It is expected to pay VAT on revenue derived locally at a rate of 15% from next month
Following Google and Amazon earlier, Facebook has now registered a business identification number (BIN) with the National Board of Revenue (NBR) on Sunday.
It is expected to pay VAT on revenue derived locally at a rate of 15% from next month and can now submit returns on the total turnover at the end of each year through a local consultant or online from their country.
Although the social media giant had been paying VAT, it did not have a registered BIN. After close to two years, they obtained the BIN from the NBR.
It has been reported that the tech giant had handed over about Tk1.7 crore in VAT for July and August last year alone.
In August last year, Facebook’s local agent had sold advertisements worth Tk6.23 crore to various local organizations for which they paid Tk91.39 lakh in VAT.
All large companies, including multinational companies such as Reckitt Benckiser, Marico, Foodpanda — and local companies— Pathao, Evaly, and others — use digital media for advertising products and services.
According to insiders, nearly all large companies are now advertising on digital media. Additionally, these companies have a large business here through e-commerce, advertisements, and other services that have helped them generate the revenue.
However, tech giants were unwilling to set up representative offices in Bangladesh initially.
In 2020, Facebook Inc was strictly informed by the NBR to designate an agent in Bangladesh to operate locally.
The social media giant did not want to pay the indirect tax or VAT to the NBR through agents or share data on sales containing information about customers on the grounds of privacy breaches and security risks.
But then the NBR decided to allow tech giants to get direct VAT registration without opening local offices in order to bring them under the tax network, earlier last year.
Following which, earlier last month, Amazon had registered as Amazon Web Services Inc. using its address in Seattle, USA. Meanwhile, Google had registered VAT under Asia Pacific PTE Limited using MapleTree Business City Singapore, where it has a regional office.
Technologies Ireland Ltd, Facebook Ireland Ltd, and Facebook Payments International Ltd -three entities of Facebook- obtained the BIN under Dhaka South VAT Commissionerate, says an official of PricewaterhouseCoopers (PwC) - the local consultant catering to Facebook, Amazon and Google as well.
“It is a commendable move by the NBR to pave the way for non-residents to register for businesses locally. We have been assisting them throughout the whole process, and hopefully we will be able to bring more non-residents under the local compliance laws and ready to play an active role in that regard,” said the PwC official.
“Although tech giants have been trying to register, the NBR did not have an efficient online registration process, but with the recent changes in the online registration in the last six months, has made it easier for foreign companies to register,” says the consulting firm.
Additionally, when a user pays for services from these tech giants through credit cards, the bank deducts 15% VAT. The VAT online project director confirmed upon inquiry.
The tech giants will be paying VAT to the NBR on behalf of unregistered users who did not register with the regulatory authority.
Registered users already pay VAT to the banks that do not reach them. If the tech giant pays VAT again without receiving it from the user, it simply becomes a case of double taxation, he added.
Although tech giants had expressed the willingness to register with the NBR as early as 2019, several issues have delayed the process.
Discussing one such issue with Kazi Mostafizur, NBR VAT Online project director, had told Dhaka Tribune earlier: "The initial online registration process we had was very different from international standards. The software only registered digits as TIN and BIN numbers, whereas globally alphabets and digits are both used."
He also assured that the NBR has been heavily implementing and upgrading systems that will ease the process further.
Syed Almas Kabir, president of Bangladesh Association of Software and Information Services (BASIS), told Dhaka Tribune that the registration of Facebook was much needed and will play a crucial role going forward.
According to Kabir, this brings the possibility of such tech giants to open up local offices or install local servers and cache hubs in contrast to offshore hubs such as that of Singapore, that would develop services and enable a more efficient IT based ecosystem.
“This is a good opportunity to establish a relationship with the social media giant for all stakeholders including the government. We have to frequently establish connections in terms of issues that are as dynamic as content moderation, as well as many others,” he added.