Bangladesh – Lovat Compliance

VAT Standard rate

VAT standard rate in Bangladesh in 2024 is 15%, which applies to supplies of goods in Bangladesh and import. Supplies of basic essential goods to Bangladesh are not subject to VAT. Export is zero-rated.

VAT registration threshold

Businesses must register for VAT purposes in Bangladesh if their annual revenue exceeded BDT 8 million (approx. EUR 67,000).

Tax representative

Non-resident businesses must appoint legal VAT agent, who will be liable for registration, VAT filings and payments in Bangladesh.

Registration procedure

Businesses must submit the VAT application registration form VAT 2.1 to the Bangladesh National Board of Revenue in order to get the Business Indentification Number within 15 days from the date the obligation was incurred. The application will be processed within 3 (three) working days, after which a Business Identification Number will be issued on form VAT 2.3. The registration certificate can be received online.

Deductible VAT

Businesses can reclaim input tax by deducting it from output tax. Expenses that are not relevant to the business cannot be claimed for deduction. Input tax is not recoverable to the businesses that are not registered for VAT purposes in Bangladesh.

Keeping records

The period of keeping records in Bangladesh must be at least five years.

VAT returns filing and payment date

Business must submit returns and pay VAT in Bangladesh electronically on monthly basis. The deadline is the 15^th day of the month following the reporting period.

Penalties in Bangladesh

Penalty for non-submission of VAT return – fine of BDT 10,000 (approx. EUR 83).
Penalty for late payment – interest of 1% per month.
Penalty for false – fine equivalent to the taxable amount or/and imprisonment.
Penalty for fraud – fine in amount from BDT 10,000 to BDT 200,000 (approx. EUR 83 – EUR 1,665) or/and imprisonment.

VAT Standard Rates

The standard VAT rate for digital services in Bangladesh is 15%.

VAT Zero Rate

Some services may qualify for a zero-rated VAT under specific conditions. This generally includes services exported outside Bangladesh such as:

Supply of service rendered outside Bangladesh;
Supply of service rendered to international transport;
Service rendered to repair, reconstruction, maintenance, alteration work, etc. of temporarily imported goods;
Supply in favor of goods with warranty of repair or replacement;
If any individual imports any goods with warranty, in that case if the same is sent to the exporting country for repair or replacement within the time of warranty, all related service shall be of zero rated.

Threshold

The registration threshold under the new VAT procedure is Taka 8 million and enlistment threshold is Taka 3 million.

For businesses providing digital services, VAT registration is mandatory if their annual turnover exceeds BDT 3 million. Below this threshold, registration is optional, but businesses may choose to register voluntarily to avail of VAT input credit benefits.

Pieces of Evidence

To determine that digital services have been provided in Bangladesh, the National Board of Revenue (NBR) uses certain criteria and evidence that are critical to confirm that digital services have been provided in Bangladesh:

Customer Location (IP Address; Billing Address);
Payment Information (Credit/Debit Card Details; Bank Account Details; Mobile Payment Services);
Contractual Agreements (Service Agreements; Terms of Service);
Communication Records (Email and Correspondence; Support Requests);
Usage Patterns (Access Logs; User Registration Information);
Regulatory Compliance (Licenses and Permits; Compliance Documentation);
Physical Presence (Local Office or Branch; Local Representative).

These pieces of evidence are necessary to establish that digital services have been provided within the jurisdiction of Bangladesh, ensuring compliance with local VAT regulations. The NBR may request any combination of these documents during audits or assessments to verify the provision of services.

E-Services List

In Bangladesh, the National Board of Revenue (NBR) includes various digital services under VAT regulation, this encompasses services such as:

software development,
digital advertising,
cloud computing,
online streaming services,
IT-enabled services like data processing and web hosting.

Registration Procedure

Enrollment is required if the turnover of economic activity exceeds BDT 8 million in the last 12 months. It is required to register within 15 days from the date the need for registration arises.

Service providers can register for VAT online through the VAT Online System (VOS) on the NBR’s official website or submit document to the tax office. Business identification number (BIN), trade license, and relevant business information are required for registration. Once the application is submitted, NBR reviews it and, upon approval, issues the VAT registration certificate.

Tax Representative

Foreign digital service providers without a physical presence in Bangladesh must appoint a local tax representative. This representative handles VAT compliance, including registration, filing returns, and maintaining records.

Keeping Records

Businesses are required to maintain comprehensive records of all transactions, including sales and purchases, for at least 6 years. These records must be accessible for audit purposes and should be kept in a manner prescribed by the NBR.

Filing VAT Return and Payment Date

VAT returns must be filed monthly by the 15th of the following month. For example, the VAT return for June must be submitted by July 15th. VAT returns can be submitted electronically through the NBR portal or at one of the NBR offices.