Bangladesh Implements VAT on Digital Services, Effective July 1, 2018
Bangladesh has implemented VAT on digital services, with foreign businesses required to comply since July 1, 2018. The VAT rate varies depending on the service category, with standard and reduced rates applicable.
The standard VAT rate of 15% applies to services like Digital Content Development, Animation, GIS, IT Support, Software Development, and Website Development. Meanwhile, the reduced rate of 5% covers 'Information Technology Enabled Services (ITES)' and other specified digital services.
Initially, the term 'virtual business' included digital platforms like Facebook, YouTube, and Google. However, the definition was later clarified to include a broader range of digital services. Businesses must analyze their sales to determine the applicable VAT category. Invoices must bear the term 'Mushak 6.3', and a local tax agent is required for registration, filing, and payment. Notably, no B2B validation is needed for VAT application in Bangladesh, covering both B2C and B2B transactions.
Bangladesh's first major attempt to tax the digital economy was introduced in the 2018-19 budget by then Finance Minister AMA Muhith. Since then, foreign businesses selling digital services to customers in Bangladesh must apply VAT, contributing to the country's revenue collection efforts.
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