VAT Registration and Cancellation: Step-by-Step Process

In Bangladesh, all businesses that meet certain requirements must pay VAT or value-added tax. This VAT is a consumption tax put on goods and services at each production or distribution stage. 

VAT in Bangladesh is governed by the Value Added Tax Act, which outlines the rules and regulations for VAT registration, collection, and compliance. VAT rates in Bangladesh change depending on the goods or services type, with standard rates typically ranging from 5% to 15%. This rate can change before a new fiscal year starts and is set by the Bangladeshi government.

Paying VAT is one of the most crucial tasks that every business needs to do. This is because VAT is a significant source of revenue for the government and plays a crucial role in financing public services and infrastructure development.

We will do a deep dive into the necessities of VAT in Bangladesh and how much different industries need to pay in 2024. But our biggest point in this article will be Bangladesh’s VAT registration and cancellation process.

Who Needs To Register for VAT in Bangladesh?

All businesses must register for VAT in Bangladesh, but only if they meet the threshold. The annual sales registration threshold in Bangladesh is BDT 30,000,000. So, if your business has annual sales within 12 months, they are exempt from registering for VAT in Bangladesh. 

Suppose your local sales reach over the threshold. In that case, you should register for VAT and follow all the tax regulations set by the Bangladeshi government. This includes understanding tax rates, collecting taxes, issuing invoices, and filing returns.

Why is VAT Necessary in Bangladesh?

There are many reasons why VAT is necessary in Bangladesh. VAT helps businesses and the Bangladeshi government, from developing the economy to increasing transparency. Here are just five examples of why VAT in Bangladesh is necessary :

Revenue Generation

The biggest reason why we need VAT is because it’s a major source of revenue for the government. The money collected through VAT in Bangladesh is used to finance various public services like healthcare, education, etc.

Economic Stability

VAT in Bangladesh also stabilizes the economy by helping the government manage its budget and lessen its need for outside funding. The government can see more sustainable economic growth with a more stable economy and finances.

Redistribution of Wealth

VAT lets the government share wealth more equally within the country, and they do so by taxing goods instead of income. VAT ensures that people with more purchasing power end up paying more VAT. VAT narrows the gap between rich and poor in the country by ensuring the rich give more to the government’s revenue.

Encourages a Transparent Economy

By levying VAT, businesses are encouraged to be more transparent by maintaining proper records of their transactions. They are also encouraged to follow tax regulations. So, VAT promotes transparency and accountability in various sectors of the economy, which can reduce tax evasion and foster compliance with tax laws.

Support for Development Projects

As we said before, VAT generates government revenue, which helps fund various development projects. These projects aim to develop various government sectors for public benefit. From infrastructure, healthcare, and education to social welfare, VAT helps to develop many such areas. 

How Much VAT to Pay By Industry in Bangladesh?

As we mentioned in the beginning, businesses in Bangladesh need to pay VAT at a rate between 5% and 15%. Some sectors are exempted, meaning they fall under the 0% VAT requirement. Here is a table that shows how much VAT is levied for certain goods in Bangladesh:

VAT Registration in Bangladesh: Step-by-Step Process

If your business has exceeded the annual sales threshold of BDT 30,000,000, you are now required to register for VAT in Bangladesh. We will now go over the process of VAT registration in Bangladesh step-by-step. 

Document Needed for VAT Registration in Bangladesh:

1. TIN certificate
2. NID/Passport copy of owner/shareholders
3. Bank solvency certificate/Latest bank statements
4. Trade license
5. Certificate of Incorporation
6. Import registration certificate and (for import activity)
7. Export registration certificate (for export activity)
8. Layout Plan equipment (for manufacturing activity)
9. List of Machinery & equipment (for manufacturing activity)
10. Old BIN (if any)
11. BIDA registration (for branch office)
12. Name, mobile number, and email of an authorized person

VAT Registration Process in Bangladesh:

1. Visit the website “vat.gov.bd” to begin the VAT registration process.
2. Click on the “Sign-up” option to create a user account and fill in the necessary information fields.
3. After providing the required information, the system will send an “Activation code” to the applicant’s phone number for user ID registration.
4. Once the registration process is complete, the system will send an email with a user ID and a one-time password.
5. Log in to the VAT online portal using the provided credentials.
6. Navigate to the “Form” option and click on “Add form,” then select “Mushak – 2.1 VAT/Turnover Tax Registration Form.”
7. Fill out all the required information fields in the registration form and apply along with all necessary supporting documents. The required document list is provided above.
8. After successfully applying, National Board of Revenue (NBR) officials will verify and inspect the submitted documents.
9. Upon verification, the applicant will receive the VAT registration certificate either in printed form or via email through the system.

Check the in-depth article on how to get a VAT certificate in Bangladesh in 2024 from Legal Advice BD.

VAT Cancellation in Bangladesh: Step-by-Step Process

You might have to cancel your VAT registration in Bangladesh for many reasons, from closing your business to transferring ownership. Regardless of the reason, you must follow the VAT cancellation process in Bangladesh for proper and legal cancellation of your VAT registration. 

We will now go over the step-by-step process of VAT cancellation in Bangladesh.

VAT Cancellation in Bangladesh

1. Informing Appropriate Authority: Start by informing your local VAT office about canceling your VAT registration. You can do so either by submitting a written application with relevant documentation or through paperwork related to your reason for cancellation.
2. Clearing Outstanding Liabilities: You must clear any outstanding VAT liabilities. These liabilities can be anything from paying any overdue taxes, fines, or penalties that your business owes to the government. We recommend you consult with a VAT lawyer for this stage to get a clear understanding of how much you need to cover.
3. Submitting of Necessary Documents: You may be required to submit various documents based on your reasoning for VAT registration cancellation. You can find out which documents are needed through your local VAT office.
4. Verification from VAT Officer: Once you have submitted all your required forms and documents, a VAT officer will review your case, do an inspection, and verify. This is done to ensure nothing is missed or false.
5. Receiving VAT Registration Cancellation Certificate: After the verification and liabilities are cleared, you will receive the official VAT registration cancellation certificate.
6. Returning VAT Certificate: You must return your original and cancellation certificates to the VAT office at this stage. 
7. Updating Records with Authorities: Finally, you must inform any other relevant parties and committees about your VAT cancellation. This is especially important if your business gets a new owner or structure.

Conclusion

The process of VAT registration and cancellation in Bangladesh isn’t very complicated. However, the steps involved must be followed strictly because there are legal and monetary consequences if not followed. 

As mentioned above, businesses whose annual sales turnover is lower than the threshold don’t have to worry about VAT. However, they must remember they must register for VAT once they cross it. 

The standard VAT rate in Bangladesh is 15%, but various sectors or industries pay 5%, 7.5%, or 10%. Also, other industries fall under the zero percent VAT rate. Check out the annual Tax and VAT documents every fiscal year to see how much you need to pay.

In conclusion, paying VAT is a vital task that everyone and every business must do. This is because it helps with the development of your country and government.

FAQs

What are the penalties for non-registration?

Non-registration for VAT can lead to penalties, including fines and legal consequences.

Can a business voluntarily cancel its VAT registration?

Businesses can voluntarily cancel their VAT registration if they meet certain criteria.

How long does the VAT registration process take?

The duration of the VAT registration process can change, but it typically takes a few weeks to complete.

What documents are required for VAT registration?

Personal identification documents, business licenses, and tax identification numbers are some of the documents required for VAT registration.

What are the consequences of not complying with VAT laws?

Non-compliance with VAT laws can result in penalties, interest charges, and legal action by the tax authorities.