Global social media giants Facebook, Google, Youtube and Satellite channels will have to appoint VAT agents in Bangladesh and pay 15 percent VAT on advertisement revenue to the government.
National Board of Revenue (NBR) issued the directive on 26th Jun, 2019 saying that VAT and Supplementary Duty Act 2012 on digital services will be applicable from July 1. In the directive, NBR has asked the social media such as Facebook, Google, Youtube and satellite channels, Zee Bangla, Star Jalsha, Star Sports will have to appoint VAT agents. As per the section 19 of the “value added tax and supplementary duty act 2012”, companies like Facebook, Google and Youtube have to go for VAT registration and pay VAT through local offices or agents.
Foreign television channels and tech companies who don’t have offices in the country, are known as non-resident in the VAT law, will have to take business identification number (BIN) and appoint VAT agent locally to maintain VAT-related documents and records and payment of VAT.
NBR said the new law, which will replace the VAT Act 1991, makes it compulsory for non-residents to hire VAT agent here to air programmes or to provide electronic services that are taken by people in Bangladesh.
Industry insiders are welcoming the initiative saying the directive to appoint VAT agents will remove the challenges of withholding tax. The VAT agent will ease foreign entities to register or make payment of VAT. Local enterprises will be able to obtain required VAT chalan for transactions.
However, the Association of Television Channel Owners (ATCO) press the Govt. to be tougher on the companies that are running their campaigns on foreign television channels. They ask for higher VAT and Tax impose on those companies. Currently, local channels have to deposit VAT but the foreign ones do not have to although a number of advertisements broadcasted on the channels for the local audience. The NBR directive comes following pleas from ATCO to collect tax from the foreign television channels properly.
On April 12, 2018, the High Court ordered the government to realize appropriate tax, VAT and other charges from the revenues earned by different digital platforms like Google, Facebook, Amazon, Yahoo and YouTube. In response to a writ petition, the court also asked the Govt. to form a special committee to assess the amount of their financial transactions in recent years and submit an assessment report by June 25.
In November 2017, the Newspaper Owners’ Association of Bangladesh (NOAB) sent a letter to the finance ministry, the central bank and the NBR voicing its grievance over the rise in digital advertisements. The association claimed that Facebook and Google are earning huge amount of money from digital advertisements without paying any tax.
To bring the incomes of the tech companies under the tax net, the NBR slapped a 15 percent withholding tax this fiscal year on ‘advertisement income or digital marketing’. In addition, a 15 percent VAT is to be paid by the advertisers on the bills served by digital companies.
The market size of digital campaigns is estimated at more than Tk 1,000 crore as per industry insiders and the government is deprived of any earning from the transactions.