In Bangladesh, every business entity must file taxes. More than a responsibility, it’s a legal requirement. Neglecting or failing to pay it duly only extends the due amount by adding fines, interest, and bans on licenses, necessitating renewals. During the filing of a tax return, businesses need to submit estimations and appraisals of their annual transactions, after having them calculated and audited by certified professionals.
The process is quite bendy and often leads to mistakes, followed by rejections and penalties. Only by being aware of common business tax filing mistakes in Bangladesh, such conditions can be avoided.
Understanding Business Tax Filing in Bangladesh
Paying tax has been made compulsory by the government and is dictated by the Income Tax Ordinance, 2023, and the VAT & SD Act, 2012. According to these acts, all businesses must share a specified percentage of their revenues as income tax. After stepping over the eligibility threshold, they must also return VAT on goods and services.
To carry out successful business tax filing Bangladesh, corporate bodies must go through a checklist of responsibilities. Most of which entail pre-requisites, analysis, submission procedures, deadlines, and legal compliance. Errors, rejections, and consequent penalties are frequent occurrences.
Top 10 Common Business Tax Filing Mistakes in Bangladesh
Common tax errors in Bangladesh are those that businesses commit frequently by chance and willingly out of ill intent. Learning about them, taking steps, and growing habits to avoid them are also parts of tax return best practices. So, let’s get a hold of these mistakes first:
Lacking TAX Knowledge
It’s simple and reasonable. Without having a good grasp of the TAX regulations and boundaries, misstepping is just a matter of time. In 2024, the tax return rate among TIN holders was 30.4%. The NBR marked people’s lack of awareness and the fear triggered by it as the primary reasons.
A large portion of taxpayers live totally in the dark regarding the tax filing process, how much they are meant to pay, and under what terms, eventually falling into the loop of refilings, resubmissions, and forwarded fines. The most common factors playing behind such scenarios are:
- Not having a professional tax advisor
- Not keeping updates of regulatory changes in the tax field
- Attempting to stay out of the complex process
- Fearing audits and compliance checks
- Playing blind to the following consequences
Untimely or No VAT Registration
Value Added Tax (VAT) is an obligatory tax payable for businesses with an annual turnover of BDT 3 crores or more. Sellers of VAT-applicable services or goods are also obligated to pay it. VAT is supposed to be paid monthly and follows a separate registration process, called Business Identification Number (BIN) registration. Guided by different motives, Bangladeshi businesses tend to skip or neglect signing up for it. Most notable are:
- Keeping a low profile in order to make more money
- Getting regulatory bodies away from looking into their transactions
- Not having an organized record maintenance system
- Not knowing how to register online
Misclassifying Goods
Describing a product by attaching it to the wrong VAT rate, including it under the wrong tax category, or tagging it to a false HS code are recurring VAT filing mistakes in Bangladesh. Particularly for businesses dealing in large shipments or with a broad range of product categories. Deliberate or careless, inaccurate tagging in tax documents not only makes your business look suspicious but also invokes penalties. It may also add to production costs. Such blunders can happen due to:
- Inability to distinguish between exempt, standard-rated, and zero-rated
- Misreading the tariff schedules and the local VAT system
- Trying to evade supplementary and customs duties
- Not knowing how HS codes work
Using the Business Account for Personal Causes
Tax estimating and reporting are the two hardest parts of tax filing. It only becomes ten times more complicated if you mix up personal and business expenses by using the same bank account. It raises chances for miscalculations, missing deduction opportunities, withholding tax noncompliance, and distorted reports. You can commit the same mistake:
- If you don’t understand the independent liability model of registered businesses
- By paying personal expenses, like shopping and buying groceries, with the business bank account
- With the intention of showing personal payouts as business expenses, which is a legally forbidden and punishable act
Missing Deadlines
Tax, in the context of its many types, like income tax, VAT, SD, and TDS, varies by schedules and deadlines. It’s strongly advised by governing acts that businesses must clear their applied duties before the due dates specified in the acts. Delays and negligence will only create pain and fine-inflicting intricacies. Typical reasons behind missing deadlines are:
- Being careless and not checking different tax schedules
- Failing to prepare essential documents in time
- Being apathetic to seeking professional help
Submitting Incomplete or Vague Records
Tax documentation errors are as disastrous as non-submissions. Misleading documentation, transactions not backed by invoices or memos, and overgeneralized narrations of activities are nothing but a reflection of your unwillingness to comply. Such gestures will be censured strictly and lead to legal complications. Here is why businesses often fail to prepare proper documents:
- Attempting preparations with little knowledge about the requirements
- Preparing under a tight schedule with the cut-off date near at hand
- Managing the documents and filings with untrained staff
- Intending to conceal ill practices
Keeping Shallow Records
To be thorough with your tax filing, you must provide every record of transactions, as per the NBR guidelines. The documents, including invoices, receipts, or any other forms of payment proof, will be meticulously audited. Many businesses, when explaining their purposes and activities, are found with paperwork jumbled with badly and vaguely articulated statements. They also come short in the proofs for their purchases and sales. Such happens because:
- Administrative ineptitude in storing short and loose papers
- Not having an organized and trackable product indexing system
- An inclination to fill the gaps later with fake receipts
- Not using a digital pos system, instead relying on manual input
Being Unaware of the Deductions
Deductions are the NBR allowable business expenses Bangladesh that you can subtract from your total revenue to determine the actual taxable amount. For example, employee salaries, bills on rent and utilities, and such. There are also deduction criteria, like input VAT and withholding tax, that businesses often overlook and therefore overpay. Here are the reasons:
- Lack of or vague understanding of permitted deduction criteria
- Misunderstanding of the deduction concept
- Relying solely on the government’s tax appraisal system
Overlooking Software Regulations
Using unapproved software to format and evaluate tax counts can create ambiguity. Reports made with such software face rejection due to their irregular layout, categorization, and formula models. In most cases, these reports fail to record all the crucial entries regarding sales, purchases, productions, and distributions that are required for an immaculate tax filing. Common causes include:
- Unprofessional attitude towards buying or adapting to approved software
- Lack of training or resources for learning how to use new software
- Not following legal guidance on the usage of digital reporting media
Not Hiring a Chartered Accountant
Chartered accountants (CA) are licensed professionals who specialize in all types of tax law and their procedures and requirements. They can save time and effort by taking care of every step, from auditing to submissions, of a tax filing. Still, businesses, mostly small to medium-sized and occasionally large enterprises, don’t consider hiring one. Because:
- CA services come at a price, which is looked at as an extra cost
- Unwillingness to disclose critical business information to an outsider
- No legal requirement for an audit report submission
Penalties and Consequences of Tax Filing Errors in Bangladesh
Mistakes made during the filing of taxes fall under punishable acts. They inflict similar consequences to any other tax non-compliance penalties. The NBR describes all chargeable fines and other types of punishments in the associated tax acts:
Late Submissions: Basically BDT 5,000 to BDT 50,000. Additionally, 10% of the total tax amount and a 2% monthly interest.
Fraudulent and False Return: For anyone trying to pay less by falsely representing the revenue amount, the full amount they are hiding will be included in the filing, with a fine of 50% of that amount.
No VAT Registration: Businesses, if found by the NBR to be running without VAT registration, will pay a penalty of BDT 10,000 to 100,000.
Late VAT Filing: In addition to a basic fine of BDT 10000, businesses that fail to submit their VAT returns on time have to pay an additional BDT 100 per day after the due date and 2% of the VAT amount per month.
Tax Filing Checklist for Bangladeshi Businesses
By strictly following the tax return checklist Bangladesh businesses can easily make their way around errors. As the filing processes for all types of taxes vary in paperwork and requirements, they create separate groups of checklists. Here is a detailed overview of each of the groups:
Checklist for Income Tax Filing
A comprehensive checklist to cover your tax filing includes all documents and obligations that you should prepare and abide by for an acceptable submission. Key elements are:
Required Submittals
- National Identification Number (NID)
- Proof of the registered address; It can be utility bills or the business address registration certification
- Documents essential to provide as income statements:
- Loss and profit entries, bank statements, and balance sheets
- Salary slips and Form No 16
- Slips, receipts, and memoirs for every type of income, including contributions, investments, and real estate
- Certificates for withholding taxes to claim deductions
- Proof of previous tax clearance
- Proof of investments allowed for a rebate claim
- Lists of all the properties and assets owned by the business
Due Date
Businesses must appeal for a filing before the 15th of the 7th month after the end of the income year
Checklist for VAT Filing
VAT filing checklists are easier to follow both in paperwork and due date. Here are the details:
Required Submittals
- Mushak forms covering invoice, vouchers, debit and credit notes, business identification number (BIN), and declaration for coefficient distribution
- Detailed sales and purchase entries with demonstrative invoices and vouchers
Due Date
Businesses should submit VAT returns or claim input VAT within the first 15 days of each month.
How to Avoid Tax Filing Mistakes: Pro Tips for Business Owners
Tax penalties can really cut deep into your bank account. The best is to avoid mistakes from happening at all. Here are practical steps Bangladeshi businesses can take:
Register Properly: Get the TIN (Taxpayer Identification Number) and BIN (Business Identification Number) for your business from the NBR portal.
Maintain Detailed Records: Keep detailed records of income, expenses, invoices, payroll, VAT challans, and all Mushak forms. Always keep them audit-ready.
File on Time: Find some ways to get notified when any TAX due date draws next to the door. Set a mobile reminder or ask your PA for an early warning.
Use NBR-Approved Software: For VAT and invoicing, always use software approved by the National Board of Revenue to avoid compliance violations.
Apply Correct VAT Rates: Understand and correctly apply VAT classifications, which are standard, zero-rated, reduced, and exempt. Mistakes in VAT rate application are common and costly.
Consult Tax Professionals: Hiring a chartered accountant or tax consultant kills chances of complex errors and ensures your filings align with the latest regulations.
How Bangladesh Consultant Helps Avoid Tax Filing Mistakes for Business
Bangladesh Consultant has earned a place as a trustworthy business law partner and consult service. Our expert lawyers are all professionals, have a reputable presence in their respective fields, and are the best players in their games. If you don’t know how to file taxes in Bangladesh or want transparent and complete filing, we can help. We ensure:
- Deadlines are met, and filings are precise
- All the entries and documents are checked and accurate
- Total compliance with the Bangladesh NBR tax filing guide
- Finding reduction chances and claiming them
- Audits by certified legal professionals
- Immaculate calculations of all the amounts, including fines and penalties
Conclusion
Getting into complications while complying with the rules is not uncommon for businesses. Often, due to out of awareness and carelessness, businesses fail to prepare a filing that raises questions and appears unacceptable.
Most frequently, they forget deadlines, fail to collect and store essential documents, misrepresent, and miscalculate the tax amount, and don’t bother hiring a professional. Knowing about the typical mistakes that lead businesses to penalties can help them avoid mishappenings. But the best measure to take is to consult a legal advisor, like Bangladesh Consultant, who has in-depth experience in corporate tax planning in Bangladesh.
FAQs
What is the penalty for late tax filing in Bangladesh?
A fixed penalty of BDT 5,000 to 50,000, plus 10% of the total tax amount and 2% monthly interest on the unpaid amount.
Can I revise a filed tax return in Bangladesh?
Yes, an income tax return business BD can be revised within 6 months from the original filing date under Section 78 of the Income Tax Ordinance.
What documents are required for business tax filing?
TIN, trade license, audited financial statements, bank statements, VAT returns, salary and expense records, Mushak forms, and proof of tax payments.
How often should a business file VAT returns in Bangladesh?
Monthly. VAT returns (Mushak 9.1) must be submitted by the 15th of the following month.
Does NBR allow online tax return submission?
Yes, NBR offers an online e-return submission system through the eReturn portal.
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