Bangladesh uncertainty around taxation of foreign-supplied digital services

Tue Jul 4, 2017

The long-anticipated introduction of a new Value-Added Tax (VAT) system in Bangladesh has, once again, been hit with delays.

Bangladesh introduces digital VAT

Due to internal pressures the Bangladesh government has reversed on a recent decision to implement the Value Added Tax and Supplementary Duty Act, 2012. The proposed VAT reform is unlikely to take place until the next elections in Bangladesh in two years time.

This news had caught many digital businesses around the world off guard as it gave them just three weeks lead-in time to update their platforms. They were to be faced with the challenge of charging and collecting VAT of 15% on all sales of digital services to Bangladeshi consumers. As a result of the Bangladesh government’s decision this uniform 15% VAT rate will not be applied.

Recent developments

On June 22, Taxamo learned that there was significant local challenges to this proposed new law (it was subsequently cancelled on June 28) affecting foreign sellers of digital services with customers in Bangladesh. It was unclear as to whether the proposed law would come into force as planned on July 1. We now know that it is not coming into effect with a different taxation system set to be implemented based on existing Bangladesh tax law.

However, it will be a few weeks before clarity is provided. The Bangladesh Government is currently working on their budget deficit issues. It is still a possibility that they will make the foreign suppliers of digital services liable for VAT under the current VAT regime

Here at Taxamo we will keep you up-to-date on any changes in this regard.

Note: Taxamo content is created for guidance only, please consult your local tax advisor.

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