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Overview of Tax Compliance in Bangladesh: Income Tax & VAT

Table of Contents

This document provides a general overview of the primary income tax and Value Added Tax (VAT) compliance requirements for businesses operating in Bangladesh, governed mainly by the Income Tax Act, 2023 and the Value Added Tax (VAT) and Supplementary Duty Act, 2012. Adhering to these regulations is crucial for avoiding penalties and ensuring smooth operations.

Income Tax Compliance (Income Tax Act, 2023)
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Income tax is a direct tax levied by the National Board of Revenue (NBR) on the income earned by individuals and entities. Businesses must obtain a Taxpayer Identification Number (TIN) and comply with various obligations.

Key Concepts
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  • Tax Deduction at Source (TDS) / Withholding Tax: An essential collection mechanism where the entity making certain payments (e.g., salaries, contractor bills, rent) must deduct tax at prescribed rates and deposit it to the government treasury. The payee can claim credit for this TDS against their final tax liability.
  • Advance Income Tax (AIT): Companies are generally required to pay their estimated income tax liability in instalments throughout the income year.
  • Income Year: Typically the period from 1 July to 30 June.

Monthly Obligations
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  • Deposit of Tax Deducted at Source (TDS): Deposit deducted tax to the government treasury.
    • Deadline: Within two weeks of deduction.
  • Monthly Withholding Tax Return: Submit a return detailing TDS to the tax office.
    • Deadline: Within 25th day of the following month.

Quarterly Obligations
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  • Advance Income Tax Payment: Pay advance tax instalments.
    • Deadlines: By the 15th of September, 15th of December, 15th of March, and 15th of June.
    • Authority: Tax Office.

Yearly Obligations
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  • Annual Income Tax Return Submission: File the company’s annual income tax return.
    • Deadline: Generally, by the 15th day of the seventh month after the income year ends (e.g., 15 January for a 30 June year-end).
    • Authority: Tax Office.
  • Statement of International Transactions: Submit details if engaged in international transactions (transfer pricing documentation).
    • Deadline: Submitted with the annual income tax return.
    • Authority: Tax Office.
  • Audited Financial Statements: Prepare and submit audited financial statements, often required before the Annual General Meeting (AGM).
    • Deadline: Varies; often required at least 21 days before AGM.
    • Authority: CA Firm / Company responsibility.
  • Income Tax Certificate Collection: Obtain the certificate after assessment completion.
    • Timeline: Following return submission/assessment.
    • Authority: Tax Office.

Value Added Tax (VAT) Compliance (Value Added Tax and Supplementary Duty Act, 2012)
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VAT is an indirect tax on the consumption of goods and services. Businesses exceeding the turnover threshold must obtain a Business Identification Number (BIN) and comply with VAT regulations.

Key Concepts
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  • VAT Deduction at Source (VDS): Similar to TDS, certain entities must deduct VAT when paying suppliers for specific goods/services and deposit it. The supplier can typically claim this as input credit.
  • Mushak Forms: Standardised forms used for VAT compliance (e.g., Mushak 9.1 for returns, Mushak 6.3 for invoices).
  • Input Tax Credit: Registered businesses can generally deduct the VAT paid on their inputs (purchases) from the VAT collected on their outputs (sales) when calculating their net VAT liability.

Monthly Obligations
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  • VAT Return Submission (Mushak 9.1): File the monthly VAT return electronically.
    • Deadline: Within the 15th day of the month following the reporting month.
    • Authority: VAT Online System / VAT Office.
  • Deposit of Net VAT Payable: Pay the net VAT amount calculated in the return.
    • Deadline: Within the 15th day of the month following the reporting month.
  • Deposit of VAT Deducted at Source (VDS): Deposit deducted VAT to the government treasury.
    • Deadline: Within 15 working days from the date of deduction.
    • Authority: Bank / Treasury.

Record Keeping and Other Obligations
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  • Maintenance of Registers (Daily): Maintain prescribed registers (e.g., Purchase Register - Mushak 6.1, Sales Register - Mushak 6.2/6.2.1).
    • Frequency: Daily updates required.
    • Authority: Company responsibility.
  • Invoice Issuance (Mushak 6.3): Issue VAT-compliant invoices for every taxable supply.
  • VDS Certificate Issuance (Mushak 6.6): Issue a certificate to the supplier when VDS is deducted.
    • Deadline: Within 3 working days of deposit.
  • Price Declaration (Mushok 4.3): Submit price declarations for certain goods/services before sale or upon price change.
    • Deadline: At least 15 days before sale/change.
    • Authority: VAT Office.
  • VAT Audit: Be prepared for potential audits of VAT records by authorities.
    • Frequency: Yearly / As required.
    • Authority: VAT authorities.

Tax and VAT Dispute Resolution
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Tax Dispute
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Disputes regarding income tax or VAT assessments often arise following the submission of returns or audits conducted by the tax authorities, primarily the National Board of Revenue (NBR). The process typically initiates with an assessment by the Deputy Commissioner of Taxes (DCT) and proceeds through several stages if the taxpayer disagrees with the assessment.

Here is a general overview of the dispute resolution pathway:

  1. Assessment by DCT: After reviewing a submitted tax return or conducting an audit, the DCT may issue an assessment order. This order might determine a higher tax liability, impose penalties, or charge interest, leading to a notice of demand.
  2. Filing an Appeal with the Commissioner of Appeals (Taxes): If the taxpayer disagrees with the DCT’s assessment order, they have the right to file an appeal.
    • Authority: Commissioner of Appeals (Taxes) or Commissioner (Appeal) for VAT.
    • Procedure: A formal appeal must be filed within the timeframe stipulated in the relevant Act (e.g., typically 45 days from the date of service of the notice of demand). Often, a certain percentage of the disputed tax must be paid before the appeal is admitted.
    • Outcome: The Commissioner of Appeals reviews the case, hears both parties (taxpayer and DCT representative), and issues an appellate order, either upholding, modifying, or annulling the DCT’s assessment.
  3. Filing an Appeal with the Taxes Appellate Tribunal: If either the taxpayer or the DCT is dissatisfied with the order of the Commissioner of Appeals, a further appeal can be lodged.
    • Authority: Taxes Appellate Tribunal (the highest administrative body for tax appeals).
    • Procedure: An appeal must be filed within the prescribed time limit (e.g., typically 60 days from the date the Commissioner’s order is communicated).
    • Outcome: The Tribunal hears the appeal and issues a final order based on the facts and legal arguments presented.
  4. Reference to the High Court Division: If the order of the Taxes Appellate Tribunal involves a question of law, either the taxpayer or the Commissioner of Taxes can apply to the High Court Division of the Supreme Court of Bangladesh to hear the case on that specific legal point.
    • Procedure: This involves filing a reference application within the stipulated timeframe.
  5. Appeal to the Appellate Division: In certain cases involving significant legal questions, an appeal against the judgment of the High Court Division may lie with the Appellate Division of the Supreme Court of Bangladesh.
  6. Alternative Dispute Resolution (ADR): The Income Tax Act, 2023, and VAT & SD Act, 2012 also provide mechanisms for Alternative Dispute Resolution (ADR). Taxpayers can opt for ADR (mediation) at certain stages of the dispute, potentially offering a faster and less formal resolution pathway compared to the traditional appeal process.

Navigating tax disputes requires careful adherence to procedural timelines and a thorough understanding of the relevant legal provisions.

VAT Dispute
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Similar to income tax, disputes related to Value Added Tax (VAT) and Supplementary Duty (SD) typically arise from assessments or decisions made by VAT authorities under the Value Added Tax and Supplementary Duty Act, 2012, and associated rules. If a business disagrees with a VAT assessment, demand, or penalty, a structured appeal process is available.

Here is a general overview of the VAT dispute resolution pathway:

  1. Assessment/Decision by VAT Officer: Following a review, audit, or investigation, a VAT officer (e.g., Revenue Officer, Assistant Commissioner) may issue an assessment order or decision determining VAT liability, imposing penalties, or disallowing input tax credits, resulting in a demand notice.
  2. Filing an Appeal with the Commissioner (Appeal): If the registered person (taxpayer) disputes the decision of the VAT officer, the first recourse is to file an appeal.
    • Authority: Commissioner (Appeal), Customs, Excise & VAT.
    • Procedure: A formal appeal must be lodged within the timeframe specified in the VAT & SD Act, 2012 (typically 90 days from the date of communication of the order). Pre-payment of a certain percentage of the disputed amount is often required for the appeal to be admitted.
    • Outcome: The Commissioner (Appeal) reviews the case, may conduct hearings, and issues an appellate order confirming, modifying, or setting aside the original decision.
  3. Filing an Appeal with the Customs, Excise and VAT Appellate Tribunal: If either the taxpayer or the VAT department is dissatisfied with the order of the Commissioner (Appeal), a further appeal can be filed.
    • Authority: Customs, Excise and VAT Appellate Tribunal.
    • Procedure: An appeal must be filed within the prescribed time limit (e.g., typically 90 days from the date the Commissioner’s order is communicated). Specific deposit requirements may apply.
    • Outcome: The Tribunal, acting as the highest administrative appellate body for indirect taxes, hears the appeal and delivers a final order based on the facts and legal interpretations.
  4. Reference to the High Court Division: If the Tribunal’s order involves a substantial question of law, either party (taxpayer or the Commissioner representing the department) can apply to the High Court Division of the Supreme Court of Bangladesh for a ruling on that legal point.
    • Procedure: This requires filing a reference application within the stipulated timeframe (e.g., typically 90 days).
  5. Appeal to the Appellate Division: In specific circumstances involving significant legal questions or constitutional matters, an appeal against the High Court Division’s judgment may be possible to the Appellate Division of the Supreme Court.
  6. Alternative Dispute Resolution (ADR): The VAT & SD Act, 2012, also incorporates provisions for Alternative Dispute Resolution. Taxpayers can apply for ADR (mediation facilitated by an NBR-appointed facilitator) at certain stages, offering a potentially quicker and less adversarial route to resolving disputes compared to the formal appeal hierarchy.

Successfully navigating VAT disputes necessitates strict adherence to deadlines, procedural requirements, and a comprehensive understanding of the VAT & SD Act, 2012, and related rules and regulations.

Navigating tax disputes requires careful adherence to procedural timelines and a thorough understanding of the relevant legal provisions.

Special Compliance for MNC and Foreign Investors
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Foreign Investor must also adhere to other non-tax regulations:

  • Quarterly Foreign Direct Investment (FDI) Statements: Companies with foreign investment must submit returns to Bangladesh Bank.
    • Deadlines: 20th October, 20th January, 20th April, 20th July.
    • Authority: Bangladesh Bank.
Key Contact

For assistance with navigating tax and regulatory compliance requirements in Bangladesh, please reach out to: