Social media giants will get VAT registration soon
The National Board of Revenue plans to permit global social media giants to secure direct VAT registration without opening local offices within its move to bring them beneath the tax network.
The development comes as tech giants such as Google and Facebook are yet to create representative offices or appoint agents consistent with VAT laws that arrived to effect on July 1 this past year.
A decision was taken last week so that non-resident firms will get VAT registration online without opening office in Bangladesh, said Syed Mushfequr Rahman, the director general of the VAT Intelligence.
"The measure will get rid of bottlenecks and permit us to get VAT," Rahman said.
The move came after Facebook last month sought direct VAT registration from the NBR. Google also wants the same, sources said.
Digital advertisements progressively creating the lion's share of companies' promotional campaign budget. But the government does not receive much VAT from the advertising running on Facebook, YouTube, Google and other digital platforms.
Each year, Facebook, YouTube and Google together earn much more than Tk 1,000 crore from Bangladesh and a lot of the sum aren't sent through the banking channel, according to stakeholders.
This has prompted the income administration to create it mandatory for foreign platform to either open offices or appoint agents.
But none of the tech firms are yet to acquire VAT registration as they are unwilling to pay the indirect tax to the NBR through agents or share sales details containing info on customers.
Last month, Ernst & Young LLP wrote to the NBR with respect to Facebook, saying sharing sales details containing info on customers with individual VAT agents breaches data privacy and poses security risks.
Facebook is bound by data privacy laws to guarantee the confidentiality and privacy of such information, the letter said.
No reputed international chartered accounting and consultancy companies have developed VAT agent certificate, based on the letter.
These firms are hesitant and sceptical about acting as VAT agents because of concerns such as for example handling funds with respect to clients or assuming joint and several liability for payments of most dues of the non-resident VAT-payers.
Facebook wanted the NBR to permit direct VAT registration instead of through VAT agent and invite direct transfer or online payment of taxes to the earnings board's designated bank-account.
To be able to resolve the problem and finalise an application for VAT registration for non-resident taxpayers, senior VAT officials in a meeting last week agreed to bring changes to rules.
However the tech giants must name an area agent in the registration form for communication purpose with the NBR, said Rahman, who was present at the meeting.
Recently, Amazon Web Services (AWS), informed its clients in Bangladesh that it could soon be asked to gather VAT on the sales of its cloud services.
AWS asked clients to update accounts by providing VAT registration numbers, according to a Facebook post of Md Zakir Hossain, commissioner of the Customs, Excise & VAT Commissionerate, Jashore.
AWS has started the task to pay VAT in Bangladesh, he said, adding that it's very good news for Bangladesh as it would allow the country to accumulate VAT on cross-border transactions.
