There’s no doubt that we live in a world of advertising. It’s everywhere we look; from the TV commercials we see to the banner ads that pop up when we’re browsing the internet. In Bangladesh advertiser have to bear Tax & VAT on Advertising.
Here the question is What is Advertisement? Why are advertisements important? What are the types of advertisement? Does Tax & VAT charge on advertising? Who are withholding authority to deduct VAT & Tax on advertisement bill? What is the VAT & Tax rate for Advertisement Bill? How to calculate Tax & VAT on Advertisement Bill? what will do if payee fails to submit proof of submission of return at the time of making the payment?
I will help you answer all these question in this post. You’ll get a practical insight on how to calculate Tax & VAT on Advertisement Bill. Just follow & practice for error free calculation. Let’s start.
What is Advertisement?
An advertisement is a message designed to promote a product, service, or idea.
Why are advertisements important?
Advertising is important because it allows companies to promote their products and services to potential customers. This can help to increase sales and profits, as well as awareness of the company and its products.
What are the types of advertisement?
There are many types of advertisement, including print ads, direct mail ads, television ads, radio ads, podcast ads, mobile ads, social media ads, paid search ads, native ads, display ads, outdoor ads, guerrilla ads, product placement ads, public service ads, online ads, Banner ads, Interstitial ads, Native ads, Video ads, Playable ads etc.
Does Tax & Vat charge on advertising?
In Bangladesh, Tax & VAT are integral part of advertising bill. It is one of the main revenue sources of government revenue. Every advertisement bill is subject to VAT & Tax applicable on any platform.
VAT charge on Advertising
Service Code: S007.00
Advertising Agency means any person, institution or organization engaged in the preparation of advertisements of any name or type on a commercial basis or in any manner prepared for the purpose of promoting or assisting in the promotion of any product or service; and If any person, institution or organization’s website or online edition of a newspaper, periodical, magazine, etc. advertises, it will also be included in the advertising agency.
Service Code: S054.00
Advertiser through satellite channel means any producer or service provider who prepares and arranges for advertisement for the purpose of marketing or promotion of any product or service produced in his company, through a national or international satellite channel installed in space or in exchange of money.
Tax charge on Advertisement
Income Tax Ordinance 1984, Section 53K
Tax charge on Advertisement of newspaper or magazine or private television channel or [private radio station or any web site [or any person on account of advertisement or] purchasing airtime of private television channel or radio station or such web site].
Income Tax Ordinance 1984, Section 52AA
Media buying agency service
Who are withholding authority to deduct VAT & Tax on advertisement bill?
VAT Reference:
S.R.O No.240-AIN/2021/163-VAT rule 2 of sub-rule (1)(b)
Withholding authority are Any Government or any Ministry thereof, department or office, any semi-public or autonomous body, State-owned enterprises, local authorities, council or any similar body, non-governmental organizations approved by the Bureau of NGO Affairs or Department of Social Services, Any bank insurance company or similar financial institution, Secondary or higher education institutions and a limited company;
Tax Reference:
Income Tax Ordinance 1984, Section 53K
Withholding authority are The Government or any authority, corporation or body including its units, the activities or the principal activities of which are authorized by any Act, Ordinance, Order or any other Instrument having the force of law in Bangladesh or any company as defined in clause (20) of section (2) or any banking company or any insurance company or any co-operative bank established by or under any law for the time being in force or any non-government organization registered with NGO Affairs Bureau or any university or medical college or dental college or engineering college responsible for making any payment.
Income Tax Ordinance 1984, Section 52AA
Withholding authority are Specified person as mention in section 52
What is the VAT & Tax rate for Advertisement Bill?
| VAT | Rate | Tax | Rate |
| Service Code: S007.00 Advertising Firm | 15% | Section 53K Advertisement of newspaper or magazine or private television channel etc. | 4% |
| Service Code: S054.00 Advertiser through satellite channel | 15% | Section 52AA Media buying agency service (a) on Commission or fee — (b) on gross bill amount— | 10% 0.65% |
How to calculate Tax & VAT on Advertisement Bill?
Bill No. 01– “Advertisement of Newspaper”, “Magazine”, “Private Television Channel”, “Private Radio Station”
Bill Amount = 200,000
Term: Tax & VAT as per Government Policy
Calculation process
Step-1 Calculate VAT Amount.
Bill Amount = tk. 200,000
VAT = 200,000 x 15/115 = tk. 26,087.
So, you must deduct VAT tk. 26087.
If Form Musak-6.3 “VAT Challan” certified by the Revenue Officer is provided with bill, VAT shall not be deducted at source
Step-2 Calculate Base Value.
Base Value = Bill Amount – Value Added Tax
= 200,000 – 26,087
= tk. 173,913
Step-3 Calculate Tax Amount from Base Value.
Tax Amount = Base value x Rate of Tax
= 173,913 x 4%
= 6957
Step-4 Calculate Payment Amount.
Payment = Base Value – Tax
= 173,913– 6957
= tk. 166,956
Total payment amount from this bill tk. 166,956 after deducting TDS & VDS.
[N.B- It is assumed that Form Musak-6.3 “VAT Challan” not certified by the Revenue Officer.]
Bill No. 02 “Advertisement of Newspaper”, “Magazine”, “Private Television Channel”, “Private Radio Station”
Bill Amount = 200,000
Term: Tax & VAT Excluded
Calculation process
Step-1 Calculate Tax Amount.
We Tax & VAT Excluded means Bill Amount = Payment Amount
Bill Amount = tk. 200,000
Tax = Payment Amount x Tax Rate/ (100-Tax Rate)
200,000 x 4/(100-4) = tk. 8,333.
So, you must deduct Tax tk. 8,333.
Step-2 Calculate Base Value.
Base Value = Payment Amount + Tax
= 200,000 + 8,333
= tk. 208,333
Step-3 Calculate VAT Amount from Base Value.
VAT Amount = Base value x Rate of VAT
= 208,333x 15%
= 31,250
Step-4 Calculate Actual Bill Amount.
Actual Bill Amount = Base Value + VAT
= 208,333 + 31,250
= tk. 239,583
Here Actual Bill Amount tk. 239,583 Total payment amount from this bill tk. 200,000 after deducting TDS & VDS.
Bill No. 03 “RICO Advertising Agency Ltd.”
Bill Amount = 200,000
Term: Tax & VAT as per Government Policy
Calculation process
Step-1 Calculate VAT Amount.
Bill Amount = tk. 200,000
VAT = 200,000 x 15/115 = tk. 26,087.
So, you must deduct VAT tk. 26087.
Step-2 Calculate Base Value.
Base Value = Bill Amount – Value Added Tax
= 200,000 – 26,087
= tk. 173,913
Step-3 Calculate Tax Amount from Base Value.
Tax Amount = Base value x Rate of Tax
= 173,913 x 0.65%
= 1,130
Step-4 Calculate Payment Amount.
Payment = Base Value – Tax
= 173,913 –1,130
= tk. 172,783
Total payment amount from this bill tk. 172,783 after deducting TDS & VDS.
Bill No. 04 “RICO Advertising Agency Ltd.”
Calculation process
Step-1 Calculate VAT Amount.
Bill Amount = tk. 2,800,000
VAT = 2,800,000 x 15/115 = tk. 365,217.
So, you must deduct VAT tk. 365,217.
Step-2 Calculate Base Value.
Base Value = Bill Amount – Value Added Tax
= 2,800,000 – 365,217
= tk. 2,434,783
Step-3 Calculate Tax Amount from Base Value.
As per Section-52AA
The amount for services mentioned in SL No. 4 of the Table shows both commission or fee and gross bill amount tax shall be the higher amount between (i) and (ii) where–
(i) tax calculated on commission or fee applying the relevant rate in the table; and
(ii) B x C x D, where–
B = Gross bill amount
C = 2.5% for SL. 4, and
D = rate of tax applicable on commission or fee:
Tax on Bill Amount = B x C x D
= Base value x 2.5% x Rate of Tax applicable on commission or fee
= 2,434,783 x 2.5% x 10%
= 6087
Tax on Commission Amount = Commission x Rate of Tax
= 100,000 x 10%
= 10,000
[N:B] Tax shall be the higher amount between Tax on Bill Amount & Tax on Commission Amount.
Here the tax amount is tk.10,000
Step-4 Calculate Payment Amount.
Payment = Base Value – Tax
= 2,434,783 – 10,000
= tk. 2,424,783
Total payment amount from this bill tk. 2,424,783 after deducting TDS & VDS.
what will do if payee fails to submit proof of submission of return at the time of making the payment?
- The rate of tax shall be fifty percent (50%) higher if the payee fails to submit proof of submission of return at the time of making the payment;
- The rate of tax shall be fifty percent (50%) higher if the payee does not receive payment by bank transfer;
If you face any problem to calculate Tax & VAT, Share it with us in the comments!
