7.5%, a new input-output coefficient shall be submitted to ensure input tax credit on excess increased input tax. Furthermore, a new declaration shall be submitted in the case of changes in a product’s price or total input/raw materials value of more than 7.5%.
Correcting errors in previous returns. The Commissioner may, on an application made by a taxable person within such time, on such terms and in such manner as may be prescribed, grant a taxable person permission to file an amended return after removing the clerical mistakes and omissions from such return. The Commissioner may determine the surrounding circumstances of which a decreasing adjustment may arise as a result of any amendment made under this section, and returns may be filed without paying monetary penalty.
Digital tax administration. There are two transactional reporting requirements in Bangladesh. See the subsection above Supplementary filing.
J. Penalties
Penalties for late registration. The penalty for not applying for registration or enlistment within the prescribed time limit is BDT10,000. Additional penalties and interest will also apply if there is any evasion of VAT on sales before registration.
Penalties for late payment and filings. The penalty for not filing the VAT or turnover tax return within the prescribed time period is BDT5,000. For the late payment of tax, interest may be charged at a rate of 1% simple interest per month.
Penalties for errors. An error of not including the output tax in the VAT return may result in a penalty minimum half and maximum equal to the amount of output tax not included.
An error of claiming more input tax credit than entitled to in the VAT return may result in a penalty minimum half and maximum equal to the amount of input tax irregularly taken.
An error of making incorrect adjustments in the VAT return may result in a penalty minimum half and maximum equal to the amount of the incorrect adjustment.
If a person fails to pay tax due to mistake or misrepresentation or if there is any tax payable or takes tax refund or takes excess input tax credit or fails to make proper decreasing/increasing adjustment and subsequently pays the final tax with interest assessed under the relevant section of the Act, no penalty shall be imposed on him in such case.
No penalty shall be imposed, if any registered entity fails to submit monthly VAT return during its operation temporarily closed due to lack of supply and resumes its operation after a certain period of time.
For any tax payable, interest can be charged for a period of maximum 24 months.
An error of an irregularity related to a tax invoice or credit/debit notes may result in a penalty of BDT10,000.
Failure to maintain prescribed records may result in a penalty of BDT10,000.
Failure or irregularities of non-submission of the input-output coefficient within the time frame may result in a penalty of BDT10,000.