document classification: highly confidential · gp, robi, banglalink, etc.) telco intermediary...
TRANSCRIPT
1
Document Classification: Highly Confidential
kpmg
Rahman Rahman HuqChartered Accountants
Technical Seminar on
New VAT Act 2012 and Rules 2016
8 March 2017
3
Document Classification: Highly Confidential
Value Added Tax Act, 1991
&
Value Added Tax Rules, 1991
Value Added Tax and
Supplementary Duty Act, 2012
&
Value Added Tax and
Supplementary Duty Rules, 2016
4
Document Classification: Highly Confidential
New VAT Act in the context of difficulties
and challenges in current VAT Law
5
Document Classification: Highly Confidential
New VAT Law in Current Context
Price
Declaration
System
Truncated
VAT
Tariff VATLimited
rebate
system
Administrative
difficulties
Collection
complexities
More
clarity
needed
6
Document Classification: Highly Confidential
Clarity and New Concepts
Economic activity
Recurring activity for supply of goods, services
or immovable property
One-off initiative of a commercial
activity or enterprise Supply of goods,
service or property made under any lease or license
Business, profession or
vocation
7
Document Classification: Highly Confidential
Clarity and New Concepts
Economic Activity does not include
Service rendered by employee to employer
Recreational pursuit or hobby carried on a
non-commercial basis
Services (other than for purpose of company’s
business) rendered by director of a company
8
Document Classification: Highly Confidential
Clarity and New Concepts
Goods Service
Immovable
Property
Supply
Any
combination
of the three
9
Document Classification: Highly Confidential
Clarity and New Concepts
Supply of Goods
Sale or Exchange
or Disposal of
goods
Goods on lease,
rent or otherwise
Transfer of rights
Rights to use
BuyerSeller
CurrentNew
10
Document Classification: Highly Confidential
Clarity and New Concepts
Grant, assignment or
right
Making available a facility or
opportunity
Performing an act
License permit and
such
Supply other than goods or
immovable property
Supply of service
11
Document Classification: Highly Confidential
Interest or right
over land
Right to acquire
or the option to
exercise right
License to
occupy land
Supply of
Immovable
Property
Clarity and New Concepts
12
Document Classification: Highly Confidential
Clarity and New Concepts
Resident v Non-resident
Resident
Lives in Bangladesh
Stays in Bangladesh over 182 days in a
fiscal year
OR
Individual
OR
Stays in Bangladesh over 90 days and 365
days in pervious 4 year in a fiscal year
13
Document Classification: Highly Confidential
Clarity and New Concepts
Resident v Non-resident
Company, trust
or association of
persons
Government
Entity and
Property
development
joint venture
Mandatory
Resident
Incorporated in Bangladesh
Centre of control and
management in Bangladesh
OR
Any other person is a non-resident
14
Document Classification: Highly Confidential
Clarity and New Concepts
If non-resident provides any supplies
carrying on an economic activity
from or through a fixed place in
Bangladesh, it would be considered
as a supply in Bangladesh.
Why Resident v Non-resident?
A fixed place of business includes branch office, factory,
workshop, mine, gas well, location of construction or
installation project
15
Document Classification: Highly Confidential
Registration vs Enlistment
Supply goods or service subject
to supplementary duty?
NO
Turnover exceeds BDT 8 million?
YesNO
Turnover exceeds BDT 3 million?
YesNO
Yes
Voluntary or
temporary
registration maybe
obtained
VAT @ 15%
VAT Registration
VAT @ 3%
Turnover Tax
Enlistment
No VAT or Turnover Tax
No VAT Registration or
Enlistment
16
Document Classification: Highly Confidential
Defining Turnover for Registration/Enlistment
Turnover does not include for the purpose
of registration/enlistment threshold
Exempted
supply
Transfer of
capital asset
Value of sale of an
organization
Permanently closing down
an economic activity
17
Document Classification: Highly Confidential
VAT Registration under New Act
Distribution Center
Branches
Sales points
Factories
Central Registration
If maintains its records and accounts
independently and separately from the central unit
Central Registration
is Mandatory!Branch Registration is optional.
VAT Registration under Current Act
Central Registration
is Optional!
18
Document Classification: Highly Confidential
VAT Registration under New Act
A new VAT registration under the new Act will be
necessary
Registration
regulation is
already effective
Old registration will need to be converted into a
new VAT registration under the new Act
19
Document Classification: Highly Confidential
Advance Payment of VAT
through Current Account System is removed
Concept of VAT Payment –Current Account under Current Law
Advance Payment of VAT
through Current Account System
The balance of VAT Current Account (advance VAT
payment and input VAT) must be positive before
raising any sales invoice
20
Document Classification: Highly Confidential
Concept of VAT Payment –Through Return under New Act
Total payment through VAT Return
Goods can be sold
without depositing
VAT to Government
Treasury
21
Document Classification: Highly Confidential
Output VAT
Concept of VAT Payment –Through Return under New Act
New System of payment through Return
at a glance
Sales
Input VAT
Net payable:
Through Treasury Deposit
Or
Refund to be carried
forward
Less
Purchase/
Expenses
22
Document Classification: Highly Confidential
Types of VAT
Turnover Tax at 3%
on turnover.
Standard VAT at 15%
on each transaction.
• Input tax credit not allowed
• Advance tax can be adjusted
• Input tax credit is allowed
• Advance tax can be adjusted
Tariff VATTruncated VAT Trade VATPackage
VAT
CurrentNew
23
Document Classification: Highly Confidential
Types of Supplies
• Goods,
• Services,
• Immovable properties
• Any combination
• Taxable Supplies
• Zero rated Supplies
• Exempted Supplies
On the basis of
nature
On the basis of VAT
imposition
24
Document Classification: Highly Confidential
Imposition of VAT on Taxable Supplies
Taxable
ImportTaxable Supply
Goods
Services
Immovable Property
Imported Service
By a registered person
in Bangladesh through
economic activity
Services imported by
the registered person
Only
goods
25
Document Classification: Highly Confidential
Zero Rated Supplies
Zero Rated
Supplies
Supply of goods for export
Supply of zero-rated services
Supply of immovable
property relating to overseas land
26
Document Classification: Highly Confidential
Supply of goods for export also includes
Supply of goods for ocean – going
ship or aircraft
Supply of goods for temporarily
imported machinery
Purchase by tourists from listed
duty free goods seller
Deemed Export
27
Document Classification: Highly Confidential
Supply of zero-rated services
Supply of service to a recipient outside Bangladesh
Supply of service for ocean – going ship or aircraft
Provision of services for temporarily imported goods
Provision of physical services to any land or any goods which is situated in
outside Bangladesh
28
Document Classification: Highly Confidential
Exempted Supplies or Imports
Supply or import mentioned in First ScheduleBasic
Necessities
Immovable Property
Culture Intermediation
Special cases
AgricultureActivities of charitable
institutions
29
Document Classification: Highly Confidential
Exempted Supplies or Imports
Right or option to receive exempted supply
If a good or
service is both
exempted and
zero-rated, it will
be regarded as
zero rated.
e.g.
export of
medicine
30
Document Classification: Highly Confidential
VAT implication on sales of running business
Sale of running
business
Also includes
any segment
which can
operate
separately
Is not a
taxable
supply
31
Document Classification: Highly Confidential
Imported Service – VAT Mechanism
While the recipient will make the VAT payment, it is
termed as a Reverse VAT Charge
As per Current VAT Law As per New VAT Law
Service importer normally pays
VAT at the time of payment of
imported service
No Impact except cash flow!
Subsequently claims as Input
VAT via Current Account
through VAT Return
Service importer must show
Output VAT on the value of
service in the return
No Impact! Not even cash flow!
In the same Return the service
imported Input VAT Credit for
the value of imported services
32
Document Classification: Highly Confidential
Imported Service – VAT MechanismCurrent VAT Act
Value of Imported
Service
Normal Consideration paid
or to be paid is the value
of imported service
33
Document Classification: Highly Confidential
Imported Service – VAT MechanismNew Act
Value of Imported
Service
Normal Consideration paid
or to be paid is the value
of imported service
Fair Market Value if
service imported from a
related party
34
Document Classification: Highly Confidential
Imported Goods – VAT MechanismCurrent VAT Act
VAT @ 15%For Commercial
Importer
All taxable import
Advance Trade VAT
4%
•Can be adjusted if commercial
importers use Standard Rate of 15%
Output VAT on sales.
35
Document Classification: Highly Confidential
Imported Goods – VAT MechanismNew VAT Act
VAT @ 15%For supply of
taxable imports
•Registered or enlisted person can
adjust against VAT payable
•Non-registered or non-enlisted
person can claim refund
All taxable import
Advance VAT 3%Supply of
taxable
import?
36
Document Classification: Highly Confidential
Goods and Services – VAT Mechanism
Consideration
of Supply
inclusive of VAT
VAT as per Tax
Fraction
Value of
Taxable
Supply
Tax Rate /(100+Tax Rate)
Price
Declaration
is not
required
37
Document Classification: Highly Confidential
Goods and ServicesActual Consideration vs Fair Market Value
Fair ValueConsideration of
Supply inclusive of VAT
No consideration or lower
than fair value consideration?
NO
YES
YES
NO
YES
NO
Transaction between
associates/related party?
Can associate take full input
credit?
38
Document Classification: Highly Confidential
Goods and Services – VAT Mechanism
Current System for supply
without consideration
VAT on free goods is required to be paid
Declared price is considered value of supply
39
Document Classification: Highly Confidential
Goods and Services – VAT Mechanism
Free
goods
Buy 1
get 1
Bonus
Goods
New System for supply
without consideration
Value of taxable supply is zero i.e. no VAT
Supply as sample is limited to BDT 20,000
40
Document Classification: Highly Confidential
Clarity Given on Supply of Telco Products & Services
Telco Services
Service relating to transmission, emission, or
reception of signals
Projection of images, sounds, or similar
information by electromagnetic or electronic signaling
system
41
Document Classification: Highly Confidential
Clarity Given on Supply of Telco Products & Services
Telco Product
Phone card, prepay card, recharge card, or
prepayment for acquisition of telecommunications
goods
Airtime for telecommunications
services, including internet access time, or download
capacity
42
Document Classification: Highly Confidential
Clarity Given on Supply of Telco Products & Services
Telco Supplier
Other than intermediary (e.g. Telco operator –
GP, Robi, Banglalink, etc.)
Telco Intermediary
Person who acts as a distributor,
representative, VAT agent, or an intermediary
43
Document Classification: Highly Confidential
Clarity Given on Supply of Telco Products & Services
Taxable Supply
Supply by Telco supplier
Non Taxable Supply
Supply between two Telco suppliers
Sale by Telco intermediary
Distribution of prepaid Telco products by a Telco supplier or Telco intermediary
44
Document Classification: Highly Confidential
VAT determination for Certain Cases
Value of sale of residential building
50% of consideration
Others
50% of fair market value
Land Owner
First sale of residential premises is exempted
Subsequent sale after 2 years of first use is exempted
45
Document Classification: Highly Confidential
VAT determination for Certain Cases
Any excess amount paid to exercise the option, right or
vouchers is the value of taxable supply.
Option or right or vouchers
When settlement of debt is made by a creditor through a sale
of property of the debtor will be treated as a deemed supply of
the debtor.
1) The creditor is liable to pay VAT on the supply,
2) VAT should be deposited before any surplus money, if any,
may be returned to the debtor.
Sale of property to pay off debt
46
Document Classification: Highly Confidential
VAT determination for Certain Cases
Tax will be payable for any amount collected/ retained by the
supplier from its customer even though supply does not take
place or transaction is cancelled
Cancelled Transaction
Lay-by sales
Output Tax payable at the
time of installment
payments.
• Payment by at least more than
one installments
• Possession and ownership is
transferred after payment of
last installment
47
Document Classification: Highly Confidential
Supply by registered person of in-kind
benefit of service or immovable property
without consideration.
Specific Cases
In-kind Benefits to the employees
Supply by registered person of in-kind
benefit in lieu of cash to any of their
employees
Free
accommodation
?
Own vs
Other
Goods
48
Document Classification: Highly Confidential
Specific Cases
A supply consisting of the characteristics of a single
supply from an economic point of view shall not be
artificially split
Single and multiple supplies
If there are more then one element every supply shall
distinct and independent
49
Document Classification: Highly Confidential
Withholding Entities Current Law
Public Limited
Company
Government Entity
Financial
Institutions (Banks,
NBFI etc.)
Non-government
Organization
Post-secondary
educational institution
Establishment
registered with LTU
Private Limited
Company outside
LTU
Firms or
Institution
Withholding Entities New Law
50
Document Classification: Highly Confidential
Tax Withholding Mechanism
Is the recipient a
withholding entity?
Is a supply over BDT
10,000?
Is the Supplier a
withholding entity?
Is the supply exempted
or zero-rated?Withhold VAT
at up to 1/3 of
tax fraction
No withholding
obligationNo
No
Yes
Yes
No
Yes
Yes
No
A withholding entity
cannot transact with
an unregistered or
non-enlisted
supplier
51
Document Classification: Highly Confidential
Tax Withholding Mechanism
If my tender value is
BDT 30,000 and each
supply value is BDT 9k,
9k and 12k.
So withholding is on
12K or on the entire
tender value?
52
Document Classification: Highly Confidential
Amount of net payable tax
Net Tax payable
Output VAT
Input VAT Credit
Increasing Adjustments
Decreasing Adjustments
Supplementary duty
53
Document Classification: Highly Confidential
Eligibility of Input Tax Credit New Law
Input Tax Credit
Registered Person
Imports and taxable supply received as part of economic activity for taxable supply
Consideration for taxable supply is paid or is liable to be paid
54
Document Classification: Highly Confidential
Restriction on Input Tax Credit –Current VAT Act
Payment by cash
over BDT 100,000
Capital expenditure (e.g.
Building, infrastructure)
Exempted
supplies
No Input Tax Credit mainly on
Items not included in
price declaration
Output VAT under
truncated VAT
system
Restriction on Input Tax Credit –New VAT Act
55
Document Classification: Highly Confidential
Partial input tax credit in New Act
When part of the
consideration is paid or is
due to be paid
When full input VAT credit
cannot be claimable (e.g. total
supplies include exempt
supplies)
Input
VAT
Taxable
Supplies
All
Supplies
Input tax credit on the amount
of consideration paid or is due
to be paid
Then,
Input VAT is claimed
proportionately
56
Document Classification: Highly Confidential
Adjustments in New Act
Insurance
Withholding Tax
Excess VAT paid in
previous periodConsequences of
change in tax rate
Goods put to a private use
Interest, monetary penalty, fine,
fees, etc.
Second-hand goods
purchased for resale
Not making payments
through banking channel
57
Document Classification: Highly Confidential
Point of determining VAT liability on Taxable Supplies
Earliest of
When supply is made
When tax invoice is issued
When a part or the whole of the consideration is received.
General Supplies
58
Document Classification: Highly Confidential
Point of determining VAT liability on Taxable Supplies
Earliest of
Recipient makes payment to supplier
Supplier takes out coins, notes or tokens from Such machines
Vending Machines
Supply of any goods is made through a vending
machine, meter, or such similar automatic devices
that are operated by coins, note or tokens
59
Document Classification: Highly Confidential
Point of determining VAT liability on Taxable Supplies
Earliest of
When separate invoices are issued for each supply
When receivable consideration against each supply is received in part or in full
When the price against the series of supplies becomes payable
The first day of the tax period to which the payable consideration relates, if it is possible to ascertain the
payable amount at that time.
Progressive or periodic supply
Any supply where consideration is paid progressively
or periodically e.g. lease, hire of license, construction
or engineering activity.
60
Document Classification: Highly Confidential
Filling of Return
Return must be
filled by 15
days following
tax period
Revised Return
may be filled
May allow
extension
of 1 month
Commissioner
Interest of
2% per
month is
payable
61
Document Classification: Highly Confidential
Books and Record Current Law
Books and records in prescribed format or
own designed format
In prescribed forms or
format as per Rules
Own designed templates/format
keeping minimum prescribed
information for certain
documents
Books and records should be
maintained for 6 years.
62
Document Classification: Highly Confidential
Books and Record New Law
Books and records in prescribed format or
own designed format
In prescribed forms or
format as per Rules
Own designed templates/format
keeping minimum prescribed
information for all prescribed
books
Must contain all the
information in the
prescribed format
Books and records should
be maintained for 5 years.
Books, accounts and audit must be
maintained in accordance with BFRS.
63
Document Classification: Highly Confidential
Carry Forward of Negative VAT and Refund in New Act
General Persons
Is it less than BDT 50,000?
Decreasing adjustment for next 6
tax period
Is the Net Negative VAT payable
(i.e. refund) fully adjusted?
Can be adjusted for unlimited
period
Refund is available
NO
YES
Good for
new setups
No need
to go to
DEDO
NO
64
Document Classification: Highly Confidential
Carry Forward of Negative VAT and Refund in New Act
Special Rules for
Building and Construction Company
Excess paid tax can carried
forward for unlimited time period
Decreasing adjustment
in the next tax period
No cash refund
is allowed.
65
Document Classification: Highly Confidential
Appeals and Revisions
Appeal Time Limit Deposit money Disposal of Appeal
Appeal to
Commissioner
90 days from the
date of order issued
10% of tax specified or
penalty imposed
Within 1 year
Appeal to Appellate
Tribunal
90 days from the
date of order issued
10% of tax specified or
penalty imposed
Within 2 years
Revision by High
Court Division
10% of tax specified or
penalty imposed
Any interim order of the Appellate Tribunal staying collection of
tax shall cease to have effect on the day after the expiry of a
period of 6 (six) months following the day on which it was
passed unless the case is finally decided, or the interim order is
withdrawn by the tribunal earlier.
66
Document Classification: Highly Confidential
Transition Period
What about existing Advance VAT paid
up to time of enforcement of VAT Act?
Unadjusted Advance VAT can be adjusted in new
VAT Act as “decreasing adjustment”
Up to 10% of net
VAT payable in
each tax period
Certificate
issued by
Commissioner
67
Document Classification: Highly Confidential
Transition Period
Unadjusted Advance VAT cannot be
adjusted in following cases:
Cannot Adjust if
If he is not registered under new Act
If there remains any undisposed case pending against him under the VAT Act 1991
If any arrear tax remains unrealized with him under the VAT Act 1991
If any appeal or writ remains pending against him under the VAT Act 1991
68
Document Classification: Highly Confidential
Transition Period
Judgment remains for consistency of
existing SRO with new VAT Act.
All rules, orders, SROs, notifications, and notices
issued under VAT Act 1991 will continue in force as
far as they are consistent with the provisions VAT
Act 2012
69
Document Classification: Highly Confidential
Thank youMehedi HasanPartner
© 2017 Rahman Rahman Huq, a partnership firm registered in Bangladesh,
and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a
Swiss entity. All rights reserved.