The Financial Express

Global tech giants out of VAT net

NBR's year-long effort proves futile

| Updated: August 07, 2020 13:12:01

Evaly and Fianancial Express Evaly and Fianancial Express
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The National Board of Revenue (NBR) has yet to ensure proper VAT collection in the last one year from global technology companies such as Google, Facebook, and YouTube.

Complexities over registering the companies under the VAT net for payment of tax, including the appointment of agents and amendments to the forms and the slow pace at the NBR stood in the way of realising taxes from the global tech giants.

It has been found that none of the locally-licenced VAT agents are willing to take the responsibility for working on behalf of the global firms due to what many say "tricky policy" of the tax collector.

As per VAT law, the relevant VAT agent would be held responsible for detection of evasion by global companies not based in Bangladesh.

According to the law, a non-resident business must have to appoint an agent for executing its VAT-related activities without having physical presence in the country.

Talking to the FE, some renowned VAT agent companies said their parent companies will not allow them to take such a responsibility.

They also said the existing VAT forms are designed for companies having permanent establishments in the country, not for non-resident entities.

In a meeting held last week, the NBR decided to prepare new forms for such companies.

A senior official said the NBR is exploring the possibility of allowing the global giants to obtain VAT registration directly without the help from agents.

"The NBR may make BIDA registration mandatory for the non-resident companies," he said.

The process of VAT registration for the global giants would be simplified, he added.

In October, Google Asia Pacific Pte Ltd, in a letter, requested the revenue board to bring the required amendments and clarifications in the law to allow the company to obtain VAT registration on its own and to pay the indirect tax directly instead of appointing a local agent.

The company also sought time to comply with the provisions of the law and requested the NBR to defer the imposition of the relevant provisions until it gets registered with the VAT system.

In the recent meeting, the VAT policy wing of the NBR decided to update some forms and hand it over to the VAT online unit to help the non-resident companies obtain VAT registration directly.

The NBR made the VAT registration mandatory for such firms in the budget for FY 2019-20.

Field-level VAT officials said currently, they are receiving VAT as banks deduct 15 per cent VAT at the time of remitting the money to the accounts of the firms, but without registration it is difficult to monitor what would be the actual payable amount.

Rakesh Shaha of Ernst & Young Bangladesh said some amendments would be required to the existing form, including the currency field is only in taka.

Sources said the government is trying to persuade the global search engine and social media firms to open permanent establishments in Bangladesh to operate business complying with the country's law.

They said the firms are worried over the VAT registration issue in Bangladesh as it remained non-compliant for a year in a country.

However, despite requests from the Bangladesh Telecommunication Regulatory Commission since last year, the global digital platforms have yet to set up their own offices in Bangladesh.

A company must have a physical address in Bangladesh and provide bank accounts details to obtain the BIN or Business Identification Number (BIN) from the VAT online system.

There is a provision in the law that subjects these entities to fines of Tk 10,000 per month for skipping filing of VAT returns.

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