Bangladesh has proposed a 5% VAT on all types of ‘virtual business’ in its 2018-19 budget. The term ‘virtual business’ was later clarified to mean digital platforms such as Facebook, YouTube, and Google.

According to the Bangladesh-based The Financial Express, Finance Minister AMA Muhith proposed a VAT on digital platforms at 5 per cent. The new VAT, according to early reports, may come into effect from July 1 this year.

In his speech unveiling the 2018-19 budget, AMA Muhith said: “With the fast development of internet technology, social media, and mobile application platform-based virtual businesses are booming. In order to bring these online-based virtual businesses within the tax net, a new service code has been defined as ‘Virtual Business’ on which 5 per cent VAT shall be imposed.”

This is a significant development in Bangladesh as it marks the country’s latest attempt to tax the digitalisation of the economy. Back in July 2017, just days after new VAT rules were announced, the Bangladesh government reversed a decision to implement the Value Added Tax and Supplementary Duty Act, 2012. The reversal was due to internal pressures.

Online shopping not in scope

Within days of the 2018-19 budget proposal, however, the chairman of Bangladesh’s National Board of Revenue (NBR) Mosharraf Hossain Bhuiya clarified that “online shopping”, specifically, was not in scope of the proposed new rules. The new 5% VAT is to be applied on digital platforms only. The reason provided for its inclusion in the budget speech was a “printing mistake”.

Of course, as per usual, we will keep you updated on this latest proposal in Bangladesh.