Are you a business owner in Bangladesh? Do you want to save money? You might qualify for VAT exemption! This guide cuts through the confusion. Learn who can skip paying VAT and how to apply. We will explore the rules for VAT exemption in Bangladesh, so you can find out if you are eligible.
In Bangladesh, the Value Added Tax (VAT) Act 2012 outlines a range of goods and services exempt from VAT to support essential sectors and reduce the burden on low-income populations. Understanding VAT exemptions is critical for businesses aiming to comply with the law while maximizing tax efficiency.
What is VAT Exemption
VAT exemption means some businesses don’t charge value-added tax. They’re not required to collect or pay VAT on certain goods or services. This usually applies to specific sectors like healthcare, education, or charities. If exempt, you can’t reclaim any VAT you pay on business purchases. It’s different from zero-rated, where VAT is charged at 0%.
Categories of VAT-Exempt Entities and Goods
- Essential Goods and Commodities
The government exempts basic necessity items from VAT to make them affordable to the general public. These include:
- Rice, lentils, flour, and edible oil
- Fresh fruits and vegetables
- Unprocessed fish and meat
- Baby food and milk
- Sanitary napkins and essential medicines
- Educational and Healthcare Services
To ensure access to basic human rights, services in the following sectors are exempt:
- Non-profit educational institutions
- Public universities
- Government and charitable hospitals
- Basic health services and diagnostic centers
- Government and Public Sector Entities
Certain government activities and projects that do not engage in commercial profit-making are VAT-exempt, including:
- Services rendered by ministries and government departments
- International and foreign aid projects approved by the Economic Relations Division (ERD)
- Financial Services and Insurance (Limited Scope)
While most banking services are taxable, some specific services are VAT-exempt, such as:
- Interest income from deposits
- Life insurance policies
- Foreign exchange trading by banks (specific conditions apply)
- Agricultural Inputs and Activities
To promote food security and farming, the following are VAT-exempt:
- Seeds, fertilizers, and irrigation services
- Agro-machinery (select items)
- Agricultural consultancy services
- Small Enterprises (Turnover Below Threshold)
Businesses with annual turnover below BDT 3 crore are not required to register for VAT and are exempt from filing regular VAT returns. However, they may need to register for turnover tax, depending on business activities.
- Export-Oriented and EPZ Enterprises
Entities operating in Export Processing Zones (EPZs) or fully export-oriented businesses are often exempt from output VAT, though they must comply with input VAT and refund procedures.
For more information click here : https://nbr.gov.bd/regulations/sros/vat-sros/eng
How to Claim VAT Exemption?
Eligible businesses must maintain appropriate documentation and, where necessary, obtain approval or certification from the National Board of Revenue (NBR) to claim exemptions. It is recommended to consult VAT professionals to avoid misclassification.
Need help verifying your exemption eligibility or registering your VAT-exempt business? Contact Recom Consulting Ltd. for expert assistance.
