Liaison or branch office in Bangladesh
Branch or Liaison Office is one of the two options for foreign investors wishing to setup their presence in Bangladesh. The other option is incorporating a Bangladeshi subsidiary company.
If you are a foreign investor, we recommend you to read our article on foreign investment. It will help you to understand the legal regime about foreign investment in Bangladesh.
The information presented below provides details of setting up a Branch or Liaison office in Bangladesh. Approval of Bangladesh Investment Development Authority (BIDA) is the primary requirement for setting up a Branch or Liaison office in Bangladesh
Key facts about Liaison Office in Bangladesh
- Liaison office and Representative office are same in Bangladesh.
- A Liaison/Representative Office of a foreign Company can perform very limited activities, which includes:
- maintain liaison/ coordination between principal and local agents, distributors/exporters’ institutions through correspondences, personal contracts and other electronic media.
- collect, compile analyze and disseminate business information related to its field of activities as mentioned in the approval letter.
- A Liaison/Representative office will have no local source of income in Bangladesh. All setup and operational costs including salaries of the expatriates and local employees of the Liaison or Representative office will have to borne by the parent company aboard.
- No outward remittances of any kind from Bangladesh sources will be allowed except the amount brought in from abroad (the unspent part).
Key facts about Branch Office in Bangladesh
- A Branch office of a foreign company can engage in commercial activities with prior approval of BIDA.
- A Branch office may have local source of income from the approved field of business activities in Bangladesh and with the prior approval of the Inter-Ministerial Committee and with proper justification and sufficient supporting documents.
Key facts about both Branch and Liaison Office in Bangladesh
- The activities of a Branch and Liaison office shall remain confined to the areas and for the period of time mentioned and approved in approval letter issued by BIDA. If the company intends to continue their Office beyond the period approval, they will have to apply for necessary renewal/ extension in the prescribed form with proper documents at least 2 (two) months before the expiry of the current term.
- If the approved company intends to employ any foreign nationals(s) in their Office, work permits should be obtained from the BIDA.
- An amount of foreign exchange equivalent to the sum of not less than US$ 75,000 or equivalent as estimated initial establishment cost and 6(six) months operational expenses of the Office must be brought in as inward remittance in Bangladesh within 02(two) months from the date of issuance of the BIDA permission letter. For this purpose, the Office shall have to open an account with any scheduled bank of Bangladesh as per the instructions contained in the Guidelines for Foreign Exchange transactions for receipt of remittances.
- Quarterly return of incomes and expenditures out of remittances received from abroad shall have to be submitted to the BIDA, concerned Bank, National Board of Revenue and Bangladesh Bank with documentary evidences.
- Any change(s) of present address shall be intimated to the BIDA for necessary action and approval before the proposed change is carried out.
- The permitted Office shall have to obtain clearances/ licenses from the concerned government agencies, as and where required, under the existing rules of the country.
- The permitted Office shall have to pay duty/income tax/VAT/revenues and other taxes payable to the government under the existing laws of Bangladesh.
- Deduction of taxes at source while paying office/house rent, salaries, and bills for purchased goods, services and contract work has to be made, and subsequently deposited to the designated government accounts as per provisions of Bangladesh Income Tax Ordinance, 1984. For the purpose of deduction of taxes at source & VAT, enterprises shall have to obtain Taxpayer Identification Number (TIN) from the National Board of Revenue.
- Approval of Branch and Liaison Offices and award of work permit for foreign nationals will be made on the condition of security clearance from the Ministry of Home Affairs. The Ministry of Home Affairs shall provide security clearance within 45 days of issuance of permission letter under the existing Visa policy. Otherwise it will be treated that the concerned agencies have no objection to the issuance of visa.
- Expatriates working in manufacturing industry, business organizations of private sector, educational institutions, Branch and Liaison Offices etc. in Bangladesh must submit income tax clearance certificate/income tax exemption certificate under section 107 of Income Tax Ordinance, 1984.
- Branch and Liaison Office under proprietorship companies will be generally discouraged.
- For establishing more than one Office of the permitted Branch or Liaison Offices in Bangladesh, the foreign company shall have to take separate prior permission from the Bangladesh Investment Development Authority.
Branch/Liaison Office as a Type of Business Entity
A Branch or Liaison Office is a proper legal entity once registered with the BIDA in Bangladesh. It is considered an extension of the foreign company and not as a separate legal entity. Unlike a Bangladeshi subsidiary company, the parent company of a Branch or Liaison Office is implicitly liable for all the debts and liabilities of the Branch or Liaison Office.
Other informationName: The name of Bangladeshi Branch or Liaison Office must correspond to the name of the foreign company.
Constitution and Activities: The shareholders, structure of company and its activities are directed by foreign company’s Memorandum and Articles of Association. There is no separate Memorandum and Articles of Association for the Branch or Liaison Office.
Office Address: A Branch or Liaison Office must have an office address located in Bangladesh.
Documents Required for BIDA Approval
In general, the following documents/information is required for approval of a Branch or Liaison Office in Bangladesh:
- Application in prescribed form signed by the authorized person for establishment of branch/liaison/ representative office – 4 copies.
- Memorandum and Articles of Association and Certificate of Incorporation of the principal/ parent company.
- Name and nationality of the directors/promoters of the principal company.
- Audited Accounts of last financial year of the principal company.
- Company’s board of director’s resolution regarding opening of office in Bangladesh.
- Proposed organogram of the office showing the posts to be occupied by both expatriates and local personnel.
- Details of activities to be performed through the proposed branch/liaison/representative office in Bangladesh.
- Forwarding Letter
- Documents (item 2-5) shall have to be attested by the concern Bangladesh mission/mission of the respective country in Bangladesh/respective country’s apex business chamber/local business chambers.
- Any documents not in English must be translated in English before submission.
- 4 copies of all the documents must be submitted to BIDA.
- BIDA might ask for more documents after reviewing the above mentioned documents.
A fee of BDT 25,000 (Twenty five thousand) is required to be paid through bank Pay Order and the original copy of the Pay Order has to be submitted to the BIDA.
Registration Procedure and Timeline
All document should be submitted to BIDA physically. You may also apply online using BIDA’s website. After proper scrutiny of all documents, BIDA officials will place the application and documents to Inter-Ministerial Committee. The Committee will review the documents and might ask for more documents or a physical presentation. If the committee is satisfied, they will provide the approval. The Inter-Ministerial Committee usually sits twice every month. Usual timeline is one month or less.
Approval is usually provided to open a branch or liaison office initially for a period of 3(three) years which can be extended later.
Bank Account Opening
After obtaining the approval for a Branch or Liaison office, a bank account must be opened in any bank in Bangladesh. An amount of foreign exchange equivalent to US$ 75,000 or more must be brought in as inward remittance in Bangladesh within 02(two) months from the date of issuance of the BIDA permission letter.
18B Approval from Bangladesh Bank
Update September 15, 2015:
Recently Bangladesh Parliament has amended the Foreign Exchange Regulations Act 1947. The requirement of 18B Approval from Bangladesh Bank has been removed. Pursuant to the amendment, from now on Branch Office or Liaison Office or Representative Office will have to report to Bangladesh Bank within 30(thirty) days of obtaining permission from Bangladesh Investment Development Authority. We will update this section once Bangladesh Bank publish any notification in this regard.
The much awaited amendment is here folks. Finally the Parliament has passed the Foreign Exchange Regulation (Amendment) Act, 2015 and on September 9, 2015, the gazette has been published.
Let’s take a look what has changed and how you might be affected.
Applicable to all resident in Bangladesh:
From now on Foreign Exchange Regulation will be applicable to virtually all persons living in Bangladesh irrespective of their nationality except foreign diplomatic representations or accredited officials of such representations located within Bangladesh and offices of organizations established by international treaty located within Bangladesh.
Previously there was some ambiguity whether Foreign Exchange Regulation would be applicable to foreigners living in Bangladesh or not.
The definition of securities expanded:
The current definition includes deposit receipts in respect of deposits of securities, units of mutual fund or collective investment scheme, as defined in Securities and Exchange Commission (Mutual Fund) Rules, 2001 as well as other instruments defined as security in the Securities and Exchange Ordinance, 1969.
New definition introduced
The amendment introduces some new definitions such as Export, Import, capital account transaction, current account transaction, goods, person, person resident in Bangladesh, service etc. These new definitions will provide better interpretation of the act. It will also expand the jurisdiction of Bangladesh Bank/government.
Export of Service will be covered
From now on, the government will be able to prohibit the export of any goods or classes of goods or services or classes of services from Bangladesh unless a declaration supported by such evidence that the amount representing the full export value of the goods or services has been or will be received in a prescribed manner within the prescribed time.
No more 18A and 18B
The requirement of 18A and 18B approval has been stripped off. From now on Branch Office or Liaison Office or Representative Office will have to report to Bangladesh Bank within 30(thirty) days of obtaining permission from Board of Investment or similar competent authority in Bangladesh to establish their presence in Bangladesh.
More information can be sought
From now on the government or the Bangladesh Bank will be able to ask any person resident in Bangladesh to make a return of their holdings of foreign exchange, foreign securities, any immovable property or industrial or commercial undertaking or company outside Bangladesh, held, owned, established or controlled by that person.
Punishment for breaking any provision of the FERA is now maximum seven years.
Registration with Registrar of Joint Stock Companies and Firm (RJSC) After obtaining approval from both Bangladesh Bank and BIDA, registration with the RJSC is required. The following documents will be required for this purpose:
1. Approval letter of BIDA.
2. Approval letter of Bangladesh Bank.
3. Certified copy of the memorandum and articles of the company or other constitutional documents. (Filled in Form XXXVI)
4. Full address of the registered or principal office of the company. (Filled in Form XXXVII and Filled in form XLII)
5. A list of the directors and secretary, if any, of the company. (Filled in Form XXXVIII)
6. The name and address or the names and addresses of one or more persons resident in Bangladesh, authorized to accept on behalf of the company service of process and any notice or other document required to be served on the company. (Filled in Form XXXIX)
7. The full address of the office of the company in Ballades which to be deemed its principal place of business in Bangladesh.
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