VAT registration compulsory for all foreign entities in Bangladesh
All foreign entities will have to obtain value-added tax (VAT) registration certificates for conducting operations of their branch offices, liaison offices and projects in Bangladesh.
After bringing foreign technology companies under tax purview in 2020, the National Board of Revenue (NBR) now has imposed the requirement on all foreign organisations by amending the VAT Act in the proposed Finance Bill for the 2022-23 fiscal year.
Many global companies like Samsung and General Electric have been conducting business in Bangladesh for a long time through branch offices.
These companies were not required to obtain VAT registration, officially known as Business Identification Number (BIN), as their turnover was tied to the parent company's accounts. But from now on, branch offices of all foreign companies will have to register.
The move will make it easier for the NBR to collect VAT on purchases of branches and liaison offices of foreign projects or organisations, according to NBR officials.
At the same time, NBR officials believe that a large number of global NGO projects, liaison and branch office activities of the companies will come under compliance.
Kazi Farid Uddin, first secretary (VAT policy) of the National Board of Revenue, said, "The existing VAT law does not require registration of branches or liaison offices of foreign organisations. But these organisations are conducting various activities on behalf of their parent organisation in marketing, publicity and market expansion."
The new VAT law of NBR will help bring the accounts of these companies and projects under compliance. Their tax returns can also be collected in the future, he said.
The revised law stipulates that companies will have to register for trading goods or services subject to VAT and supplementary duty in Bangladesh, the NBR official said.
The same will be applicable for companies which participate in any tender, engage in the import-export business, take branch or liaison office or act as VAT agents, he added.
Earlier in 2020, the NBR made VAT registration of tech giants including Google, Facebook, YouTube and Amazon compulsory in Bangladesh. Those companies are now submitting regular returns.
On condition of anonymity, a senior official of a global organisation that does consultancy on VAT law in Bangladesh, said that the law enacted by NBR in 2020 to bring foreign companies under VAT was mainly applicable to digital service providers.
"The new amendment covers all foreign companies as well as those conducting business through branches or liaison offices," he said.
"However, most of these companies do not have turnover in Bangladesh. All sales are controlled by the main office. They are also paying the VAT applicable on purchases in the country as ordinary buyers. But from now on the process has become transparent," the official added.
