A large number of Bangladeshi subscribers to global technological giants are subjected to double taxation for legal lacuna and lack of expertise to track transactions by the non-resident companies, sources say.
Those who are placing any advertisement with or obtaining any type of services from the facebook, Google, Netflix, Microsoft and Amazon are currently compelled to pay VAT at a rate of 32.5 per cent.
The situation has arisen after the companies registered with the VAT (value-added tax) wing of the National Board of Revenue (NBR) and started submitting VAT returns since last August in compliance with the country's law.
As per VAT law, commercial banks deduct 15-per cent VAT at the time of remitting the service charges by the global companies while local subscribers also pay another 15 per cent on the advertisements or other services obtained from the digital platforms.
"All of the subscribers to the technological giants are not VAT-registered entities or Business Identification Number (BIN)-holders to claim the VAT refund," says a VAT consultant, preferring anonymity.
He found many of the subscribers even not aware about the high rate of VAT on them but struggling to survive for higher cost of availing technological services.
"Users of the services of those tech biggies are not supposed to obtain VAT registration as they have to carry some associated costs for compliance," he adds.
As per the VAT law, businesses have to count Tk 10,000 penalty if they fail to submit VAT returns by the 15th of every month.
Officials said the complex issue recently made both the revenue board and the Bangladesh Bank concerned as double taxation is against the principle of the tax law.
A senior VAT official says the NBR held meetings with the stakeholders to settle the issue but the matter is quite complex like a Gordian knot.
The VAT official has had no mechanism yet to audit the VAT returns of the non-resident companies so they can assess what is the payable VAT of the global giants on their services delivered inside Bangladesh.
Earlier, the BB had requested the NBR to issue an order exempting banks of the task of deducting VAT at source from the service charges that non-resident companies are repatriating to their home country.
The VAT official feels it difficult to issue such letter waiving the 15-per cent VAT deducted at source as VAT officials have to assess the number of sales or services delivery first.
"Big companies availing services from the facebook, Google are capable of adjusting the paid VAT by claiming refund but thousands of small and medium businesses are not," he says about the quandary.
A separate monitoring team of e-commerce businesses is necessary in the VAT wing to track such services, he suggests.
There are some 1600 members of e-cab, the association of e-commerce businesses in Bangladesh while there are no data on how many of them have Business Identification Number (BIN).
After two years of making VAT registration and return submission mandatory, the NBR made the VAT law favourable for non-resident companies not having permanent residence.
The companies started submitting VAT returns from August last under VAT zone South under Dhaka.
The NBR amended relevant provisions of the VAT and Supplementary Act-2021, issued new forms for VAT compliances, allowed direct payment of VAT from outside the country as per demand of the non-resident companies.
Officials say the VAT wing is preparing a new audit manual that would address the issue related to NRCs' VAT-return assessment.
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