Samsung evades Taka 162 crore VAT
Service showed as exports
15 May 2025, Dhaka
** Samsung has provided services to Bangladesh, but has shown those services as exports to evade VAT
** Samsung provided services worth about Tk 460 crore in three fiscal years, did not pay any VAT
** Samsung has claimed services as exports, but no information on imports was found in the CIS cell
In Bangladesh, ‘services’ have been provided, but the records show them as ‘exports’. Over three fiscal years, services worth more than Tk 460 crore were delivered. Through this dubious practice, Tk 162 crore—including interest—has been evaded.The Dhaka North VAT Commissionerate has uncovered a major case of VAT evasion involving the multinational company Samsung India Electronics Private Limited, amounting to a significant sum. Authorities have already issued a show-cause notice along with a preliminary demand letter to the company. Following the completion of the hearing process, a final demand notice will be issued shortly. A copy of the VAT evasion report on Samsung India Electronics Private Limited is currently in possession of Business Barta.
According to NBR sources, Samsung India Electronics Private Limited does not directly sell products in Bangladesh. It has been selling Samsung-made products through a few dealers. Despite operating a branch office in the country, the company has allegedly evaded VAT by misclassifying service supplies as “export of services.” Following these allegations, the Dhaka North VAT Commissionerate conducted a detailed audit of the company, scrutinizing its submitted documents, VAT returns, and annual financial reports (CA reports). The investigation specifically focused on transactions between July 2016 and June 2019 (FY 2016-17 to 2018-19), uncovering substantial evidence of tax evasion. Based on these findings, the investigating officials have submitted a formal report detailing the violations.
The investigation report revealed that Samsung India provided services worth Tk 460.19 crore over three fiscal years. In the 2016-17 fiscal, TK 25,97,85,967 and TK 161,70, 02,789 in 2017-18, and TK 272, 51,49,401 worth of services were provided in 2018-19 fiscal year. However, the company incorrectly declared these services as “exports” in its VAT returns. Under the VAT Act, 1991, such services are subject to a 15% VAT, amounting to Tk 69.02 crore. With an additional 2% interest penalty, the interest payable is Tk 93.28 crore.
Based on the agreement with Samsung India, the Bangladesh branch office is limited to marketing and sales, after-sales service, warranty claims, replacement of consumer electronics products, sale of accessories, IT hardware, and phones. The branch office carries out product marketing service,s including product promotional activities, technical and commercial proposals to increase product sales, implementation of product sales strategies, increasing product sales, creating business opportunities for products, creating and maintaining close relationships with potential customers and others.
According to sub-section 3(d) of section 6 of the Value Added Tax Act, 1991, VAT shall be payable on services provided by a registered or registrable person in the course of conducting or expanding a business, whichever occurs first among the following activities. At the time of occurrence, ‘when the supply of services is received in Bangladesh from outside the geographical boundaries of Bangladesh and when the full or partial price is paid’. In this case, Samsung India (India) provides services to Bangladeshi customers or service recipients from outside Bangladesh through Samsung India (Bangladesh). As a result, the supply has been made in Bangladesh, so VAT will be applicable and recoverable.
The report further states that although the company claims export of services, no foreign exchange has been repatriated by the company. The CIS cell of the National Board of Revenue did not find any import information in the name of the company. Similar to Samsung India, ‘Bioneer Corporation, Korea, and SB Solutions, Bangladesh’ had the same problem. Later, they wrote to the NBR. The NBR gave an explanation on October 25, 2020 which mentioned that there is no scope to claim that the supply of services has been exported. According to the NBR’s explanation, the services provided by Samsung India Electronics Private Limited have been provided to Bangladesh as per the destination principle. As a result, there is no legal scope to consider this service as an export or zero-rated. For which Samsung will have to pay the VAT evaded on the supply of services.
On the other hand, in addition to the supply of services, the audit revealed tax evasion at source on various service purchases or expenses of the company. From July 2016 to June 2019, the company procured or purchased services worth a total of TK 35,57,05,639. On which, VAT of TK 57,46,045 including interest was not paid at source. In March this year, a show cause notice was issued to Samsung India Electronics Private Limited by the Dhaka VAT North Commissionerate under sub-section (1) of Section 55 of the VAT Act, 1991, for the payment of VAT of a total of TK162,89,13,957 including interest on service supplies and purchases or expenses.
In this regard, a senior official of the NBR’s VAT department told Business Barta, Samsung says they hold non-resident status. Although they do business in Bangladesh, they are working on behalf of Samsung India. They are advertising on behalf of Samsung India for sales promotion in Bangladesh. However, the VAT law states that if any service is provided in Bangladesh or something is physically given on a product, the service can’t be considered as exports. This is a matter of policy.
However, the law needs some more clarification on this matter. Samsung authorities say that the remittances that Samsung India sends for running the branch office or expenses in Bangladesh are repaid, which is again an export. It means services equivalent to this amount were exported.
On the one hand, they are saying remittances, and on the other hand, they are saying exports. However, we are saying that if the service is provided in the country, it will not be considered as exports. Therefore, VAT will have to be paid for this service. The hearing is over, and the VAT office will issue a final letter of demand soon. Apart from these two fiscal years, we will audit other fiscal years to uncover the loopholes.
When Business Barta contacted Samsung India Electronics Private Limited on this issue, it was asked to submit written questions. Later, through PR on behalf of the company, a Samsung spokesperson said, ‘As a responsible corporate organisation, Samsung complies with all applicable laws and regulations. Since the matter is under legal process, it would not be appropriate to comment on the matter now.’