Tax and Legal

A Comprehensive Guide to VAT in Bangladesh

A Comprehensive Guide to VAT in Bangladesh

Every legal business structure in Bangladesh requires a Business Identification Number (BIN), unique in character, for the registration and return submission of VAT in Bangladesh. Obtaining BIN is considered the most crucial step for every legal entity to set up their business in Bangladesh. VAT in Bangladesh is considered the most important factor for a business to carry out its banking activities and participate in the tender, export, and import of business services. The rules and guidelines for registration and return submission of VAT in Bangladesh must be followed irrespective of the mode of carrying the business, whether the entrepreneur lives in Bangladesh or conducts an online business.

The Basics of VAT in Bangladesh

VAT, which stands for value-added tax, is an indirect tax or a consumption tax charged for the consumption of goods and services in Bangladesh. The customers are the main persons entitled to pay VAT in Bangladesh. The VAT in Bangladesh is determined based on making an addition to the actual level of value of the goods and services and adjusting the input tax payable against the supplied goods and services. VAT registration and VAT return submission in Bangladesh is only possible through the National Board of Revenue (NBR) authorized to do so.

The Business Identification Number, i.e., BIN, is issued by most of the business units for gathering the Certificate of VAT registration in Bangladesh under the provisions of the Value Added Tax and Supplementary Duty Act of 2012 and the Value Added Tax and Supplementary Duty Ordinance of 2016. The rate of VAT in Bangladesh is 15% over the imported, produced, and rendered goods and services except for the goods and services waived in Section 15(3) by the first schedule of the Value Added Tax and Supplementary Duty Act of 2012.

Importance of VAT in Bangladesh

Every legal business entity needs to have the VAT number or Business Identification Number (BIN) registered in Bangladesh. The benefits of having VAT in Bangladesh are as provided below:

  1. Registered VAT in Bangladesh acts as a mark of the legitimacy of business in Bangladesh, allowing the business to legally conduct its business operations within Bangladesh;
  2. Various business units have access to different kinds of benefits offered by the government in the form of tax incentives or rebates, grants, subsidies;
  3. Offers legal protection to the business units established and running their business in Bangladesh;
  4. Easy to obtain import and export registration certificates;
  5. Easy access to bank loans under the name of the registered or enlisted person or business;
  6. The credibility of the business becomes more appealing from the client’s point of view;
  7. The business(es) established in Bangladesh can claim the input tax credit;
  8. Higher avenues for the legal business units to expand their operations.

VAT Registration in Bangladesh

VAT registration in Bangladesh requires receiving the VAT registration certificate containing the business identification number, i.e., BIN, from the National Board of Revenue for the purpose of VAT return submission in Bangladesh through Form Mushak-9.1. The annual turnover of the economic activities must exceed 8 million Bangladeshi taka for the VAT registration in Bangladesh and 3 million Bangladeshi taka for the VAT enlistment in Bangladesh.

Central VAT registration in Bangladesh

It is a form of VAT registration in Bangladesh where Central or Unit VAT registration is obtained by business entities even operating their business from different places and hence preserving and maintaining the accounts, tax deposit, and documents containing the record of the economic activities specifying the supply of identical or similar goods or services or both from different places.

Relevant documents for VAT registration in Bangladesh

Ensuring all the legal requirements for VAT registration in Bangladesh includes the process of pilling up and submitting all the relevant documents to the local VAT office or the Bangladeshi tax authority, namely the National Board of Revenue (NBR) required for obtaining the Business Identification Number through the VAT registration Certificate. The enlisted documents required to obtain VAT in Bangladesh are:

  1. National identification proof of the shareholder(s);
  2. Complete details of the shareholder(s), and owner(s) of the legal structure;
  3. Facsimile of the certificate of Tax identification number of the shareholder(s) issued by the National Board of Revenue;
  4. Facsimile of the trade license of the business unit;
  5. Facsimile of the import and export registration certificate (IRC and ERC);
  6. Complete operational address of  the legal entity as specified in the trade license;
  7. Facsimile of the rental or ownership deed of Agreement;
  8. Certificate of bank solvency or latest bank statements;
  9. Facsimile of the memorandum and article of association of the legal entity;
  10. The list of invoices specifying the annual turnover of the legal entity;
  11. The list of machinery, equipment, features of the products, stored products, etc.
  12. Facsimile of BIDA (Bangladesh Investment Development Authority) registration certificate.
  13. Old Business identification number (if any).
  14. The photographs of the owner(s) and shareholders(s);
  15. The details like National identification proof, contact and address proof, designation, and other relevant information of the authorized person appointed to register for the BIN.
  16. Any other relevant document (if any).
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Eligibility for VAT registration in Bangladesh

It is important to scrutinize section 4 of the Value Added Tax and Supplementary Duty Act of 2012 to clearly define the eligibility of VAT registration in Bangladesh. Section 4 of the act provides for compulsory registration of VAT in Bangladesh for business entities or companies (except for those whose goods and services are exempted from VAT in Bangladesh) on the basis of yearly turnover, as provided below:

  1. If turnover exceeds the 3 crores Bangladeshi taka;
  2. If the annual sale or turnover ranges between 50 lakhs and 3 crores, Bangladeshi taka.

The business (es) and company (ies) that are compulsorily eligible for VAT registration in Bangladesh are:

  1. Individuals or institutions carrying export-import associated business.
  2. Individuals or organizations carrying business associated with providing goods or services against tender or contract or work order or statement of work.
  3. Individuals or institutions engaged in business entities levying supplementary duty on the supply, production, and import of goods and services;
  4. All other manufacturers, service providers, and establishments carry their business in super shops, shopping malls, city corporations, and district cities (according to general order 17).
  5. A non-resident of Bangladesh through an agent appointed to carry an online business in Bangladesh
  6. Any other business entity or company specified by the National Board of Revenue (NBR).

Steps for VAT registration in Bangladesh

The VAT registration in Bangladesh is done under the aegis of the National Board of Revenue (NBR) free of cost, which requires the compilation of all the documents relevant to registering VAT in Bangladesh. The individual or business unit must apply at least 15 days before the registration date to obtain the Business Identification number as provided in the VAT registration certificate. The steps or procedures that need to be followed for the registration of VAT in Bangladeshare:

Step 1: Choose the mode of Registration

The first step is to determine and choose the mode for the registration of VAT in Bangladesh, i.e., whether to register through the official website of the NBR (i.e., online mode) or by collecting the prescribed application from the Zonal office of the National Board of Revenue (i.e., offline mode).

Step 2: If online Registration

If choosing for the online registration of VAT in Bangladesh, then the following procedure is attracted:

  1. Firstly, need to sign up and create a login ID and password;
  2. Secondly, download, fill in all the relevant details required, and submit the application form named ‘Mushak-2.1 VAT or Turnover Tax Registration form;
  3. Thirdly, need to fill and attach the relevant documents compiled for the registration of VAT in Bangladesh;
  4. Submit the form and wait for the verification call.

Step 3: If offline Registration

If choosing an offline registration of VAT in Bangladesh, the following procedures are required to be abided:

  1. The first step is collecting the application from the Zonal Office of the National Board of Revenue.
  2. The next step is filling up the application form with all the relevant information.
  3. The next step involves attaching all the relevant documents.
  4. Submission of the form along with the attached documents is the last step in the offline mode of VAT registration in Bangladesh.

Step 4: Verification and Physical Inspection

The next step in the process of VAT registration in Bangladesh is the verification of the documents at the municipal VAT office (for both online and offline modes) and inviting the zonal officer of NBR to physically inspect the premises of the business units in Bangladesh.

Step 5: Obtaining a Business Identification Number (BIN)

After the satisfied verification and inspection, the last step is the issuing of the Business Identification Number (BIN) through a VAT registration certificate, received either in printed form or through email, notifying the successful registration or enlistment of VAT registration in Bangladesh.

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It takes approx. 7-15 days for successful registration of VAT in Bangladesh. Individuals or business units registering VAT for their enterprise may suffer certain challenges like the complex procedure of pilling up the documents, depicting the category of tax, and the possibility of rejection of the application due to lack of professional experience during registration of VAT in Bangladesh. Not only this but the whole procedure of VAT registration in Bangladesh can be simplified by appointing professional assistance and maintaining proper and organized records with respect to the tax procedures and any changes (if any).

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VAT return submission in Bangladesh

VAT in Bangladesh is charged by the final or end users, i.e., the consumers of the goods and services. Hence, the verified document for VAT return submission in Bangladesh is carried out by every company and business having their certificate of VAT registration in Bangladesh. Section 64 of the Value Added Tax and Supplementary Duty Act of 2012 provides a clear provision for filing the VAT return for each taxable month, i.e., for 1 calendar month within 15 days of the expiry of the tax period. The VAT return submission in Bangladesh must contain all the relevant information pertaining to the VAT on sales (i.e., export or local sales), purchases (i.e., import or local purchase), paid VAT, any deduction, or exemption in the current year specifying the net amount of VAT the company has to pay or get reimbursed by the VAT authority of Bangladesh.

Every individual or legal entity who has registered or enlisted for the VAT in Bangladesh is eligible to file the VAT return submission in Bangladesh through Form Mushak-9.1 (VAT return form) for registered entities and Form Mushak-9.2 (turnover tax return form) for enlisted entities.

Relevant documents for VAT return submission in Bangladesh

The list of relevant documents required for filing and calculating the VAT return submission in Bangladesh are:

  1. The primary details of the accesses, i.e., the taxpayer like TIN, name, address, etc.
  2. Facsimile of registered Business Identification Number or the VAT registration number.
  3. The details of the purchase and sale accounts of the legal entity.
  4. The facsimile of the financial statement for the taxable period.
  5. Proof of any type of income or receipt.
  6. Bank account and other relevant proofs.
  7. Details of the accounts code-wise payment schedule.
  8. Facsimile of Treasury challan.
  9. Facsimile of sales book Mushak-6.1 and Mushak-6.2.1
  10. Mushak-6.6 – Facsimile of VAT deduction certificate (Mandatory in case the taxpayer inputs data in Note 24 & 29)
  11. Mushak-6.10, containing any information related to the purchase or sale invoice of transaction above 2 lacks- mandatory if the case applies.
  12. Any Other Documents (if any).

Steps for VAT Return Submission in Bangladesh

The procedure or steps responsible for the VAT return submission in Bangladesh is as provided below:

Step 1: Deciding the mode/place of VAT return submission in Bangladesh

The first and foremost step is to decide the mode for VAT return submission in Bangladesh. Some of the easiest methods for filing the VAT return in Bangladesh are:

  1. At the online portal of the National Board of Revenue,
  2. At any office of the VAT Department or Commissionerate;
  3. At any service centre as provided by the NBR or the Commissioner of VAT;
  4. At any fair conducted by the VAT authorities of Bangladesh; or
  5. At any other place as provided by the NBR or the commissioner of VAT in Bangladesh.

Step 2: Create the username and password

The second step is to access the IVAS-TPOS dashboard (i.e., taxpayer online service) with a registered username and password.

Step 3: Download and fill the Form Mushak-9.1

The third step requires downloading the form Mushak-9.1 to file the return. It also establishes filling out the details required in the form. Some of the relevant information that must be mentioned in the form includes the following information:

  1. The information of the taxpayer, which includes business Identification Number, name and address of the taxpayer, type of legal entity (ownership), business and economic activity carried in the legal entity.
  2. The data pertaining to the VAT return submission in Bangladesh, mentioning the Tax period for filing the return (the month for which the tax return is filed), the type of return, the date of submission, the last date of amendment;
  3. The data with respect to the supply-output tax;
  4. The data with regard to the purchase-input tax;
  5. Mention all the values for decreasing and increasing adjustments in VAT;
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Step 4: Calculate the net taxable amount

The next step is the calculation of the net taxable amount, which is automatically performed by the system. The relevant calculations performed are:

  1. Calculation of the net payable VAT for the tax period;
  2. Calculation of the net payable VAT for the tax period after adjustments with the closing balance and the balance of form no.18.6;
  3. Calculation of the net payable supplementary duty for the tax period (before and after adjustments);
  4. Calculation of interest on overdue VAT

Step 5: Make other relevant adjustments

The next step includes making the relevant adjustments to the old account’s current balance, like adjusting any remaining balance, i.e., VAT from the Mushak-18.6, etc.

Step 6: Treasury Deposit

The proceeding step specifies the account’s code-wise payment schedule for the taxpayers through sub-form G.

Step 7: Calculate the closing balance

Calculation of the closing balance specifies and informs the taxpayer regarding any tax dues to be paid or any tax excess to be refunded.

Step 8: Receive refunds (if any)

If there is any excessive balance left, then the authorities are liable to refund the balance of the requested amount for a refund of the VAT.

Step 9: Declaration

Here, the taxpayer is authorized to declare and mention all the relevant information, specifying that all the information mentioned in the form for VAT return submission in Bangladesh is true, complete, and accurate to his/her knowledge. The information in the declaration must contain the name, designation, mobile number, national identification or passport number, and email address of the taxpayer.

Step 10: Upload relevant documents

The next step requires marking, uploading, and checking the soft copies of all the relevant documents as provided in the attachment section of the portal.

Step 10: VAT return submission in Bangladesh

The last step is to file and submit the VAT return form on the portal or to the specified authorities (if applicable). After the successful VAT return submission in Bangladesh, a submission ID is created, which is to be preserved for further usage, and lastly, an email about the successful VAT return submission in Bangladesh is received.

Penalty for irregularity in VAT return submission in Bangladesh

Section 85 of the VAT Act of 2012 establishes situations of non-compliance or irregularity in VAT attracting penalty, as provided below:

  1. A penalty of 5,000 Bangladeshi takas is applied if there is any non-compliance or irregularity found during the filing of the VAT or turnover tax return within the prescribed period.
  2. A penalty of 10,000 Bangladeshi takas is applied if there is any non-compliance or irregularity found in applying for the registration or enlistment within the prescribed tax period;
  3. A penalty of 10,000 Bangladeshi takas is applied if there is any non-compliance or irregularity found in displaying the registration or the turnover tax certificate in the places visible.

Conclusion

Almost all businesses are required to have their VAT in Bangladesh attracted by the VAT registration and the VAT return submission in Bangladesh. The VAT in Bangladesh not only fosters business growth but also provides various tax benefits and deductions, establishes business reliability over customers, expands the national economy, etc. VAT return submission holds similar importance in dealing with the requirement of VAT registration in Bangladesh.

FAQs

  1. Who is responsible for VAT in Bangladesh?

    The consumer, being the end user, is authorized to pay VAT for the goods and services, but the supplier holds the responsibility of realizing the amount of VAT from the consumer along with the price of the goods and services and crediting the net amount of VAT to the treasury of government after making relevant adjustments.

  2. What are the most recent VAT rates in Bangladesh?

    The rate of VAT in Bangladesh is 15% with a reduced rate of below 15%, also known as the standard rate of VAT for the import and supply of goods and services, and the rate of 0% applies for carrying any export of goods and services.

  3. What is the registration threshold for VAT and Turnover Tax?

    The VAT and turnover tax registration threshold in Bangladesh is 3 crore Bangladeshi taka and between 50 lakhs and 3 crore Bangladeshi taka, respectively.

  4. What exactly is a VAT Certificate of Honour?

    The VAT Certificate of Honour is a letter of recognition issued after filing the VAT return submission in Bangladesh. The certificate of Honour is issued in favour of the taxpayer in VAT form-18.5 for all the tax periods during the year.

  5. Who shall sign on the VAT return?

    There is no requirement to sign the VAT return application form if filing the VAT return through an online portal. However, the taxpayer or the registered or enlisted individual is required to put a seal on the VAT return if filing offline.

  6. Is VAT return submission in Bangladesh mandatory?

    Yes, every registered and enlisted individual or legal entity must file for the VAT return submission in Bangladesh.

  7. When does the VAT return have to be furnished?

    The VAT return submission shall be furnished on every 15th of the following month after the completion of the tax period.

  8. How many types of VAT are there in Bangladesh?

    The types of VAT as observed in Bangladesh are:
    a) Trade VAT, at a rate of 5% for any supplies received from the trader;
    b) Specific VAT, for businesses dealing with certain goods and services that are subject to tariff value-based VAT;
    c) Advance VAT, at a rate of 3% for importers on taxable imports;
    d) Turnover VAT is at a rate of 4% for businesses enlisted or required to be enlisted carrying on the economic activities.

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