Income Tax

1. What tax rate will apply to my company?

2. What are the tax benefits / special tax incentive am I

eligible for? Can I, as a shareholder/director, avail the
same tax benefit?

3. Are there any special tax benefits available to

founders investing into the company?

4. Do I need any registrations to qualify for tax

incentives? Is there any other requirement?

5. Can I take remuneration or other payment from my

company for my services? If yes, will such payment
be taxed? Will such payment be taxed, even though
the company is eligible for tax benefits/exemption?

6. How tax are calculated?

7. Is there any restriction for expenditure?

8. When do I need to pay through bank transfer or

cheque?

9. Can I set off tax losses? Can I carry them forward?

10. When am I required to deduct tax at source (TDS)?

What are the rates of deduction? When do I deposit
TDS in favour of the authority? Do I need to submit
any other information in respect of TDS?

11. Who would deduct tax source from my receivables?

Is there any exemption available against such TDS? If
so, what are the documentary requirements?
 12. Can I claim credit against TDS? What are the
documentary evidence I would require to claim credit
against TDS?

13. What are the tax returns/statements I should file

each year, and what are the timing for such
return/statement filing?

14. When do I need to pay tax to the authority?

15. Is it possible to take refund of the extra tax paid?

16. What are tax and/or and stamp duties obligation if

shares are transferred?

B. Value Added Tax (VAT)

1. Do I need a VAT or turnover registration?

2. Is the goods or services I am supplying, exempted?

3. What is the applicable VAT rate?

4. What are my VAT obligations as a supplier?

5. What is the method of payment of VAT?

6. At what stages should VAT be paid?

7. If the service I am providing is Vat able, what is the

rate?

8. What are my VAT obligations as a buyer?

9. When should I deduct VAT at source?

10. If I have an obligation to deduct VAT at source, what
are my obligations after deduction?

11. What will be the penalty for failure to deduct VAT?

12. What are my obligations to pay VAT if I am

obtaining services from abroad (e.g. Facebook,
Google)?

13. What are the documentations I need to maintain for

VAT rebate and adjustments?
How To Calculate Tax & VAT
On Professional Service.
February 11, 2023 by fm_skill_sharing
Spread the love
“Professional services, such as consulting, engineering, legal advisor,
architect, interior designer or accounting, are subject to Tax & Value
Added Tax (VAT) in many countries. If you provide professional
services, it’s important to understand how VAT & Tax works and how to
calculate it accurately on your invoices. In this guide, we’ll walk you
through the process of calculating Tax & VAT on professional services,
including the steps for determining your Tax & VAT rate and the
appropriate Tax & VAT treatment for your services.”

Here the question is What is Professional Service? Does Tax &

VAT charge on Professional Service? Who are withholding
authority to deduct VAT & Tax on Professional Service? What is
the VAT & Tax rate for Professional Service? How to calculate
Tax & VAT on Professional Service? 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 Professional
services. Just follow & understand the Tax & VAT implications on
professional service. A Step-by-Step Guide to Calculating the Right
Amount. Let’s start.

What is Professional Service?

Professional services refer to a range of services. It is typically
provided by individuals or companies who have specialized knowledge,
education, and experience in a particular field. Examples of
professional services include consulting, accounting, engineering, legal
services, marketing, and architecture.

Legal Advisor refers to a person, legal expert, or group of legal

experts who are part of a chamber or organization. He provides legal
advice and assistance to individuals or companies on matters related
to laws, legal procedures, or other legal issues. They may provide this
advice directly or through representation in court or other legal
proceedings in exchange for money.

Audit and Accounting Firm is a professional organization. They

provide a wide range of financial and accounting services to
businesses and organizations. These services may include auditing
financial statements, preparing financial statements, providing tax
advice, and offering consulting services. The firm may be composed of
certified public accountants (CPAs), chartered accountants (CAs), or
other financial experts with the knowledge and skills to provide these
services. The firm may also provide internal audit, financial due
diligence, and other assurance services.

Graphic Designer is a professional who uses design elements such as

typography, photography, illustration, and color to create visual
representations of information and ideas. They work to create a variety
of visual materials such as brochures, posters, logos, websites,
packaging, and more. Graphic designers use software such as Adobe
Photoshop, Illustrator, and InDesign to create digital designs and
layouts. They also use visual arts, typography, and page layout
techniques to produce designs that are both functional and appealing.
Graphic designers work in a variety of industries, including advertising,
marketing, web design, print and publishing.

Architect is a professional who designs and plans the construction of

buildings and other structures. They consider factors such as safety,
function, and aesthetic appeal when creating their designs. Architects
work closely with engineers, construction professionals, and other
design specialists to ensure that their designs are feasible, compliant
with building codes, and compatible with the surrounding environment.

Interior Designer is a professional who designs the interior spaces of

buildings, such as homes, offices, and commercial spaces.

Does Tax & VAT charge on

Professional Service?
In Bangladesh, Tax & VAT are integral part of professional service. It is
also a revenue sources of government revenue. Every professional
service bill is subject to VAT & Tax applicable on any platform.

Who are withholding authority

to deduct VAT & Tax on
Professional Service?
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 of its ministries

 Department,
 A semi-public or autonomous body
 State-owned enterprises
 Local authorities
 Council or similar body
 Non-governmental organizations approved by the Bureau of NGO
Affairs or the Department of Social Services
 Any bank, insurance company or similar financial institution
 Secondary or higher-level educational institutions and
 limited company
Tax Reference:
Income Tax Act 2023, Section-104 (3)

The Specified person means-

(a) any company, firm, association, trust or fund;

(b) Public-Private Partnership
(c) any foreign contractor, foreign enterprise or association or
organization established outside Bangladesh;
(d) any hospital, clinic or diagnostic centre;
(e) any e-commerce platform having an annual turnover of more than
one crore taka, other than any specified person, by whatever name
called;
(f) hotels, community centers, transport agencies with an annual
turnover of more than one crore taka;
(g) any person other than a farmer engaged in the production and
supply of tobacco leaves, cigarettes, bidis, jorda, gul and other tobacco
products;

VAT Rate Tax Rate

Service Code: S032.00 Section 90 & Rule 4, SL No. 1

Consultancy & Supervisory 15% Professional service, technical services fee, technical 10%
Firm assistance fee

Section 90 & Rule 4, SL No. 1

Service Code: S034.00
15% Professional service, technical services fee, technical 10%
Audit & Accounting Firm
assistance fee

Section 90 & Rule 4, SL No. 1

Service Code: S045.00
Professional service, technical services fee, technical 10%
Legal Advisor 15%
assistance fee

Service Code: S050.00 Section 90 & Rule 4, SL No. 1

Architect, Interior designer 15% Professional service, technical services fee, technical 10%
or Decorator assistance fee

What is the VAT & Tax rate for

Professional Service?

How to calculate Tax & VAT on

Professional Service?
 Professional Service-Related Bill

Calculation Process

Step-1 Calculate VAT Amount.

Bill Amount = tk. 569,250

VAT = 569,250 x 15/115 = tk. 74,250.

So, you must deduct VAT tk. 74,250.

Step-2 Calculate Base Value.

Base Value = Bill Amount – Value Added Tax

= 569,250– 74,250

= tk. 495,000

Step-3 Calculate Tax Amount from Base Value.

Tax Amount = Base value x Rate of Tax

= 495,000x 10%

= 49,500

[N.B- It is assumed that Proof of Submission of Return (PSR) duly

submitted by service provider. If PSR not submitted to withholding
authority then tax rate will be 50% higher.]

Step-4 Calculate Payment Amount.

Payment = Base Value – Tax

= 495,000– 49,500
 = tk. 445,500

Total payment amount from this bill tk. 445,500 after deducting TDS
& VDS.

Legal Advisory Service-Related Bill

Calculation Process

Step-1 Calculate Tax Amount.

Here VAT Excluded means Bill Amount = Base Value

Bill Amount = Base Value = tk. 25,000

VAT = 25,000 x 15% = tk. 3,750.

So, you must deduct VAT tk. 3,750.

Step-2 Calculate Base Value.

Base Value = Bill Amount = 25,000

Actual Bill Amount = Base Value + VAT

= 25,000 + 3,750

= 28,750

Step-3 Calculate Tax Amount from Base Value.

Tax Amount = Base value x Rate of Tax

= 25,000x 10%

= 2,500
[N.B- It is assumed that Proof of Submission of Return (PSR) not
submitted by service provider. If PSR not submitted to withholding
authority then tax rate will be 50% higher.]

Tax Amount = Base value x Rate of Tax

= 25,000x 15% [10% + 5% (10% x 50%)]

= 3,750

Step-4 Calculate Payment Amount.

Payment = Base Value – Tax

= 25,000– 3,750

= tk. 21,250

Total payment amount from this bill tk. 21,250 after deducting TDS &
VDS.

Audit & Accounting Service-Related

Bill

Calculation Process

Step-1 Calculate VAT Amount.

Bill Amount = tk. 172,500

VAT = 172,500 x 15/115 = tk. 22,500.

So, you must deduct VAT tk. 22,500.

Step-2 Calculate Base Value.

Base Value = Bill Amount – Value Added Tax

 = 172,500 – 22,500

= tk. 150,000

Step-3 Calculate Tax Amount from Base Value.

Tax Amount = Base value x Rate of Tax

= 150,000x 10%

= 15,000

Step-4 Calculate Payment Amount.

Payment = Base Value – Tax

= 150,000–15,000

= tk. 135,000

Total payment amount from this bill tk. 135,000 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;