The Google Asia Pacific Pte Ltd (GAP) has sought direct access to VAT department, not via VAT agents, to simplify VAT payment system for non-resident companies.
It has proposed that the National Board of Revenue (NBR) allow such entities having no establishments in Bangladesh to obtain VAT registration directly.
The Singapore-based GAP director Lavanya Swetharanyan sent the proposal to the NBR chairman in a letter dated October 22.
GAP representatives earlier also sat with NBR on their VAT payment issue on September 29, 30 and October 03.
The GAP letter has highlighted the difficulties facing non-resident service providers in complying with the requirements under the newly introduced VAT and Supplementary Duty Act-2012.
However, non-resident electronic service providers came under the purview of VAT for the first time as the new VAT law took effect from July 1, 2019.
To company with the new provisions, GAP proposed to bring a change and clarity in taxation principles and processes for non-residents in Bangladesh.
As per section 17 (1) (c) (iii) in the new law, the government has slapped VAT on electronic services that are provided by non-resident companies to VAT unregistered persons.
Section 19 also has mandatory provisions of appointment of VAT agents to deal with VAT payment issues of non-resident companies, as they do not have any permanent establishments here.
The VAT officials will consider the service as 'supply made within Bangladesh', according to the law.
GAP has requested the government not to make appointment of VAT agents mandatory for them to obtain VAT registration.
It cited examples of other countries where payment of taxes through VAT agents is optional.
In other countries, a non-resident service is given an option to register on its own or through an agent in-country, the GAP letter said.
"In Bangladesh, the government could instead allow for direct registration of non-residents in line with the commonly accepted precedent," it stated.
GAP has suggested removal of some requirements in the process of allowing non-residents to obtain VAT registration.
The requirement of furnishing bank account details and mentioning places of businesses here are the barriers to obtaining VAT registration by non-residents.
GAP proposed to amend the VAT registration form to allow such companies to fill it with their addresses outside Bangladesh.
It has requested the government to defer the provision of charging VAT from it until changing the procedural aspects of VAT registration.
It also termed responsibilities of VAT agents 'onerous legal liabilities' and not in line with common international tax practice.
As per the VAT act, VAT agents must bear all responsibilities of non-residents, be jointly and severely liable for payment of all taxes, interest and penalties on the non-residents' behalf.
The company said such onerous requirements are difficult to comply with. The non-residents should be consulted in line with the common international practice before making the VAT act applicable, it added.
The common international tax practice provides a non-resident sufficient time, at least six to eight months, to comply with the final law.
"Since this is the first time that non-resident companies have been asked to comply with tax laws in Bangladesh," GAP said, "they need sufficient time to understand legislation and implications…"
It said the non-residents should be given chance to read the final law, share queries with the government, obtain clarifications and make changes in their IT systems to comply with.
To obtain VAT registration and deposit VAT to the government, GAP proposed to issue enabling provisions and clarifications.
"We would like to humbly submit that GAP is a law-abiding corporate entity and it is out endeavour to comply with the applicable legal provisions and statues," it writes.
The current IT infrastructure of the VAT department does not allow the non-residents to make payment from a bank account outside Bangladesh.
However, it is commonly accepted to make direct payments from overseas bank accounts for payment of taxes or any statutory requirements.
GAP requested to provide an IT structure which enables non-residents to make VAT payments directly from their overseas bank accounts to comply with the provisions of VAT on electronic services.
It also proposed to simplify VAT invoice system for non-residents.
A senior VAT official said NBR allowed both companies and individuals to appoint as VAT agents by non-resident companies to facilitate them to pay VAT.
Now, global companies such as Google, Facebook and YouTube seek to get registered with VAT departments directly, he told the FE.
It is unfortunate that these global giants have yet to obey the VAT law in the last four months, he said.
The official said NBR is actively considering GAP's proposals and would take steps accordingly.
doulot_akter@yahoo.com