The National Board of Revenue (NBR) has instructed its field-level offices to ensure collection of 15 per cent Value Added Tax (VAT) on advertisements in the digital social media.
Companies providing advertisement in different internet services, Youtube, Facebook and paying royalty or charges, will have to pay 15 per cent VAT as per VAT Law-1991, said a recent instruction, signed by NBR second secretary (VAT Policy and Rules) Md Tariq Hassan.
The instruction has been issued in a bid to collect proper VAT from the companies giving advertisements beyond the geographical boundary of Bangladesh, officials said.
Officials expressed their doubt over collection of VAT from the overseas payments of social media's advertisement bills, although there is a provision in this regard in the VAT law.
The VAT wing of the NBR issued the instruction to the field-level VAT offices across the country and also gave a carbon copy (CC) to the Bangladesh Bank (BB) governor.
The companies make overseas payments of the advertisement bills through Bangladesh Bank (BB) and other commercial banks, he said.
Banks are supposed to deduct the VAT at a rate of 15 per cent from the advertisement bills before making the overseas payments.
"The VAT offices will have to examine whether the banks are collecting the VAT properly," the letter said.
The NBR instructed the field-level VAT offices to inform it after examining the issue, it added.
Many companies now-a-days prefer providing advertisements in the social media instead of local television channels or other media.
However, Facebook and Youtube do not have any permanent establishment in Bangladesh. They remain out of the purview of country's laws for not having any office in Bangladesh.
The companies make overseas payments through credit cards or other ways for the advertisement.
A senior official of a leading commercial bank said most of the payments of such advertisements are made through credit cards.
"So far, I know, none of the commercial banks deduct 15 per cent VAT from the advertisement bills due to lack of awareness on this issue," he added.
He termed the process of deduction of 15 per cent VAT from the international payments, made through credit cards, a 'complex process.'
In a recent pre-budget meeting, the Newspaper Owners Association of Bangladesh (NOAB) urged the NBR to bring social media including Facebook and Youtube under tax net.
They said the digital social media were eating up 50-60 per cent of the online advertisements, affecting the local media industry.
Following their demand, the NBR chairman assured them of taking necessary measures.