VAT registration has been made mandatory for all overseas companies in the budget proposal for FY23.
During the budget speech on Thursday, Finance Minister AHM Mustafa Kamal proposed to bring changes in the tax and customs law to bring under VAT registration all the branch offices, liaison offices and any projects of the overseas or foreign companies conducting operations in Bangladesh.
Through this initiative, all the foreign companies operating in Bangladesh like Samsung, General Electronics, and MetLife Insurance will be bound to take VAT registration or BIN (Business Identification Number) like tech giants Facebook, Google, and Microsoft.
In order to bring these institutions under VAT registration, it has been proposed to make changes in several sections of the Value Added Tax and Supplementary Duty Act, 2012 and the Value Added Tax and Supplementary Duty Rules, 2016.
Earlier, the National Board of Revenue (NBR) brought tech giant companies like Facebook, Google, and Microsoft under VAT registration from 2020 onwards. As a result, a handsome revenue is now being added to the state coffers every year from this sector.
In that vein, it has been proposed to amend section 4 of the VAT Act to make it mandatory for all branches or liaisons or project offices of overseas companies to register for VAT.
According to this new section, regardless of the total income (turnover) of these organizations, VAT registration has to be taken.
But why was it necessary? A NBR officer seeking anonymity told Dhaka Tribune: “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 overseas 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 organizations, according to NBR officials.
At the same time, NBR officials believe that a large number of global NGO projects, liaisons and branch office activities of the companies will come under compliance.
Moinul Khan, a member of VAT implementation and IT of NBR said: “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.”
Khan, who previously served as director-general of the VAT Audit, Intelligence and Investigation Directorate of NBR, believes that transparency and accountability would increase several times through this decision, even if there was no sudden hike in revenue collection.
“In addition, at the time of submission of tax returns at the end of the year, we will be able to know how much money these companies have sent out, how much money they are investing and if they have any kind of loan in the bank. In other words, if someone commits any corruption, it will be much easier to catch them,” he added.
