Value Added Tax (VAT) in Bangladesh 2025-2026

 

Value Added Tax (VAT) is governed by the VAT and Supplementary Duty Act, 2012. Like TDS, the rules for VAT Deducted at Source (VDS) are updated annually through the Finance Act and subsequent Statutory Regulatory Orders (SROs). For the fiscal year 2025-2026, which started on July 1, 2025, several changes have been implemented.

Key Concepts of VDS

VDS is a mechanism where a specific person or entity, known as the withholding agent, is required to deduct a certain percentage of the VAT on a supply of goods or services at the time of making a payment. This deducted VAT is then deposited directly to the government treasury. This system helps the National Board of Revenue (NBR) to ensure tax compliance and timely revenue collection, particularly from sectors where VAT collection is challenging.

General VDS Rules for FY 2025-2026

Withholding Agent: The list of entities required to act as withholding agents has been defined. This typically includes government, semi-government, and autonomous bodies, as well as large corporate entities, non-government organizations (NGOs), and banks.

Services Subject to VDS: A wide range of services are subject to VDS. The specific list and applicable rates are detailed in a separate SRO (Statutory Regulatory Order) issued by the NBR.

VDS Rate: The VDS rate is not a uniform percentage. It varies based on the type of goods or services supplied. The rates are typically a percentage of the total supply value.

Examples of VDS Rates for FY 2025-2026

The following are examples of VDS rates for certain services. Please note that this is not an exhaustive list, and the exact rates and service codes are defined in the relevant SROs.

Consultancy and Supervisory Firms: The VDS rate for these services is 15%.

Advertising Firms: The VDS rate for advertising services is 15%.

Security Services: The VDS rate for security services is 10%.

Cleaning and Maintenance Services: The VDS rate is 10%.

Printing and Binding: The VDS rate for printing services (with some exceptions) is 15%.

Land Development: The VDS rate for land development firms is 2%.

Building Construction: VDS rates vary based on the size of the building, for example:

2% for buildings up to 1600 square feet.
4.5% for buildings above 1600 square feet. 

Transportation Services: The VDS rate can be 5% for certain transport services.

 

Important Considerations

Official Sources: For the most accurate and up-to-date information, it is crucial to refer to the official publications of the National Board of Revenue (NBR), including the Value Added Tax and Supplementary Duty Act, 2012, the Finance Act 2025, and relevant SROs (Statutory Regulatory Orders).

Legal Compliance: The VDS rules are a matter of legal compliance. Failure to properly deduct and deposit VDS can lead to penalties and fines.

Exemptions: Some goods and services are exempted from VAT, and therefore VDS is not applicable to them. These exemptions are listed in the First Schedule of the VAT and Supplementary Duty Act, 2012.

Disclaimer: This information is for general guidance only and does not constitute professional tax advice. For specific tax-related matters, you should always consult a qualified tax professional in Bangladesh. Download Bangladesh VDS Rules 2025 by click following download button.