Withholding VAT: VAT Deducted at Source (VDS) 2024

Withholding VAT - VAT Deducted at Source (VDS)
Withholding VAT - VAT Deducted at Source (VDS)

In Bangladesh, Value Added Tax (VAT) is a tax on the value added to goods and services at each stage of production and distribution.

The VAT system in Bangladesh operates on a self-assessment basis, which means that VAT-registered businesses are responsible for calculating, collecting, and remitting VAT on their taxable supplies.

Withholding Vat in Bangladesh

Withholding VAT refers to a situation where a person making a payment to a supplier is required to deduct the VAT from the amount payable and remit the deducted amount directly to the National Board of Revenue (NBR), the tax authority in Bangladesh.

The person making the payment is known as the withholding agent, and the supplier is referred to as the withholding VAT recipient.

It is essential for businesses in Bangladesh to understand their obligations under the VAT law and to comply with their tax obligations, including their obligations as withholding agents. Failure to comply with the withholding VAT requirements can result in penalties and interest charges.

VAT Deduction at Source in Bangladesh

You may know about Tax deduction at source, but here we will talk about VAT deduction at source. The first step in deducting VAT at the source is determining the applicable VAT rate. The VAT rate applicable to a particular transaction will depend on the type of goods or services being supplied. In Bangladesh, the standard VAT rate is 15%.

Once the VAT rate has been determined, the next step is calculating the VAT amount that should be deducted from the source. This is calculated by multiplying the value of the taxable supply by the applicable VAT rate.

For example, if the value of a taxable supply is BDT 100,000 and the VAT rate is 15%, the VAT amount to be deducted at the source would be BDT 15,000 (100,000 x 15%).

The withholding agent should deduct the VAT amount from the payment due to the supplier and remit the deducted amount directly to the National Board of Revenue (NBR), the tax authority in Bangladesh.

The withholding agent must also prepare and submit a VAT return to the NBR every month. The VAT return should include details of the VAT deducted at source, the payment made to the supplier, and the VAT remitted to the NBR.

Applicable to Withholding VAT

Above, we have already known about the rate of withholding vat. Commonly withholding vat should be paid 15%, but there are many industries or business organizations where different vat is applicable.

There has already been given a list of service applications for withholding vat. So, look at the list below to know the withholding vat in all business spheres.

  • AC Hotel- 15%
  • AC Restaurant- 10%
  • Non-AC Hotel- 7.5%
  • Non-AC Restaurant- 5%
  • Decorators and Caterers- 15%
  • Motor Car Garage and Workshop- 10%
  • Dockyard- 10%
  • Construction Firm- 7.5%
  • Advertising Firm- 15%
  • Printing- 10%
  • Auctioneer- 10%
  • Land Development Company- 2%
  • Real Estate Company- (1-1,600 sqft) 2%. (More than 1,601 sqf- 4.5%)
  • Re-registration- 2%
  • Indenting Firm- 5%
  • Freight Forward- 15%
  • Surveyor- 15%
  • Plant or Capital Machinery Rental Firm- 15%
  • Furniture Manufacturer- 7.5% (If the manufacturer directly delivers to the consumer, then 15% VAT applicable)
  • Furniture Selling showroom- 7.5% (If VAT payment invoice is present at manufacturing stage at 7.5% rate, otherwise 15%)\
  • Courier and Express Mail Service- 15%
  • Repairing or servicing of taxable goods by any person, company, or Firm- 10%
  • Consultancy Firm and Supervisory Firm- 15%
  • Lease- 15%
  • Audit and Accounting Firm- 15%
  • Procurement Provider- 7.5%
  • Security Service- 10%
  • Television and Online Broadcasting Program Supplier- 15%
  • Law Firm- 15%
  • Transportation of Petroleum- 5%
  • Any other Transportation- 10%
  • Rent-A-Car- 15%
  • Architect, Interior Designer, or Interior Decorator- 15%
  • Graphic Designer- 15%
  • Engineering Firm- 15%
  • Sound and Lighting Rent- 15%
  • Participating in Board Meetings- 10%
  • Advertisement Broadcasting through Satellite Channel- 15%
  • Chartered Plan or Aeroplan- 15%
  • Purchase goods Participating Auction- 7.5%
  • Building, floor, or space cleaning and maintenance Firm- 10%
  • Seller of Ticket of Lottery- 10%
  • Immigration Advisor- 15%
  • Event Organizer- 15%
  • Manpower Supplier- 15%
  • Information Technology Enabled Services- 5%
  • Other related services- 15%
  • Sponsorship Services- 15%
  • Credit Rating Agency- 7.5%

It is important to note that the withholding VAT system in Bangladesh operates on a self-assessment basis, which means that businesses are responsible for ensuring that they comply with the rules and regulations governing the withholding VAT system.

If you have any doubts or need further guidance on deducting VAT at a source in Bangladesh, it is recommended that you seek professional advice from a tax advisor.

You can let us know if you have difficulty understanding this article or any other point. We will try to help you quickly. Stay with us regularly to get updated information about tax, vat, and others. Thank you.