Setting up a representative or branch office in Bangladesh

If you do not want to set up a local business yourself, you should have a local representative either on a commission basis or as an agent. A local agent can deal with Bangladeshi bureaucracy and can be responsible for quality control in the factory and container handling. The 1972 Contract Act details the rights and liabilities of an agent and of the principal. Most agency agreements have a clause permitting either party to give due notice of termination. Although agents mostly work for multiple buyers, it is also not uncommon that agents sign an exclusive contract with a single buyer. This can be negotiated. If you want more control over your activities in Bangladesh you can decide to set up a representative or branch office.

Representative office

A representative office of a foreign company can perform very limited activities, which include maintaining liaison/ coordination between the mother company and local agents and distributors/exporters’ institutions, and collecting, compiling, analysing and disseminating business information related to its field of activities as mentioned in the approval letter. A representative office will have no local source of income in Bangladesh. All set up 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 abroad. No outward remittances of any kind from Bangladesh sources will be allowed except the amount brought in from abroad (the unspent part).

Branch office

A branch office of a foreign company can engage in commercial activities with prior approval of the Board of Investment (BoI). Contrary to the representative office, 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.

Set-up procedures

The process for setting up a representative or branch office can be costly and time consuming. Registration consists of the following steps:
  1. Board of Investment (BoI) approval

All document should be submitted to the BoI physically or through the on-line database. If all documents are submitted according to the requirements, your request will be judged by the 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. Expect a usual time-line of one month or less. Approval is usually provided to open a branch or liaison office for a period of three years initially. The fee for getting a BoI approval is Tk. 25,000 to be paid to the Bank of Bangladesh or Sonali Bank.

  1. 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$ 50,000 or more must be brought in as inward remittance in Bangladesh within two months from the date of issuance of the Board of Investment permission letter. You have to contact the Bangladesh Bank within thirty days of obtaining permission from the BoI.

  1. Registration with the Registrar of Joint Stock Companies and Firms (RJSC)

After obtaining approval from both Bangladesh Bank and BoI, registration with the RJSC is required. You can check this procedure here.

  1. TIN number from the National Board of Revenue

The permitted office has 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 and VAT, enterprises have to obtain a Taxpayer Identification Number (TIN) from the National Board of Revenue.

  1. Foreign employees

If you intend to use foreign employees in your office you need to obtain work permits from the BoI, and permission from Bangladesh Bank, under section 18(A) of the Foreign Exchange Regulation Act, 1947. Approval of work permits 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 the permission letter under the existing Visa policy. Otherwise it will be treated that the concerned agencies have no objection to the issuance of visa.

For establishing more than one office of the permitted branch or liaison offices in Bangladesh, the foreign company has to take separate prior permission from the Board of Investment. A branch or representative office is a proper legal entity once registered with the BoI in Bangladesh. It is considered an extension of the foreign company and not as a separate legal entity. The parent company of a branch or representative office is implicitly liable for all debts and liabilities of the branch or representative Office. Just like all companies in Bangladesh also for this type of business you need to get a trade license with the city corporation or municipality.