How VAT works in Bangladesh
VAT in Bangladesh is administered by the National Board of Revenue (NBR) under the VAT and Supplementary Duty Act 2012 (effective from 2019). The standard rate is 15%, but unlike most countries, Bangladesh applies a wide range of sector-specific reduced rates (typically 2%, 5%, 7.5%, or 10%) for many service categories — established under the Third Schedule of the Act and updated annually through SROs (Statutory Regulatory Orders).
The most recent comprehensive update came in SRO No. 182-Law/2025/310-VAT, dated 27 May 2025, covering all 44 specified services where VDS (VAT Deduction at Source) is mandatory.
Three things make Bangladesh VAT distinctive:
- Sector-specific reduced rates — Many services have legally-reduced rates below 15%. The calculator above lets you pick your sector to find the right one.
- Turnover tax option for small businesses — Businesses with annual turnover between Tk 30 lakh and Tk 50 lakh pay 4% turnover tax instead of full VAT. This is simpler for small businesses with relatively few input expenses.
- VDS (VAT Deduction at Source) — Specified entities (government bodies, banks, large companies, NGOs, educational institutions above secondary level) must deduct the applicable VAT when paying for services and remit it directly to NBR — similar to TDS for income tax.
Do I need to register for VAT in Bangladesh?
Bangladesh has three turnover-based categories for VAT status (FY 2025-26):
| Category | Annual Turnover | Tax Type |
|---|---|---|
| Exempt | Below Tk 30 lakh | No VAT / no turnover tax |
| Enlistment | Tk 30 lakh – Tk 50 lakh | 4% turnover tax |
| Registration | Above Tk 50 lakh | Full 15% VAT (or applicable sector rate) |
Important note for specific business types: Certain businesses must register for a Business Identification Number (BIN) immediately, regardless of annual turnover:
- Importers and exporters
- Businesses operating in city corporation areas
- Specific sectors including hotels, consultancy, manpower supply, and others listed in the VAT Act
If you fall into any of the above categories, you cannot use the turnover-tax route — full VAT registration is required from day one.
You register through NBR's online portal. Once registered, you receive a Business Identification Number (BIN) and must issue Mushak-6.3 invoices for taxable supplies.
Common sector-specific VAT rates (FY 2025-26)
The table below shows commonly-applied sector rates from SRO No. 182-Law/2025/310-VAT. This is not exhaustive — there are 44+ specified services and many goods with reduced rates. Consult NBR or a qualified accountant for your specific situation.
Reduced rates (below 15%)
| Sector | Rate |
|---|---|
| Land development | 2% |
| Building construction (1-1,600 sqft) | 2% |
| Building construction (1,601+ sqft) | 4.5% |
| IT-enabled services (ITES) | 5% |
| Internet service providers | 5% |
| Restaurants (general) | 5% |
| Goldsmiths and jewellery shops | 5% |
| English medium schools | 5% |
| Ride-sharing services | 5% |
| Electricity distribution | 5% |
| Online retail goods sales | 5% |
| Furniture sellers (showroom) | 7.5% |
| Picnic spots and tourist sites | 7.5% |
| Ready-made garments (marketing) | 7.5% |
| Hotels (non-AC) | 10% |
| Restaurants (non-AC) | 10% |
| Motor garages and workshops | 10% |
| Construction firms (services) | 10% |
| Procurement providers | 10% |
| Social and sporting clubs | 10% |
Standard rate (15%)
Most other services and goods, including:
- AC hotels and restaurants
- Decorators and caterers
- Advertising agencies
- Printing presses
- Courier and express mail
- Audit and accounting firms
- Legal advisors
- Engineering firms
- Architecture and interior design
- Event management
- Manpower supply
- Consultancy services
- Online retail goods
- Auction firms
- Indenting organizations
- Freight forwarders
- Community centers
- Survey agencies
- Plant and machinery rental
- Repair and servicing
- Security services
- Rent-a-car services
- Sound and lighting equipment rent
- Telecom and broadcasting services
- Most imported goods (plus Supplementary Duty where applicable)
Frequently asked questions
Do freelancers in Bangladesh need to charge VAT to foreign clients?⌄
Generally, services exported (provided to clients outside Bangladesh and paid for in foreign currency through the official banking channel) are zero-rated for VAT purposes. However, you may still need to register for VAT if your turnover exceeds the threshold, even if you charge 0% on exported services. If you earn from Upwork, Fiverr, or direct foreign clients and your annual turnover crosses Tk 50 lakh, full VAT registration is mandatory. Consult an accountant for your specific situation.
What's the difference between VAT and Supplementary Duty?⌄
VAT is the consumption tax applied broadly across goods and services. Supplementary Duty (SD) is an additional tax on specific items the government wants to discourage or treat as luxury — tobacco, alcohol, sugary drinks, and most notably vehicles. SD rates can be very high (30-250%+ on cars). Both can apply to the same product, with SD usually applied first, then VAT calculated on the SD-inclusive price.
My sector isn't listed in the calculator. What do I do?⌄
Use the "Other / Custom rate" option and enter your applicable rate. For confirmation, check NBR's official SRO documents, the Third Schedule of the VAT & SD Act 2012, or consult a qualified accountant. The full SRO 182/2025 is available through NBR's VAT publications section.
What is VDS (VAT Deduction at Source)?⌄
VDS is similar to TDS for income tax — certain entities (government, banks, large companies, NGOs, educational institutions above secondary level) must deduct the applicable VAT when paying for services and remit it directly to NBR. If you provide services to such entities, they'll deduct VAT from your invoice and you'll receive the net amount along with a deduction certificate. You should still issue a proper Mushak-6.3 invoice showing the full VAT.
Should I choose 4% turnover tax or full VAT registration?⌄
If your annual turnover is between Tk 30 lakh and Tk 50 lakh, the 4% turnover tax (enlistment) route applies — but only if you don't fall into a category that requires immediate full VAT registration (importers, exporters, hotels, consultancies, businesses in city corporations, etc.). Turnover tax is simpler — flat 4% on revenue, no need to track input VAT, simpler returns. Full VAT registration lets you reclaim input VAT on business expenses, which can save money if you have significant taxable purchases. If you're a service business with low purchases (like a freelancer or consultant), turnover tax is usually simpler. If you're a trading business with significant inventory purchases, full VAT registration may save more — compare both before deciding.
This calculator shows 15% for cars — what's the actual tax on a car in Bangladesh?⌄
Cars and vehicles attract VAT (15%), Supplementary Duty (30% to 250%+ depending on engine size and vehicle type), customs duty (for imports), AIT, and other charges. The total tax on an imported sedan can easily exceed 200% of the import price. This calculator only shows VAT — it cannot estimate full vehicle tax. Consult NBR, a customs clearing agent, or a qualified accountant for actual vehicle tax calculations.
Source: NBR (National Board of Revenue)
Reference: SRO No. 182-Law/2025/310-VAT, dated 27 May 2025
Last verified: May 2026