As the paid commission is taxable according to law, the insurance companies have to pay 15% VAT to the government exchequer on the paid commission, added the officials.
The unit also claimed the insurance companies did not pay 15% VAT on reinsurance commission, which they received from other insurance companies.
Meanwhile, LTU-VAT Commissioner Md Matiur Rahman told the Dhaka Tribune: “After scrutinising the annual reports of nine insurance companies we found that they had evaded around Tk110 crore in taxes.”
“We have issued separate show-cause notices to the companies in this regard.”
The notice directed the nine companies to explain why the amount should not be paid within 15 days of issuance of the notices.
The companies will have to respond in-writing within the stipulated time or they can also seek hearings to explain their position.
The VAT office will issue the final demand notice based on the reply of the companies.
Md Khaled Mamun, CEO, Reliance Insurance Limited told the Dhaka Tribune: “We have received the notice. The is not an isolated issue, the whole insurance sector of Bangladesh is being affected by the NBR move.”
He further claimed: “The NBR is demanding a huge amount of VAT from the insurance companies, which is outside the regulations. We will take the matter to the court.”
Meanwhile, talking to the Dhaka Tribune, Bangladesh Insurance Association (BIA) President Sheikh Kabir Hossain said: The issuance of the notice has damaged the reputation of the firms, as it was issued without prior discussion with the companies.
“The BIA has contacted the Finance Ministry, NBR and Insurance Development and Regulatory Authority for withdrawal of the VAT several times.”
He said:“It is a delicate issue. Some companies have also filed writ petitions with the apex court against the VAT.”
“For the sake of the insurance industry, we have urged the government not to impose VAT on agents’ commission and reinsurance commission. We hope the government would take a positive step in this regard,” he added.