Doing Business In Bangladesh

Facts and figures

• Total population: 170 million (2023) (Source: Trading Economics)
• Current population growth rate:1.10%
• Total area of 147,570 sq. km,
• Country is divided into eight administrative Divisions.
• Administrative Divisions are divided into 64 districts and the districts are further subdivided into 493 sub-districts or Upazila.

Economic indicators

• Inflation (twelve months average, source: Bangladesh Bank): 8.80%
• GDP rate of growth (fy 2020-21source: Bangladesh Bureau of Statistics):7.25%
• US Dollar 1 = Bangladesh Taka : 108.70 (June 2023) (source: Bangladesh Bank)
• Credit Ratings : S&P BB- ; Moody’s:B1; Fitch: BB-
• Major export destinations: USA(20%), Germany (15%), UK (9%), Spain (6%), France (5%), Italy, Canada, Belgium, China, Japan, India

Main cities

• Dhaka (capital): The country’s capital city, with a population of over of 21 Million
• Chattogram: A prime port city of the country, with a population of over 5 Million
• Sylhet: A city in the northeast of the country, with a population of about 1 Million.
• Jashore: A city in the west of the country with a population of over 3 million

Major airports:

• International airports at Dhaka, Chattogram and Sylhet
• Domestic airports at: Cox’s Bazar, Rajshahi, Jashore, Saidpur Barishal,

Seaports

• • Chattogram

• • Mongla

• • Payra (under construction, scheduled to be complete in 2023)

Languages

• • Official language Bangla (Bengali).

• • English is widely used in Government, Business and Academia

Climate
• Sub-tropical monsoon.
• Average temperature:
• Winter (December – February) (29’C Maximum; 11’C Minimum)
• Summer (April – June) (32’C Maximum; 21’C)
• Rainfall: Average annual rainfall varies from a maximum of 5,690 mm in the northeast of the country to minimum of 1,110 mm in the west.
• Bangladesh Standard Time: GMT + 6 hours

Why invest here

⮚ Strategic geographical Location
⮚ One of the fastest-growing economies in the region.
⮚ Ease of registering a business
⮚ Availability of a young and hardworking workforce
⮚ Policies are in place to afford businesses an investment friendly environment, having some of the most liberal policies in South Asia with regard to FDI, fiscal initiatives etc.
⮚ The country is a signatory to various international treaties
⮚ Impressive recovery post-COVID-19 pandemic
⮚ Foreign investors receive quick service when setting up business here
⮚ 100% foreign equity is allowed along with unrestricted exit
⮚ Currently, there are over 60 Special Economic Zones (SEZ) in both the public and the private sectors. Such zones will be extended to 100.
⮚ Almost all sectors are open for foreign investment

Major industries

❖ Garments and Textiles
❖ Business Process Outsourcing (BPO)
❖ Pharmaceuticals
❖ Ceramics
❖ Leather goods
❖ Light engineering
❖ Shipbuilding
❖ Information, Communication, And Technology
❖ Tourism
❖ Farming

Employment pattern

The agricultural sector is still the largest employer in Bangladesh, accounting for approx. 38% of the total workforce and 13.1% of the GDP. Manufacturing employs 21.4% and represents 27.8% of GDP. The Services account for 53.5% of GDP and employ 39.8% of the total workforce.

Types of business entities-Consideration for foreigners
When a foreign investor plans to do business in Bangladesh, the options available are:
a. Liaison Office (does not constitute a legal entity):
b. Branch of parent organization (a legal entity)
c. Locally registered Entity (a legal entity)

a. Liaison Office

i. General
Foreign companies planning to set up a Liaison Office in Bangladesh must obtain the required approval from Bangladesh Investment Development Authority (BIDA). The foreign investor is required to submit an application in the prescribed form along with the necessary documents, which must be attested by the Bangladesh Embassy/High Commission of the country of origin or the Apex Chamber of Commerce of the country of origin.

Liaison offices act as a communication channel between foreign companies and Bangladeshi customers. Such offices are normally established by foreign companies to promote their business interests in the country by spreading awareness of their services/products and exploring their opportunities for setting up a permanent presence.
A liaison office is not allowed to undertake any business activities, therefore, cannot earn any income in Bangladesh, under the terms of approval granted by the Bangladesh Investment Development Authority (BIDA). All setup and operational costs including salaries of the expatriates and local employees of the Liaison Office will have to be borne by the parent company abroad through inward remittance of foreign exchange. No outward remittances of any kind from Bangladesh will be allowed except the amount brought in from abroad (the unspent part).

ii. Important pointers
• Liaison office and Representative office are the same in Bangladesh.
• The name of the Bangladeshi liaison office must correspond to the name of the foreign company.
• A liaison office of a foreign company can perform very limited activities, which include:
• 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.

b. Branch

i. General

A branch office is an establishment as an extension of a foreign company in Bangladesh. Foreign companies may open branch offices to conduct business in

Bangladesh. Unlike a liaison office, a branch office can perform broader scope of activities subject to prior approval of BIDA.
A Branch Office provides the advantages of ease in operation and an uncomplicated closure. However, since the operations are strictly regulated by exchange control guidelines, a Branch May not provide a foreign company with the most optimum structure for its expansion/diversification plans.

ii. Important pointers
• The name of Bangladeshi branch office must correspond to the name of the foreign company.
• A branch office of a foreign company can engage in commercial activities with prior approval of BIDA.
• A branch office is also required to register itself with the registrar of joint stock companies and firm according to the section 379 of Company Act 1994.

c. Locally registered Entity

i. General
Foreign investors can setup their subsidiary companies in the form of private/public limited company in Bangladesh according to the Company Act 1994. Foreign investors may directly setup business organization or can setup business organization through joint venture with local or foreign partners.

ii. Important pointers
a) Company Name:
The name must be approved (cleared) before incorporation of the company in Bangladesh.

b) Directors:
Minimum two directors are mandatory. Directors can be either local or foreign. Directors must be at least 18 years of age and must not be bankrupt or convicted for any malpractice in the past. The law requires that a director must own qualification shares stated in the Articles of Association. A shareholder which is not a natural person (i.e. a company) can select nominee director.

c) Shareholders:
A private limited company in Bangladesh can have a minimum of 2 and maximum of 50 shareholders. A director and shareholder can be the same or a different person. The shareholder can be a person or another legal entity such as another company or trust. 100% local or foreign shareholding is allowed. New shares can be issued, or existing shares can be transferred to another person any time after the Bangladeshi company has gone through the incorporation process.

d) Authorized Capital:
One must state the authorized capital in the Memorandum of Association and Articles of Association. It is the maximum amount of share capital that the company is authorized to issue (allocate) to shareholders. Part of the authorized capital can remain unissued. There is no minimum or maximum limit for authorized capital in Bangladesh.

e) Paid-up Capital:
Minimum paid-up capital for registration of a Bangladeshi company is Taka 1. Paid-up capital (also known as share capital) can be increased any time after the incorporation of the company.

f) Registered Address:
In order to register a company in Bangladesh, you must provide a local address as the registered address of the company. The registered address must be a physical address and cannot be a P.O. Box.
Regulatory framework for setting up business in Bangladesh

• • Considerations for Foreigners
    Foreigners wishing to open a Bangladesh company, must take into consideration the following points:
    • They must open a bank account in the name of the proposed company with the name clearance obtained from the Registrar of Joint Stock Companies and Firms (RJSC&F) i.e. the registrar of companies and bring in the initial paid up capital. This is a mandatory for company incorporation in Bangladesh.
    • All company incorporation formalities can be handled without visiting Bangladesh.
    • All the directors and shareholders can be foreigners.
    • There is no requirement to obtain any special Bangladesh visa if you merely want to incorporate a private limited company but have no plans to relocate to Bangladesh. It is free to operate your company from overseas as well as free to visit Bangladesh on a business visa whenever required to attend to company matters on a short-term basis.
    • If you plan to relocate to Bangladesh to operate your company, you are required to obtain a work permit.

Advantages of establishing a Branch/Liaison Office in Bangladesh:
• Foreign capital invested in Bangladesh is generally allowed to be repatriated along with profit, if any, after the payment of taxes due on them, subject to prior approval.
• Profits and dividends earned by branch in Bangladesh are repatriable after the payment of taxes due on them subject to the prior permission of Bangladesh Bank.
• Liaison office cannot generate income, so corporate tax is not applicable.
• Legal formalities to start the business are very simple in comparison with limited company.

• Branch/Liaison office formation is less expensive.

Disadvantages of establishing a Branch/Liaison Office in Bangladesh:
• Branch/Liaison cannot borrow money from local sources.
• They cannot run any business not mentioned in BIDA permission letter.
• A liaison office cannot remit of any kind of amount from Bangladesh except the amount brought in from abroad (remain in foreign currency).
• High capital requirement.

Advantages of establishing Local Company in Bangladesh:

• 100% foreign ownership is allowed. Foreign investors may also setup JV (joint venture) with local or foreign partners.
• Local company provides maximum flexibility for conducting business in Bangladesh.
• A limited company can obtain loan facility from both local and international sources.
• Local company can run any business as included in Memorandum of Association which can be changed as required.
• Minimum capital requirement.

Disadvantages of establishing Local Company in Bangladesh:
• Involvement of multiple authorities.
• Increased compliance 

General requirements for setting up a business in Bangladesh.

• • Registering with the Registrar of Joint Stock Companies and Firms (RJSC)

• • Trade License issued by the local authorities.

• • A Bank account

• • A Business Identification number and a Tax Identification Number

• • Setting up an office in a non-residential area

• • Import / Export licences.

• • Obtaining license for fire for corporate office and/or factory

• • Permission from relevant authorities such as BTCL for telecommunication business etc.

• • Documentation for obtaining permission for setting up of factory.

• • Different types of business structures in Bangladesh—a comparative presentation

Type of Business structure	Private Ltd. Company	Branch Office (BO)	Liaison Office (LO)
Basic Definition	It’s a legal entity, separate from the owners/shareholders	BO can conduct business activities in Bangladesh aligned with the parent company’s business scope.	LO is a mediator for communication between the principal place of business and other entities in Bangladesh.
Registering authority	Registrar of Joint Stock Companies and Firms (RJSC&F)	Bangladesh Investment Development Authority (BIDA)	Bangladesh Investment Development Authority (BIDA
What it cannot do	No restrictions	Cannot do manufacturing	Cannot earn revenue
Nature/type of Bank Account	May open only Bangladesh Taka Account Foreign exchange accounts may be opened by export – oriented businesses	Can open local (Bangladesh Taka) as well as foreign exchange accounts	Can open local (Bangladesh Taka) as well as foreign exchange accounts
Sending remittances from Bangladesh	May be done through Letter of Credit (L/C) with proper approval and subject to obtaining relevant licenses Technical & Royalty fees upto 6% of previous year’s turnover or USD 10,000 per year per contract does not require approval. If above 6%, then approvals from BIDA and Bangladesh Bank are required. Dividends may be repatriated subject to withholding tax	Profit may be repatriated after paying required tax. Balance available in the forex account may be repatriated without restriction. Unutilized balance may be remitted when office is closed	Balance available in the forex account may be repatriated without restriction. Unutilized balance may be remitted when office is closed
Rate of Tax applicable	The tax rate for non-listed Public and Private Companies is 27.5%. However, in case of any contravention, the Tax rate can be increased up to 30%.	The remittance of profits abroad by a branch of a foreign company is subject to a branch profits tax at a rate of 20%.	No tax
Filing Requirements	RJSC&F=Annual Return NBR (for Tax)=Annual Return Payroll Tax= Monthly / Half yearly/Annual Withholding tax Returns =Monthly VAT Return = Monthly	BIDA = Quarterly Return Bangladesh Bank= Quarterly Return NBR/Tax= Annual Return Payroll Tax= Monthly / Half yearly/Annual Withholding tax Returns =Monthly VAT Return = Monthly	BIDA = Quarterly Return Bangladesh Bank= Quarterly Return NBR/Tax= Annual Return Payroll Tax= Monthly / Half yearly/Annual Withholding tax Returns =Monthly VAT Return = Monthly

Annual Audit	Mandatory	Mandatory	Mandatory
Withholding Tax/VAT Payment to Treasury	VAT = Within 15 days Tax= Within 2 weeks of the following month	VAT = Within 15 days Tax= Within 2 weeks of the following month	VAT = Within 15 days Tax= Within 2 weeks of the following month

1. 1. Registering a company

1. 1. Name Clearance: Get your proposed name approved by the Registrar of Joint Stock Companies and Firms (RJSC&F). Details of fees to be paid are given in RJSC&F website.

1. 1. Preparation of documents: Draft/prepare the Articles of Association and Memorandum of Association. These are to be submitted to the RJSC&F, along with the application seeking registration.

1. 1. Opening a Bank account in the name of the company and remit a minimum of USD 50,000 into the account.

1. 1. Submit the above documents and details along with relevant fees (details in RJSC&F website) to the RJSC&F necessary registration.

1. 1. Company incorporation

Upon submission of the above documents, you will be given a “Certificate of Incorporation” by RJSC&F

• • Other permissions and licenses you will require.

• • Trade License

• • Tax Identification Number (TIN)

• • VAT Registration Certificate

• • Fire Certificate

• • Timeline

• • Company registration procedure

• • Obtaining name clearance                                           Week 1

• • Opening bank account for deposit of capital            Week 1

• • Obtaining RJSC&F registration                                     Weeks 2—–5

• • Registration with NBR (Income tax)                             Weeks 5—–6

• • Obtaining trade license                                                   Weeks 5—–6

• • Online VAT registration                                                   Weeks 5—–6

• • Office registration procedure

• • Apply for BIDA permission                                             Weeks 1—–5

• • Letter to Bangladesh Bank under S.18B of

Foreign Exchange Regulation Act 1947                                            Week 6

• • Registration with NBR (Income tax )                              Week 6

• • Obtaining RJSC&F registration                                        Week 6

• • Trade Licence                                                                     Week 6

• • Clause 7 waiver from the permission letter of BIDA

If branch office raises invoice locally                                               Weeks 6—-7

• • VAT Registration                                                              Weeks 6