Branch & Liaison Office Registration in Bangladesh
1. Formation of a Branch Office
A Branch
Office of a foreign company can engage in commercial activities with
prior approval of the Board of Investment (“BIDA”). A Branch Office may
have local source of income from the approved field of business
activities in Bangladesh with the prior approval of the
Inter-Ministerial Committee and with proper justification and sufficient
supporting documents. The documents required to form a Branch Office in
Bangladesh are same as the Liason/Representative office below.
In our
opinion, this is not viable option for the project company renewal of
branch office permission is required and further it cannot be an special
purpose vehicle suitable for the project to carry out of balance sheet
functions, separated from the parent company.
2. Formation of a Liaison / Representative Office
Under the laws of Bangladesh, a Liaison office and a Representative office have the same meaning.
A Liaison / Representative Office of a foreign Company can perform very limited activities, which includes:
- maintaining
liaison / coordination between principal and local agents, distributors
/ exporters’ institutions through correspondences, personal contracts
and other electronic media.
- collection,
compilation, analysis and dissemination of business information related
to its field of activities as mentioned in the approval letter of BIDA.
- 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 be 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, i.e. the unspent part.
2.1 Branch / Liaison Office as a Type of Business Entity
A Branch or
Liaison Office is a proper legal entity after it is 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 private
limited 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 and hence its activities are also limited and therefore
not a viable option.
3. Key facts about both Branch and Liaison Office in Bangladesh
- The name of the Bangladeshi Branch or Liaison Office must correspond to the name of the foreign company.
- The
structure of the Branch of Liaison Office and its activities are
directed by the foreign company’s Memorandum and Articles of
Association. There is no separate Memorandum and Articles of Association
for the Branch or Liaison Office.
- A Branch or Liaison Office must have an office address located in Bangladesh.
- The
activities of a Branch or Liaison Office shall remain confined to the
areas and for the period of time mentioned and approved in the approval
letter issued by the BIDA. If the foreign company intends to continue
the Branch or Liaison Office beyond the period approval, it 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 Branch or Liaison Office of the foreign company intends to
employ any foreign nationals(s) in its Office, work permits should be
obtained from the BIDA, and permission from Bangladesh Bank, under
section 18A of the Foreign Exchange Regulation Act, 1947 will be
required.
- An amount
of foreign exchange equivalent to the sum of not less than US$ 50,000 or
equivalent as estimated initial establishment cost and 6 (six) months
operational expenses of the Branch or Liaison Office must be brought in
as an inward remittance in Bangladesh within 02 (two) months from the
date of issuance of the BIDA permission letter. For this purpose, the
Branch or Liaison 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 have to be submitted to the BIDA, concerned Bank, National Board
of Revenue and Bangladesh Bank with documentary evidence.
- Any
change(s) of present address has to 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. The rate of VAT is 15% and income tax is 32.5%. Duty is
variable depending on the import assessable value.
- 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 and VAT, enterprises shall have to obtain
Taxpayer Identification Number (TIN) from the National Board of Revenue.
- Approval of
Branch and Liaison Offices and 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 will provide security clearance
within 45 days of issuance of permission letter under the existing Visa
policy.
- 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 BIDA.
4. Documents Required for BIDA Approval
In general, the following documents and information are 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 parent company.
- Name and nationality of the directors / promoters of the parent company.
- Audited Accounts of the last financial year of the parent company.
- Parent company’s board of directors’ resolution regarding opening of Branch / Liaison / Representative Office in Bangladesh.
- Proposed
organogram of the Branch / Liaison / Representative 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 to the BIDA.
The Documents
(item 2-5) must be attested by the concerned Bangladesh mission or
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. It should also
be noted that 4 (four) copies of all the documents must be submitted to
the BIDA. The BIDA may ask for further documents after reviewing the
above mentioned documents.
A fee of Tk.
25,000 is required to be paid through treasury chalan (code no.
1-3901-0001-1876) of Bangladesh bank or any branch of Sonali Bank and
the original copy of the chalan has to be submitted to the BIDA.
5. Registration Procedure and Timeline
All documents
should be submitted to the BIDA physically. After proper scrutiny of
all documents, the BIDA officials will place the application and
documents before the Inter-Ministerial Committee. The Committee will
review the documents and upon scrutiny, it may ask for further documents
or a physical presentation. If the Committee is satisfied, it will
provide the approval. The Inter-Ministerial Committee usually sits twice
every month. Usual timeline for obtaining the approval from BIDA is
around one month. Approval is usually provided to open a Branch or
Liaison Office initially for a period of 3 (three) years which can be
extended later.
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