VAT rules for International join venture business companies in Bangladesh

What is VAT in Bangladesh?

Value Added Tax (VAT) is a consumption tax levied on goods and services in Bangladesh, administered by the National Board of Revenue (NBR). The standard VAT rate is 15%, with reduced rates of 5% for specific IT-enabled services and zero-rating for exports.

VAT in Bangladesh follows the VAT and Supplementary Duty Act 2012, which replaced the previous VAT Act of 1991. This comprehensive tax applies to manufacturing, trading, and service sectors, making compliance mandatory for businesses meeting specific turnover thresholds.

VAT Registration Requirements for Companies in Bangladesh

Who Must Register for VAT?

**Critical Update (2026):** All foreign entities operating branch offices, liaison offices, or project offices in Bangladesh must obtain VAT registration regardless of turnover, as mandated by the Finance Act 2022-23.

Registration Timeline

Companies must submit VAT registration application Form VAT 2.1 to the NBR within **15 days** from the date the obligation is incurred. The NBR processes applications within **3 working days** and issues a Business Identification Number (BIN) via Form VAT 2.3.

VAT Rules for International Joint Venture Companies in Bangladesh

Formation and VAT Compliance Requirements

International joint venture (JV) companies in Bangladesh are treated as separate legal entities under the Companies Act 1994 and must comply with all VAT obligations under the VAT and Supplementary Duty Act 2012.

Key Requirements for International Joint Ventures:

1. Incorporation with RJSC

• Register with the Registrar of Joint Stock Companies and Firms
• Obtain Certificate of Incorporation
• Submit Memorandum and Articles of Association

2. VAT Registration (BIN)

• Mandatory within 15 days of commencing operations
• Required regardless of turnover for foreign
• owned entities
• Must appoint a local VAT representative

3. Share Capital Deposit

• Foreign shareholders must deposit capital through authorized banks
• Obtain encashment certificate confirming fund transfer
• Submit certificate to RJSC with incorporation documents

4. Compliance Obligations

• Monthly VAT return submission
• Maintain VAT-compliant invoicing system
• Use NBR-approved VAT software for businesses above BDT 5 crore turnover

Sector-Specific Restrictions for Foreign Investment

Bangladesh permits 100% foreign investment in most sectors except:

• Arms and ammunition – Forest plantation
• Nuclear energy production – Security printing
• Freight forwarding (maximum 40% foreign shareholding)

VAT Rates and Sector-Specific Rules (2026)

1. Standard VAT Rate: 15%

Applied to most goods and services including:

• Manufacturing products
• Trading (import/wholesale/retail)
• Professional services
• Construction services
• Real estate transactions

2. Reduced VAT Rate: 5%

Information Technology Enabled Services (ITES) including:

• Software development and customization
• Website development and hosting
• Digital content development
• Animation (2D and 3D)
• IT support and maintenance
• Data entry and processing
• Call center services
• Cyber security services
• Search engine optimization
• Digital graphics design

3. Real Estate Sector

• 15% VAT on apartment sales
• 4.5% VAT on land transfer
• Input tax credit limited to construction costs
• Advance VAT collection at registration

4. Common VAT Compliance Mistakes to Avoid

• Late Registration: Penalties up to BDT 10,000 for delayed registration
• Incorrect VAT Rate Application: Using 15% for ITES instead of 5%
• Missing Input Tax Claims: Not claiming eligible purchases
• Improper Invoice Format: Non-compliant mushak forms
• Delayed Return Filing: 2% monthly penalty on unpaid VAT
• Inadequate Record Keeping: NBR audit penalties and assessments

VAT Registration Process: Step-by-Step Guide

Online Registration via NBR e-Portal

Step 1: Access the NBR Portal

Visit the National Board of Revenue online VAT registration system at vat.gov.bd

Step 2: Prepare Required Documents 

• Trade License from City Corporation
• TIN (Tax Identification Number) certificate
• Bank account details
• Memorandum and Articles of Association (for companies)
• Board resolution authorizing VAT registration
• Encashment certificate (for foreign investment)

Step 3: Submit Form VAT 2.1 

Complete the application form with:  

• Business name and registration details
• Nature of business and sector
• Estimated annual turnover
• Principal place of business address

Step 4: Document Verification

NBR reviews submitted documents within 3 working days

Step 5: Receive BIN Certificate

Upon approval, NBR issues Business Identification Number via Form VAT 2.3 electronically

Timeline: 3-5 working days (complete process)

VAT Compliance Requirements for Registered Companies

1. VAT Invoice Issuance

All VAT-registered businesses must issue VAT-compliant invoices (mushak) containing:

• Invoice number and date
• Seller’s BIN (Business Identification Number)
• Buyer’s BIN (for B2B transactions)
• Description of goods/services
• Quantity and unit price
• VAT amount separately stated
• Total amount including VAT

2. Monthly VAT Return Filing

Form 9.1 (Mushak 9.1)must be submitted by the 15th day of the following month, reporting:

• Total sales (output tax)
• Total purchases (input tax)
• VAT payable or refundable
• Supporting documentation (purchase and sales records)

3. VAT Software Requirement

Companies with annual turnover exceeding BDT 5 crore must use NBR-approved VAT software for:

• Invoice generation
• Purchase recording
• Stock management
• Automated VAT calculation
• Direct return submission to NBR e-system (iVAS)

SmartVAT is an NBR-approved VAT management software that ensures full compliance with VAT Act 2012 and GO-16/VAT/2019 guidelines.

4. Record Keeping

VAT-registered businesses must maintain records for minimum 5 years including:

• VAT invoices (issued and received)
• Purchase and sales registers
• Stock registers (for trading/manufacturing)
• Bank statements
• Import/export documents

Sector-Specific VAT Rules

Manufacturing Sector

• Standard 15% VAT on finished goods
• Input tax credit available on raw materials
• Production waste subject to VAT if sold
• NBR-approved VAT software mandatory for large manufacturers

 Trading Sector

• 15% VAT on import value (customs value + duties)
• Input tax credit recoverable on import VAT
• Turnover tax option (4%) for smaller traders (BDT 30-80 lakh)
• Zero-rating for export trading

 Service Sector

• 15% standard rate (professional, consulting, construction)
• 5% reduced rate for IT-enabled services
• Withholding VAT (VDS) applies to specific services
• Service codes must match NBR classification

Real Estate Sector

• 15% VAT on apartment sales
•  4.5% VAT on land transfer
• Input tax credit limited to construction costs
• Advance VAT collection at registration

Common VAT Compliance Mistakes to Avoid

1. Late Registration: Penalties up to BDT 10,000 for delayed registration
2. Incorrect VAT Rate Application: Using 15% for ITES instead of 5%
3. Missing Input Tax Claims: Not claiming eligible purchases
4. Improper Invoice Format: Non-compliant mushak forms
5. Delayed Return Filing: 2% monthly penalty on unpaid VAT
6. Inadequate Record Keeping: NBR audit penalties and assessments