Foreign Company In Bangladesh

Foreign Companies in Bangladesh

Bangladesh offers a favorable environment for foreign companies looking to establish a presence in the country. The government has taken steps to promote foreign direct investment (FDI), making it easier for foreign businesses to invest and operate in various sectors. Foreign companies in Bangladesh can establish themselves through various types of business entities, such as branch offices, liaison offices, joint ventures, and subsidiaries.

Types of Business Entities for Foreign Companies in Bangladesh

1. Wholly Owned Subsidiary

A wholly owned subsidiary is a business entity that is completely owned by the foreign parent company. The subsidiary is treated as a separate legal entity and can engage in a variety of business activities, including manufacturing, trading, and services. Foreign ownership is 100% allowed.

• Procedure: The subsidiary must be registered with the Registrar of Joint Stock Companies and Firms (RJSC) in Bangladesh.
• Advantages: Full control over business operations, no need for a local partner.

2. Branch Office

A branch office is an extension of the foreign company in Bangladesh, and it can only engage in specific business activities such as marketing, business development, and liaising. It is not allowed to engage in manufacturing or revenue-generating operations in Bangladesh.

• Procedure: The foreign company must apply to the Board of Investment (BOI) and the Bangladesh Bank for approval to set up a branch office.
• Advantages: Simpler setup and easier control from the parent company.

3. Liaison Office

A liaison office is a representative office that does not engage in any profit-generating activities. It is established primarily for marketing, promoting, or representing the foreign parent company's interests in Bangladesh. It cannot conduct direct sales or business activities.

• Procedure: The foreign company must apply to the Board of Investment (BOI) for approval.
• Advantages: Good for non-profit making activities such as market research, liaison, and promoting the parent company's interests.

4. Joint Venture

A joint venture (JV) is a partnership between a foreign company and a local company. The foreign entity partners with a Bangladeshi business to jointly operate a business in Bangladesh.

• Procedure: The foreign company and the local partner must sign an agreement and then register with the Registrar of Joint Stock Companies and Firms (RJSC).
• Advantages: Local partner brings market knowledge and distribution networks.

Steps to Set Up a Foreign Company in Bangladesh

Choose the Type of Entity
Decide whether the foreign company will establish a wholly owned subsidiary, branch office, liaison office, or joint venture in Bangladesh.

Obtain Necessary Approvals

• Board of Investment (BOI) approval is mandatory for setting up a branch office or a liaison office.
• Bangladesh Bank approval is required for repatriation of profits or funds.
• Registrar of Joint Stock Companies (RJSC) registration is required for all types of entities.

Prepare Documentation

• Memorandum of Association (for subsidiaries, JVs, etc.)
• Business Plan: Must outline the activities of the business.
• Identity Proof: Passport or registration details of the foreign company.
• Legal Documents: Copy of the parent company’s incorporation certificate and other relevant legal documents.

Register with the RJSC
Register your business with the Registrar of Joint Stock Companies and Firms (RJSC) for a subsidiary or joint venture. This is done through submitting necessary documents and paying the required registration fee.

Tax Registration and Compliance
Obtain a Tax Identification Number (TIN) from the National Board of Revenue (NBR). All foreign companies are required to comply with tax laws and file tax returns.

Open a Bank Account
A local bank account is needed for the foreign company to conduct transactions in Bangladesh. This account must be registered with the Bangladesh Bank if the company intends to repatriate profits abroad.

Compliance with Local Labor Laws
Foreign companies must comply with Bangladesh’s labor laws, which include employment contracts, salary standards, and work conditions.

Legal Requirements for Foreign Companies in Bangladesh

Taxation
Foreign companies are subject to Bangladesh’s corporate tax laws. The current corporate tax rate for foreign companies is 25%, but it may vary depending on the type of business and industry. There are also taxes on dividends, capital gains, and royalties.

Foreign Investment Policy
Foreign companies must comply with the government’s foreign investment policy, which includes rules on repatriation of profits, foreign currency exchange, and ownership structures.

Foreign Exchange Regulations
Foreign companies must comply with Bangladesh Bank's regulations regarding foreign exchange and capital movement. Repatriation of profits, royalties, and dividends requires prior approval from Bangladesh Bank.

Intellectual Property Protection
Foreign companies are entitled to register patents, trademarks, copyrights, and industrial designs in Bangladesh. The Department of Patents, Designs, and Trademarks (DPDT) is responsible for intellectual property registration.

Foreign Investment Incentives in Bangladesh

• Tax Exemptions: Special Economic Zones (SEZs) and Export Processing Zones (EPZs) offer tax exemptions and benefits for foreign investors.
• Custom Duty Exemptions: Exemption from customs duties on capital goods and raw materials for export-oriented industries.
• Special Economic Zones (SEZs): Foreign companies can benefit from various tax holidays, reduced tariffs, and other incentives in SEZs.
• Access to a Large Market: Bangladesh's strategic location provides access to regional markets such as India, China, and Southeast Asia.

Challenges for Foreign Companies in Bangladesh

1. Bureaucratic Delays: Getting the necessary approvals and registrations can be time-consuming.
2. Political Instability: Foreign companies must navigate the political climate and potential instability in the country.
3. Infrastructure Issues: Challenges such as power outages, inadequate transportation, and logistics can affect business operations.
4. Regulatory Complexity: While the government is increasingly pro-business, navigating local regulations, taxes, and compliance requirements can be complex for foreign companies.