Large taxpayers unit (value-added tax) of the National Board of Revenue has formed a committee to resolve disputes between the tax authority and the insurance companies operating in the country over VAT on agent and reinsurance commissions.
The committee will also unearth unethical practices by insurance companies for evading VAT, NBR officials said.
The LTU, under the VAT wing of the revenue board, at a views exchange meeting with representatives of the insurance companies held on December 14 in Dhaka formed the seven-member committee headed by its additional commissioner Md Kamruzzaman.
LTU commissioner Md Matiur Rahman presided over the meeting.
The committee consisting of representatives from Insurance Development and Regulatory Authority, Bangladesh Bank, Bangladesh Insurance Association and insurance companies will prepare a report on speedy settlement of disputes over VAT on agents’ commission and reinsurance commission and on other relevant issues.
Both insurance companies and the NBR have been at loggerheads over imposition of VAT on the commissions, particularly on agents’ commission over the last few years.
The LTU alone has already claimed over Tk 150 crore in unpaid VAT at the rate of 15 per cent on the commissions from eight insurance companies which did not pay the amount since FY 2014-2015.
The companies including Green Delta, Pragati, Reliance, Pioneer, Eastland, Phoenix and Rupali insurance Limited fall under the jurisdiction of the LTU.
Other field-level VAT offices have also claimed VAT on the commissions from other insurance companies.
Currently, there are 31 life insurance companies and 45 non-life insurance companies operating in the country.
The revenue board has repeatedly instructed the companies to deduct the VAT before making payment to their agents and deposit the money to the government exchequer.
But, insurance companies are declining to pay the VAT on agents’ commission as the Bangladesh Insurance Association has been seeking waiver from payment of the VAT on the commissions.
The BIA said that 15 per cent VAT should not be imposed on the commissions which were paid to the agents as their salary or wage.
VAT is not applicable to wage or salary of any other sectors, it said.
Officials of the LTU on Friday told New Age that the committee might recommend the revenue board on how to solve the dispute.
They would also see whether there is any scope of giving exemption to the sec tor from payment of VAT on agents’ commission or lowering the rate from the existing 15 per cent in future, they said.
Some insurance companies are also involved in illegal practices of VAT evasion through lowering the tariff value of insurance, said a senior official of the LTU.
He said that the tariff of commercial import was higher than that of industrial import.
But, some companies deprived the government of proper amounts of VAT declaring commercial imports as industrial imports, he said.
The committee will also look into the issue, he said.
LTU commissioner Matiur Rahman told New Age that the committee would prepare a report on the issues.
He, however, said that the companies would have to pay the VAT on agents’ commission as per the existing law.
Until the law is changed, the VAT office will act as per the existing law, he said.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Tax