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SETTING UP BUSINESS IN BANGLADESH
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General Aspects Bangladesh is situated in South East Asia, bordering mostly by India & few miles by Myanmar. Monitory Unit is Bangladeshi Taka (BDT). With about 148,460 square kilometres Bangladesh is one of the growing economy in this region. The total population is around 165.6 million. The official language is Bangla and majority people are Muslims.
Legal Forms of Business Entities Legal form
Feature
Branch Office
Foreign companies wishes to set up their presence Suitable for foreign companies looking for a presence in in Bangladesh can form a Branch or Liaison office in Bangladesh to initiate business or maintain contacts with Bangladesh. The office have no separate legal entity and can business partners, especially in cases of uncertain success. not operate any economic activity without the permission of BIDA(Bangladesh Investment Development Authority).
Sole Proprietorship
The simplest way of business structure in Bangladesh. There There is no special formalities and not suitable for foreigners. is no separate legal status of the business. Only a business address is required to operate activity. Any Bangladeshi Citizen over 18 year can apply for starting this type of business. A Trade License is the only required legal document. There is no specified permitted limit of capital invested.
Partnerships
Partnership Business a form of business organization created No minimum share capital is required and the accounting and through voluntary agreements of minimum two and maximum publication obligations are less extensive than those for corpo20 persons Their liability for the partnership’s debts and rations. liabilities is generally unlimited and personal, including all private assets.
Remarks
There are the following partnerships in Bangladeshi law: General Partnership
All the partners or one on their behalf operates the business with unlimited liability. General partnership is subdivided into voluntary & specific depending upon the duration of activity specified in the contract.
Limited Partnership
Where the liabilities of the partners are limited to the Suitable company form for small and medium-sized businesses. proportion of capital contribution. Formation & verification of necessary laws and regulations are under process and
Voluntary Partnership
Duration of the business activity is not stated in the agreement Suitable for medium-sized companies seeking additional startof partnership. up capital from persons who prefer a limitation of liability.
Appropriate for small or new companies. A written agreement is not necessary but recommended. Although registration is not mandatory but recommended because registration make the partnership eligible to enjoy some legal benefits.
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Specific Partnership
If a partnership firm is established for a specific period and A legal form specifically designed for the joint exercising of to achieve certain objective, the partnership would be called professional freelance activities. specific.
There are the following corporations in Bangladeshi law: Limited Liability Company
Company formation is not a complex process in Bangladesh. The most popular legal form for corporations, with high flexibility Office of the Registrar of Joint Stock Companies and and relatively few obligations. Firms (RJSC) is the authority for giving the registration. After application with Government fee, we get a name for the business and prepare the Memorandum & Articles of Association.
Private Limited Company
Separate legal entity with minimum 2 to 50 shareholders with Tax return and annual accounts submission is mandatory. 2 directors. Registration fee payable depending on Authorized capital on different slabs rates by the government. Some other fees are also required.
Public Limited Company
Minimum 7 to max (unlimited) shareholders depending Tax return and annual accounts submission is mandatory. upon the size of capital with at least 3 directors(max 15). Must comply with corporate governance code. Registration fee payable depending on Authorized capital on different slabs rates by the government. Some other fees are also required.
One Person Company (OPC)
Recently, 22nd September 2020 an amendment to the The amendment defines a ‘one person company’ as a company Companies Act 1994 has been proposed with a view to that only has one natural person as its shareholder. As per the including one person companies(OPCs) within its ambit. newly added section 11A(c), such one person companies must include the words One Person Company or OPC at the end of their names.
Organizational Questions Topic
Feature
Remarks
Commercial Register
performs the duties of registering commercial entities. Head office Electronic access to the informations,documents ,Forms situated at Kawran Bazar,Dhaka.It also has divisional and wide range & Fees are possible through http://www.roc.gov.bd/ of district wise service points. All commercial entities must register under RJSC except proprietorship ,some partnerships & Freelance professionals.
Trade Register Notification
Although there is no clear rules for giving notification from RJSC, Name clearence,Submission of MOU & AOA,Opening a commercial entities are not eligible to perform business without using Bank account & filing other documents and license are the RJSC registration number in places like Securities and Exchange simple steps relevant to registration. commission, Tax authority and Export/Import authority.
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Bank Account
To open a bank account individuals need a valid National ID Card (NID) and a reference from any person who has bank account in any branches of the said bank. An initial deposit required ranging from BDT 100 – 500.
Transfer of Goods and Machinery
Transfer of goods and machineries are governed by section XI A of Determination of income , arm’s length price, maintenance Income Tax Ordinance 1984 in Bangladesh. The law has been activated & submission of statements and documents, taking care from first July,2014. of important dates to avoid penalty is required.
Transaction limits are set during the filing of account opening form & documents. Anything beyond reported limit / source is subject to further verification and authorization.
Transfer of Capital With the exception of a few reserved sectors, foreign investors are free to make investments in Bangladesh in industrial enterprise. An industrial entity may be set up in collaboration with local investors or may even be wholly owned by the foreign investors. No permission is needed to set up such enterprises if the entrepreneurs use their own funds. However, to avail of facilities and institutional support provided by the government, entrepreneurs/sponsors are advised to apply for registration with the Board of Investment (BOI). For items in the control list, the office of the Chief Controller of Imports & Exports (CCI & E) prescribes the basis and conditions of import entitlement.
Non resident Bangladeshi (NRB’s) are eligible to invest to form business with the permission of Investment board and can also invest in shares in both public & private limited companies.
Visa and Residence permit
Those who invest $5,000,000.00 (U.S.) in an industrial or commercial project in Bangladesh or those who transfer $1,000,000.00 to any recognized financial institution of Bangladesh may apply for Bangladeshi citizenship. This amount is non-repatriable. Those who invest $75,000.00 in Bangladesh may apply for permanent residency.
For a Visa of Bangladesh one need to apply in Bangladesh consulate of relevant country. On-Arrival visa is permitted for foreign investors coming from countries with no Bangladeshi Embassy subject to verification of proper documents and invitation.
Capital gain is Taxed @ 15% in Bangladesh.
Employment Topic
Feature
Remarks
Work permit
Work permit is mandatory for every foreign national seeking PI Visa(Private Investor Visa) is applicable for investors whose employment in Bangladesh. Three government authorities name is on the shareholders list. The process of PI visa and work permit is almost similar to E visa and work permit. issue work permit in Bangladesh. For private sector industrial enterprise, branch office and liaison office, outside of Export Processing Zone (EPZ) – Bangladesh Investment Development Authority (BIDA). For employment of foreign national in the EPZ – Bangladesh Export Processing Zones Authority (BEPZA). For employment of foreign national in any NGO – NGO Affairs Bureau.
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Labour law
Employment law in Bangladesh is governed by the Labor Act, 2006 (“Act”) and the Labor Rules, 2015 (“Rules”).Normal working hour per week is 40-48 hours. Normal office hour 9am- 5pm. Friday & Saturday government holiday .Any dispute arising regarding employment is settled as per provision of work permit agreement and with the help of Labor Court.
Social system
Pension contribution, insurance coverage are applicable as Participation in registered pension fund and insurance premium per employment agreement. Personal contribution to any are tax exempted. private pension fund is permitted.
Taxation Companies in Bangladesh are usually taxed on two levels: On the first level, corporations are subject to corporate income tax (Körperschaftsteuer), whereas partnerships and sole proprietorships are subject to personal income tax (Einkommensteuer). Both taxes are levied by the federal government. On the second level, all business operations are subject to the trade tax (Gewerbesteuer), which is imposed by the municipalities, where the company is based.
Tax
Feature
Remarks
Corporate Income Tax
Non Listed company 32.5%,Listed Company 25%,Listed Bank /Insurance /NBFI 37.5%, Non Listed Bank /Insurance /NBFI 40%, Merchant Bank 37.5%, Tobacco industry 45%,Mobile phone operator 45%. Registered co-operative @ 15%
Sur charge is applicable on Net Asset @10% - 30% for amount exceeding from 30m – 200m. All enterprises with a gross income above BDT 5 million (with the exception of mobile operators, producers of cigarettes and tobacco products) are subject to an alternative minimum tax of 0.6% on gross receipts, if the amount due is higher than corporation tax. This rate is reduced to 0.1% for manufacturing companies in their first three years of operation.
Double Taxation
To avoid double Taxation Bangladesh has double Taxation agreement with 32 countries including UK ,Singapore,Sweeden,SouthKorea,canada,Pakistan,Romania,SriLanka,France,Japan,Malayasia,India,Germenay,Netherlands, Italy,Denmark,China,Belgium, Thailand,Poland,Philipin,Vietnam,Turkey,Norway,USA,Indonesia,Switzerland,KSA,Mauritious, Belarus & Myanmar.
Personal Income Tax
Up to BDT 300,000 tax free. Next 100,000 @ 5% Next 300,000 @ 10% Next 400,000 @ 15% Next 500,000 @ 20% Rest @ 25% For Non residents @ 30%
Personal Income Tax-partnerships
As partnerships are not separate legal entities but associations of partners, the partners themselves generally are subject to the personal income tax, with the individual tax rate applicable to each shareholder.
Tax free limit for women = BDT 350,000 Tax free limit for Person with disability = BDT 450,000
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Consumption Taxes
Excise duties have been abolished on all products except If the individual income tax rate is less than 25%, the taxpayer on bank deposits and airline tickets (exemptions are can request that his individual tax rate has to be applied. provided for disabled soldiers). An additional duty of 20%, 30%,45%,60% & 100% or more are levied on certain products, the highest being on beer (250%), alcohol and cigarettes (350%) Cylinder different cc upto (500%)
Tax incentives for Bangladesh provides for tax incentives for foreign companies investing in special economic zones and hi-tech park zones (in the foreign companies form of gradually decreasing tax discounts). Qualifying industrial undertaking set up between 1 July 2019 and 30 June 2024 are also entitled to gradual tax discounts, with rates varying from one region to another. Value Added Tax (VAT)
Basic rate is 15%. Certain products and services are exempt from VAT (foodstuffs, agricultural supply, public transport, pharmaceutical products, educational services), and some have a reduced rate: 7.5% for restaurants without air conditioning, 5% on electricity supply, information technology services, online business services (as of 2020), 10% on photography and Automobile garages, 5% on goldsmiths, 7.5% on construction, etc. Bangladesh is expected to introduce a new VAT regime by 2021, with two standard reduced VAT rates of 7.5% and 5%.
Real Estate Transfer Tax
At present, property registration cost includes: 4 percent gain tax, 3 percent stamp fee, 2 percent registration fee, 2 percent local government tax and 3 percent VAT.
Property Holding Tax
The rate of holding tax in two city corporations of Dhaka is only 12 per cent while it is 17 per cent in Chittagong and 27 per cent in Rajshahi. As per tax rule, the annual holding tax is fixed on the basis of house rent. As there is no effective house rent control act, most of the city corporations fix holding tax on their estimate of probable house rent.
Capital Gains Taxation
Capital gains arising from the disposal of listed shares are subject to a 10% tax whereas those arising from the transfer of other types securities are taxed at 15%. Non-residents are exempt from tax on their capital gains arising from the disposal of listed shares if they enjoy a similar exemption in their country of origin (otherwise they are taxed at the standard rates).
Non-resident Taxation
Non-residents are taxed at a flat rate of 30%. Salaries and allowances for expatriate employees in foreign aid projects based on an agreement between the government of Bangladesh and a foreign government are exempt from tax
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This guide has been prepared by ASHRAF UDDIN & CO, an independent member of Antea ASHRAF UDDIN & CO. 3rd & 4th Floor, 142/B, Green Road 1215, Dhaka, Bangladesh Tel.: +880 1819490550 Mohiuddin.fca@aucbd.com Web: www.aucbd.com
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