Tax and Legal

The procedure for Cancellation of VAT Registration in Bangladesh

The procedure required for cancellation of VAT registration in Bangladesh involves a diverse process through the online and offline modes leading to the cancellation of registration of the Value Added Tax. Before going through the process required for cancellation, it is important to understand what and how VAT is registered in Bangladesh, which is explained through the different forms of VAT required to be registered and paid in Bangladesh under the provisions of the VAT laws.

Understanding VAT in Bangladesh: Registration and Cancellation

VAT, which stands for Value Added Tax, generally attracts the taxes changed by the government of Bangladesh on the import of goods and services, and later on transferred to the customers by charging a customer tax on the purchase of such goods and services by them. The VAT laws in Bangladesh invite VAT registration and provide a clear provision for the cancellation of VAT registration in Bangladesh by the persons entitled to pay VAT in Bangladesh through a well-established procedure, as explained in the text below.

Bangladesh’s Perspective on VAT:

VAT, i.e., Value Added Tax, is an important source of revenue for the Bangladesh government, which is an indirect tax paid by all taxpayers. According to Section 2(79) of ‘The Value Added Tax and Supplementary Duty Act, 2012, VAT means the VAT (Value Added Tax) imposed under Section 15 of the Act’. VAT is a kind of Consumer tax that applies to buyers of goods and services. It accounted for more than 38% of the government’s revenue in the 2022-23 financial year, leaving the government dependent on VAT to raise money to maintain its economy. In Bangladesh, VAT is subject to the VAT and Surcharge Act, 2012, Value Added Tax and Supplementary Duty Rules, 2016, and Statutory Regulatory Orders (SROs), Value Added Tax Rules, notifications, orders and explanations. All imports, production, and provision of services to Bangladesh are subject to 15% VAT unless exempted, as expected to be 0% for all exports. Sometimes, VAT tax is referred to as Expenditure Tax because it applies only to expenditure, not income. The diverse law of Bangladesh also provides a view on the procedure for the registration of VAT in Bangladesh, persons entitled to pay VAT in Bangladesh and the legal procedure to be followed for the cancellation of VAT registration in Bangladesh.

Persons entitled to pay VAT: 

As VAT in Bangladesh is considered to work as a Consumer tax, the consumers are entitled to pay the indirect tax for purchasing goods and services held in the capacity of the last consumer after the VAT registration in Bangladesh. Even such consumers are exempted from paying VAT tax after the cancellation of VAT registration in Bangladesh. But as per the provisions of The Value Added Tax and Supplementary Duty Act, 2012, section 4 of the act provides the list of persons who are entitled to register themselves for the payment of VAT as provided under: 

1. A person whose income exceeds the amount stated in the document, i.e., 3 crores taka within the 12 months from the relevant month to the end of the previous month or 
2. Those whose estimated income exceeds the amount stated in the document, i.e., 3 crores taka within the next consecutive 12 (twelve) months, starting from the previous month, Carrying on the following business activities: 

There exist different rates required to be met after the VAT registration in Bangladesh that are set as per their categorization, as explained below: 

1. Standard VAT Tax, which is applicable on all business and industrial units for the goods and services at a rate of 15%; 
2. Turnover and Trade VAT Tax, which applies to the turnover of the trader or manufacturer for the goods or services that are taxable at a rate of 3%. This rate is again revised in the financial year 2022-23 and fixed at 4%; 
3. Supplementary VAT Tax applies to luxury goods and services at a rate of 5-500%; 
4. Some other VATs are flowing in the economy of Bangladesh like Truncated VAT, Input VAT, and Tariff VAT & Packaged VAT. 

Modes/ Methods of Calculation of VAT in Bangladesh: 

VAT recognizes 2 methods of its calculation in Bangladesh, namely which cease after the cancellation of VAT registration in Bangladesh:

1. Credit invoice method or the invoice-based method attracting the taxes on sales of the goods purchased by the customers, which is the most used method, and;
2.  Subtraction or account-based method, which attracts businesses to calculate the total sales tax and the difference between the total purchase tax and VAT, is generally used by Japan and the USA as a flat tax policy.

VAT registration in Bangladesh

Before going through the procedure required to be met for the cancellation of VAT registration in Bangladesh, it is necessary to know the procedure for VAT registration in Bangladesh, which requires a few steps to abide by as per the regulations governing VAT in Bangladesh.

Perspective of VAT registration in Bangladesh: 

For every business entity in Bangladesh, it is necessary to register a VAT, which is administered by the Customs, VAT, and Excise Department of the National Board of Revenue (NBR), and get a Business Identification Number (BIN) to participate in tenders, conduct business transactions, and continue normal business activities, including imports and exports. It generally takes 1-7 days for the whole procedure to complete and receive a BIN. Section 6 of the Value Added Tax and Supplementary Duty Rules, 2016, states the VAT registration in Bangladesh through an application made to the Commissioner, which is to be done by every person residing and engaged in business operations in Bangladesh to be administered by the issuance of a VAT registration Certificate containing the BIN by the Commissioner. The conditions for VAT registration in Bangladesh are under Section 4 of the Value Added Tax and Supplementary Duty Rules, 2016, as explained above.

Documents necessary for the VAT registration in Bangladesh: 

The documents that are necessary to provide aid for abiding by the procedure for VAT registration in Bangladesh are provided below:

1. Filled application form; 
2. Trade license of the business entity; 
3. Certificate of Solvency from the bank; 
4. Certificate of Tax Identification Number; 
5. Certificate of Import and Export Registration; 
6.  Certificate from Board of Investment: 
7. Copy of Deed of Agreement; 
8. Certificate of BIDA (Bangladesh Investment Development Authority) Registration; 
9. Memorandum and Article of Association of the Company; 
10. Full Details of shops, franchises, centres, machinery, equipment, sales invoices, and products stored; 
11. National ID and other relevant documents of the owners. 

The procedure followed for VAT registration in Bangladesh: 

For VAT registration in Bangladesh, everyone must apply to the relevant authorities free of cost at least 15 days before the registration date following the procedures provided below: 

1. The first step invites the gathering of the application form from the NBR zonal office or through online portals of NBR for the BIN entitlement; 
2. The next step invites the submission of the application form to the respective Zonal Officer; 
3. The next step invites the Zonal Officer to verify the documents submitted; 
4. The next step involves the zonal officer to physically inspect the premises of the business; 
5. The last step involves the grant of a VAT registration Certificate. The VAT registration Certificate, also known as the VAT Certificate of Honour, which contains the Business Identification Number, is a letter of recognition granted according to the turnover of the business.

AT registration in Bangladesh by the Non-residents: 

Even a non-resident is eligible to apply for VAT registration in Bangladesh through an agent in Bangladesh carrying an online business as VAT registration as a non-resident. The VAT agent is entitled to carry out all the activities and formalities necessary for the VAT registration in Bangladesh and also for the cancellation of VAT registration in Bangladesh on behalf of the non-resident. Voluntary VAT Registration: 

Section 8 of the Value Added Tax and Supplementary Duty Rules, 2016, provides for Voluntary VAT Registration, which states that any person who is not required to register a taxable supply during business operations may voluntarily apply for VAT registration in Bangladesh to the commissioner under the provisions of the Value Added Tax and Supplementary Duty Rules, 2016. 

Cancellation of VAT Registration in Bangladesh

Cancellation of VAT registration in Bangladesh is now possible for the establishment of the new rules under the Value Added Tax and Supplementary Duty Rules, 2016. Further, section 9 of the Rules 2016 states the cancellation of VAT Registration in Bangladesh through an application to the Commissioner by any person who either refrains from carrying out the business operations or a person who continues to make taxable supply without the VAT registration anymore. Even the Commissioner may suo moto cancel the VAT registration if he finds that it be cancelled as per the inquiries made thereunder. 

The result of the cancellation of VAT registration in Bangladesh ceases the right to issue and use any tax invoices, credit and debit notes, withholding, and return the tax registration certificates to the Commissioner.

The reasons responsible for the Cancellation of VAT Registration in Bangladesh: 

The cancellation of VAT registration is possible only under the following conditions: 

1. The business entity refrained from carrying its accounts and operations; 
2. If there is any operational change in the legal structure of the business entity, changing from self-employed to partnership or any other business entity; 
3. Any change witnessed in the ownership status of the business entity; 
4. When a business entity is not required to remain registered but continues to carry the taxable supplies,
5. When the Commissioner deems the business entity unfit to carry the VAT registration as per the inquiries made thereunder. 

Methods/ Procedure for the Cancellation of VAT Registration in Bangladesh: 

There exist various steps involved in the cancellation of VAT registration in Bangladesh, as explained below: 

1. Reaching the Authorities: 

The first step is to reach the local office for the cancellation of VAT registration in Bangladesh and apply along with the supporting documents such as a bank notice, transfer of ownership information, or associated documents; 

• Liquidating the Assets and Recovering the Debts and Liabilities: 

It is important to liquidate the assets, recover all the debts, and clear all the liabilities by paying the government dues, fines, or any penalties before inviting the procedure for the cancellation of VAT registration in Bangladesh; 

• Relevant documents: 

All the relevant documents must be produced along with the application before the Commissioner, such as notice of closure, documents representing the ownership title, etc., for the cancellation of VAT registration in Bangladesh; 

• Verification: 

The next step involves the verification of the premises and other relevant documents associated in addition to that by the Commissioner so that a hassle-free cancellation of VAT registration in Bangladesh is possible. 

• Issue of VAT registration cancellation certificate; 

The issue of the VAT registration cancellation certificate is done after the confirmation of the verification of all the legal and operational parameters set according to the established law to be done by the Commissioner; 

• Returning the VAT Registration Certificate:  

The next step involves the submission of the VAT registration certificate issued under the provisions of the Value Added Tax and Supplementary Duty Rules, 2016, and further updating the relevant authorities of Bangladesh about the cancellation of VAT registration in Bangladesh. 

Details of Form for the Cancellation of VAT Registration in Bangladesh: 

Under Rule 14(2), Form VAT 121 must be filled out to apply for the cancellation of VAT registration in Bangladesh.  The screenshot of the form is attached for the reference. 

form-1

The filling of the form for the Cancellation of VAT Registration in Bangladesh by any person proposing to do is as under-explained: 

1. Tax Identification Number (TIN); 
2. Name and address as shown on the VAT Registration Certificate; 
3. Date since when the VAT registration cancellation is required; 
4. Reason for cancellation of VAT registration in Bangladesh; 
5. The value of the taxable sales, excluding the VAT for the previous 3-12 consecutive calendar months;
6. If voluntarily registered, the value of the taxable sales, excluding the VAT for the previous 3-12 consecutive calendar months;
7. The date of voluntary VAT registration (if applies); 
8. The name and title of the person declaring and witnessing the relevancy of the form; 
9. The sign and stamp of the business entity. 

Conclusion 

Earlier, before the 2016 rule book, the law of Bangladesh didn’t provide a clear picture regarding the cancellation of VAT registration in Bangladesh. Knowing and applying the procedure for cancelling VAT registration in Bangladesh is as relevant as registering VAT in Bangladesh. Cancellation of VAT Registration in Bangladesh involves various legal as well as operational formalities to be fulfilled as per the Value Added Tax and Supplementary Duty Act, 2012.

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