Tax & VAT are key legal obligations in Bangladesh—tax is a direct charge on income, while VAT is an indirect tax on goods and services. Understanding both helps individuals and businesses stay compliant and avoid legal penalties.
For expert guidance on Tax & VAT , contact Rashels Law Desk today.
What Is Tax & VAT?
Tax in Bangladesh is a mandatory payment imposed by the government on individuals and businesses to fund public services and infrastructure. It includes income tax, corporate tax, customs duties, and other statutory levies. Wikipedia
Value Added Tax (VAT) is a type of indirect tax applied on the value added at each stage of production, import, distribution, and sale of goods or services. It’s paid ultimately by the end consumer while businesses act as collectors on behalf of the government. National Board of Revenue
VAT vs Tax: All VAT is a tax, but not all taxes are VAT — income tax is direct, while VAT is indirect. We break down the difference below.
VAT in Bangladesh — Key Legal Facts
What Is VAT?
VAT is an indirect consumption tax on goods and services.
The standard VAT rate in Bangladesh is 15% on imports and local supplies unless exempt or zero-rated.
VAT is governed under the VAT and Supplementary Duty Act, 2012 and administered by the National Board of Revenue (NBR)
How VAT Is Calculated
VAT is generally included in the sale price of a product or service:
Example (simplified legal approach):
Price with VAT = Taka 1,500
VAT portion = 1,500 × 15% / 115 = VAT amount
Net sale value subject to VAT credit is calculated using the input/output mechanism.
Who Pays VAT
VAT is ultimately borne by the final consumer.
Businesses registered under NBR collect and remit VAT.
Where to Confirm Rates
For official rates and schedules, refer to the National Board of Revenue (NBR) information: nbr.gov.bd — Bangladesh’s government authority on VAT.
Income Tax in Bangladesh
What Is Income Tax?
Income tax is a direct tax charged on the income of individuals and companies.
Key Legal Updates for 2025–26
Bangladesh has updated income tax slabs effective FY 2025–26 with progressive rates and a higher tax-free threshold — see details in our internal guide: Bangladesh Income Tax 2025-2026
VAT vs Income Tax — Core Differences
| Aspect | VAT | Income Tax |
|---|---|---|
| Type | Indirect Tax | Direct Tax |
| Who Ultimately Pays | Consumer | Individual / Company |
| Legal Basis | VAT & SD Act, 2012 | Income Tax legislation & Finance Acts |
| Basis of Charge | Consumption of goods & services | Income or profit earned |
✔ VAT is about consumption — legally passed onto consumers.
✔ Income Tax is based on income earned by persons or entities.
How to Calculate Tax & VAT
VAT Calculation (Simplified)
If the posted price is VAT-inclusive at 15%, to extract VAT:
VAT = Gross Price × (15/115)
(Standard legal method under NBR guidelines).
Income Tax (General Legal Concept)
Income tax is calculated on net taxable income after allowances and deductions per NBR rules.
Slab-wise progressive percentages apply according to the latest assessment year.
Who Is Required to Pay Tax & VAT in Bangladesh
Individuals earning taxable income (salary, business, or profession)
Companies and partnerships operating in Bangladesh
Businesses supplying VAT-able goods or services above the legal threshold
Importers and manufacturers registered under NBR
Anyone falling under these categories must comply with Tax & VAT laws as prescribed by the National Board of Revenue (NBR).
Penalties for Non-Compliance Under Tax & VAT Law
Late filing or non-filing of VAT or Tax returns may result in fines and interest
Failure to register for VAT when required can lead to monetary penalties
Incorrect or false declarations may attract additional tax, penalties, or legal action
Non-payment of due t VAT or tax can cause recovery proceedings by NBR
Compliance with VAT & tax laws is essential to avoid legal and financial consequences in Bangladesh.
How Rashel’s Law Desk Helps You
At Rashel’s Law Desk, we provide legal compliance and advisory services to individuals and businesses on:
VAT registration and compliance (NBR filing, VAT returns)
Income tax planning & return filing
Dispute resolution with tax authorities
Interpretation of VAT & tax law amendments
Business structuring to optimize tax outcomes
Our tax law experts ensure you meet all statutory duties under Bangladesh tax law while maximizing legal efficiency.
Frequently Asked Questions (FAQ)
Not necessarily. Businesses over the NBR-specified threshold must register and file VAT returns per law.
No. VAT is charged at each stage of value addition with input credit, whereas sales tax (where applicable) may be single-stage. Legal regimes differ.
Yes. Export of goods and some services may qualify for zero-rated VAT under the law.
Official VAT and income tax rates are published on the National Board of Revenue (NBR) portal.
For Consultation
Need expert legal advice on VAT & Tax compliance or disputes in Bangladesh?
Contact Rashel’s Law Desk — our tax law team will guide you with tailored legal strategies.
