Collect 15pc VAT from payments of online ads

The revenue authority has asked banks to collect 15 percent value added tax from every payment made by local firms to global tech giants for online advertisements.

The Large Taxpayers Unit, Value Added Tax (LTU VAT) under the National Board of Revenue issued a letter to 17 banks and made the call in the second week of May, officials said yesterday.

Those who advertise on social media and other digital media platforms usually pay bills for advertisements through their bank accounts, said LTU VAT Commissioner Md Matiur Rahman.

“So, we have asked banks to charge the VAT amount based on the payments on behalf of their clients.” The NBR last month directed its field offices to take steps to realise the indirect tax from the digital advertisements run by the local firms on different social media platforms such as Facebook and Google.

Earlier, the Newspaper Owners' Association of Bangladesh (Noab) urged the government to take steps to collect tax from big tech firms citing that Facebook and Google were earning a huge amount of money from digital advertisements but they were not paying any tax.

The two tech giants have no office in Bangladesh, which allows them to remain out of the purview of Bangladesh's laws.

But it is a requirement that every company that wants to do business in any country complies with the local laws, the Noab said in a letter to the finance ministry in November last year.

The NBR, in its letter, said the money was sent through the banking channel to the recipients abroad, so banks should collect 15 percent VAT when the advertisers make the payment.

In line with the NBR directive, the LTU VAT also asked banks to furnish information on whether they were collecting such VAT on behalf of their clients.

Rahman said banks should collect the tax when their clients make such payments through credit cards. “The tax was not deducted earlier,” he said.