compliance of all legal aspects of a liaison office in Bangladesh

The issue relating to compliance of all legal aspects of a liaison office in Bangladesh

1. Monthly requirements

1. Tax Deduction at Source (TDS):

As per provision of Section 48 of the ITO 1984 and clause no. 14 of the liaison permission form the BIDA, tax is deductible at source from some specified payments mentioned in the Ordinance. All sums deducted or collected in accordance with the Rules 13 of ITR 1984 shall be paid to the Government treasury within the following timeline:

Sl.	Time of deduction or collection	Date of payment to the credit of the Government
1.	in case of deduction or collection made in any month from July to May of a year	within two weeks from the end of the month in which the deduction or collection was made
2.	in case of deduction or collection made in any day from the first to the twentieth day of June of a year	within seven days from the date in which the deduction or collection was made
3.	in case of deduction or collection made in any other dates of the month of June of a year	The next following day in which the deduction or collection was made
4.	in case of deduction or collection in the last two working days of the month of June of a year	on the same day on which the deduction or collection was made

2. VAT Deduction at Source (VDS):

As per provision of Section 6 (4AA) of the VAT Act 1991, SRO No. 113-Law/2009/521-VAT dated 11 June 2009 and clause no. 14 of the liaison permission form the BIDA, VAT is deductible at source from some specified payments mentioned in the SRO. All sums deducted or collected in accordance with the VAT Act shall be paid to the credit of the Government within fifteen days from the date of such deduction or collection.

Consequences of failure to Deduct/Collect Tax at Source

As per provision of Section 57 of the Income Tax Ordinance (ITO) 1984 and Section 37 of the VAT Act 1991, if any body fails to deduct and deposit the TDS, the company would be treated as an assessee in default. The company has to pay the due tax along with penalty calculated at the rate of 2% per month of such unpaid tax for the period commencing on the date following the expiry of the due time of payment. The Deputy Commissioner of Taxes to whom the statement in respect of deduction or collection of tax is required to be submitted shall take necessary action for realization of tax along with penalty from the assessee in default.

3. Submitting of VAT challans:

As per VAT Act 1991, VAT challans (TR-6) to be submitted to the concerned circle within five days from the date of collection of Treasury challans.

4. Filing of Monthly Deduction and Collection Statement:

As per provisions of Section 58 of The Income Tax Ordinance, 1984 and Rule 18 of The Income Tax Rules, 1984, every person who has deducted or collected any tax under this Chapter shall furnish, to the person from whom such deduction or collection has been made, a certificate of tax deduction or collection and furnish the same to the tax authority within two weeks following the month of deduction or collection.

5. Filing of Monthly Salary Statement of Local and Expatriate Employees:

As per provisions of Section 50 of The Income Tax Ordinance, 1984, and every Rule 21 of The Income Tax Rules, 1984, person responsible for payment under the head ‘Salaries’ shall furnish, to the person from whom such deduction or collection has been made, a certificate of tax deduction or collection and furnish the same to the tax authority within two weeks following the month of deduction or collection.

2. Quarterly requirements

Filing of Quarterly Statements:

As per Clause no. 10 of the liaison permission from the Bangladesh Investment Development Authority (BIDA) and Guidelines for Foreign Exchange Transactions, Volume-I

A quarterly return of receipt and expenditure out of remittance receipt from abroad shall have to be submitted to BIDA, Authorized bank and concerned tax office along with encashment certificates within one month after the end of the quarter.

3. Half-Yearly requirements

Filing of Withholding Income Tax Return:

As per provision of Section 75A of ITO 1984 and para 47 of Finance Act, 2016-

A liaison Office is required to file a half yearly return of withholding tax, by thirty-first January of the year in which the deduction or collection was made and thirty-first July of the next year following the year in which the deduction or collection was made in a prescribed form accompanied by a statement of tax deducted or collected at source.

The DCT may extend the return submission date up to 15 days.

4. Annual requirements

1. Preparation of Financial Statements and Auditor’s Report

As per Section 183 (3) of The Companies Act, 1994 and Section 75(2)(d) of The Income Tax Ordinance, 1984,

every liaison office should have its annual financial statements audited by a Chartered Accountant and submit the same to the concerned authorities including Registrar of Joint Stock Companies and Firms (RJSC).

2. Filing of Income Tax Return:

As per provision of Section 75 of Income Tax Ordinance 1984, clause no. 10 of the liaison permission form the BIDA- A liaison office is required to file Income Tax Return for every income year

As per Section 9 of the Finance Act 2015, the definition of income year has been changed to the period of twelve months commencing on the first day of July of the relevant income year. In this connection, the return is required to be filed on 31 December of each year.

However, as per the newly inserted proviso of Section 2(35)(g) of The Income Tax Ordinance, 1984 introduced vide Finance Act, 2016, the Deputy Commissioner of Taxes may allow a different financial year for a company which is a subsidiary or holding company of a parent company incorporated outside Bangladesh if such company requires to follow a different financial year for the purpose of consolidation of its accounts with the parent company.

3. Filing of Transfer Pricing Return:

As per provisions of Section 107EE of the Income Tax Ordinance, 1984, every person who has entered into an international transaction shall furnish, along with the return of income, a statement of international transactions in the form and manner as may be prescribed. This return shall be submitted within the fifteenth day of the seventh month following the end of the income year.

4. Filing of Annual Salary information:

As per provision of Section 108 of the ITO, 1984-

A liaison Office is required to file annual salary information for every income year as prescribed in Rule 23 of The Income Tax Rules, 1984. The return is required to be filed before the 1st day of September of each year.

5. Information regarding filing of return by employees:

As per provision of Section 108A of the ITO, 1984-

As per Any person responsible for making any payment which is an income of the payee classifiable under the head "Salaries", shall, by the thirtieth day of April of each year, furnish to such income tax authority and in such manner as may be prescribed.

6. Filling of Annual Information Return (if required by the tax authoritiy)

As per provision of Section 75B of ITO 1984-

The NBR may require any person or group of persons including a liaison Office to submit an Annual Information Return in a prescribed form.

5. Others

1. Issue relating to Electronic Document

According to the provision of Section 11 of Information Technology Act 2006, the liaison Office is required to keep all necessary documents in paper form (hard copy). According to the provision of the Companies Act 1994, all the documents along with the books of accounts must be kept for 12 years.

2. Recruitment of expatriate staff

The ratio of expatriate and Bangladesh employees must be 1:5.

3. List of documents/register required by Bangladesh Labor Act, 2006 (amended in 2013):

• Movement Register/Log Book
• Visitor Register
• Attendance Register
• Salary Register
• Leave Register
• Service Register
• Register of Workers and Supply of Tickets and Cards
• Other Registers on need basis

4. RJSC requirement:

• Financial Statements of LO and Parent Company.
• Summary and list of employees
• Any other reporting requirements i.e. Schedules and Forms by the authority.

5. Renewal of following permissions:

• Any other permissions i.e. BIDA, Trade Liense, ERC, IRC and Labour Registration – pleases renewal as per the concerned authority’s requirements.