The National Board of Revenue plans to allow global social media giants to secure direct VAT registration without opening local offices as part of its move to bring them under the tax network. The development comes as tech giants such as Google and Facebook are yet to set up representative offices or appoint agents in line with VAT laws that came into effect on July 1 last year. A decision was taken last week so that non-resident firms can get VAT registration online without opening office in Bangladesh, said Syed Mushfequr Rahman, the director general of the VAT Intelligence."The measure will eliminate bottlenecks and enable 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 making up the lion's share of companies' promotional campaign budget. But the government does not receive much VAT from the ads running on Facebook, YouTube, Google and other digital platforms. Every year, Facebook, YouTube and Google together earn more than Tk 1,000 crore from Bangladesh and the majority of the sum are not sent through the banking channel, according to stakeholders.
This has prompted the revenue administration to make it mandatory for foreign platform to either open offices or appoint agents. But none of the tech firms are yet to obtain VAT registration as they are unwilling to pay the indirect tax to the NBR through agents or share sales details containing information about customers. Last month, Ernst & Young LLP wrote to the NBR on behalf of Facebook, saying sharing sales details containing information about customers with individual VAT agents breaches data privacy and poses security risks. Facebook is bound by data privacy laws to ensure the confidentiality and privacy of such information, the letter said. No reputed international chartered accounting and consultancy firms have obtained VAT agent certificate, according to the letter. These firms are hesitant and sceptical about acting as VAT agents due to concerns such as handling funds on behalf of clients or assuming joint and several liability for payments of all dues of the non-resident VAT-payers. Facebook wanted the NBR to allow direct VAT registration instead of through VAT agent and permit direct transfer or online payment of taxes to the revenue board's designated bank account. In order to resolve the issue and finalise a form for VAT registration for non-resident taxpayers, senior VAT officials in a meeting last week agreed to bring changes to rules. But the tech giants will have to name a local 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 would soon be required to collect 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 procedure to pay VAT in Bangladesh, he said, adding that it is good news for Bangladesh as it would allow the country to collect VAT on cross-border transactions.