By opening a branch office in Bangladesh, overseas businesses can enter into one of the fastest-expanding markets in South Asia without having to create a full subsidiary. A branch office is permitted to carry out commercial activities, offer services, carry out market research, and assist the operation of the parent company. It is a foreign parent entity that is still legally part of that foreign parent entity, but has to comply with the Bangladesh regulatory framework.
We, legaladvicebd.com, will walk you through the entire process on how to start a branch office in Bangladesh!
Legal Framework of Branch Offices in Bangladesh
The branch office is governed by:
- Companies Act, 1994
- The Foreign Exchange Regulation Act, 1947.
- Bangladesh Bank Guidelines
- Registration Regulations of BIDA (Bangladesh Investment Development Authority)
The foreign firms are required to seek the prior approval of BIDA to open a branch, liaison, or representative office in Bangladesh. The branch is not legally allowed to run or open a bank account without the permission of BIDA.
What a Branch Office Can Do in Bangladesh?
A branch office can engage in:
- Imports, exports, or services
- Market survey and advertising
- Offering after-sales services
- Contract and agreement implementation
- Local billing of business activities
- Hiring employees
- Operating as an agent of the mother company
But any branch is not capable of carrying out new business that is not within the limits accepted by BIDA and the Bangladesh Bank.
Prerequisites to Establishing a Branch Office
The foreign firm needs to address the following requirements to open a branch office:
A. Parent Company Documentation
- Certificate of incorporation.
- Memorandum and Articles of Association.
- Board resolution to approve the Bangladesh branch.
- Directors’ and signatories’ information.
B. Financial Requirements
- Inward remittance of USD 50,000 (minimum) in 2-6 months of approval.
(to provide and reflect establishment and operating costs)
- Evidence of financial soundness.
C. Office Requirements
- Physical address in Bangladesh.
- Lease agreement or rent deed
- D. Compliance Requirements
- TIN (Tax Identification Number)
- Registration of VAT (where applicable)
- Registration at the Bangladesh Bank
- Annual renewals where necessary
Any foreign document should also be notarised, attested and legalised by the Bangladesh Embassy.
Step-by-Step Process of How to Start a Branch Office in Bangladesh
Step 1: BIDA Approval
This is the core requirement.
Documents Needed:
- Application form (BIDA prescribed)
- The incorporation certificate of the parent company.
- MOA and AOA
- Branch opening board resolution.
- Names of directors and passport copies
- Organization profile
- Bangladesh Proposed activities
- Information about the local representative
- Office lease documents
- Bank solvency certificate
Processing Time: 30-45 working days.
Depending on the industry, BIDA can seek security clearance across other ministries.
Step 2: Registration (FERA Compliance) by Bangladesh Bank
The branch should also be registered with Bangladesh Bank to accept foreign remittances after it has been approved by BIDA.
Documents include:
- BIDA permission letter
- Parent company’s audited financial statements.
- Name and information on authorised signatory.
- Proof of inward remittance
Timeline: 15-25 working days.
Step 3: Opening a Bank Account
The branch should open a foreign currency account and a local currency account in an authorised bank.
Preliminary remittance of USD 50,000 has to be deposited in this account. Bank authenticates and submits documentation and reports to the Bangladesh Bank.
Step 4: TIN and Tax Registration
The branch office has to acquire:
- TIN (Tax Identification Number)
- Registration of VAT/BIN (provided the taxable activity)
The branch is regarded as a permanent establishment that has to submit yearly tax returns even in the case no profit is made.
Step 5: Trade license/authority of the City Corporation
Office operations require a trade license from the corresponding City Corporation or Municipalities.
Step 6: Compliance with the Staffing and Employment
If hiring expatriates, a work permit must be obtained by way of BIDA. The national policy requires at least 80% of employees to be local.
Step 7: Annual Reporting/Compliance
A branch office is under an obligation to remain compliant by submitting:
- Annual audit report (audited by an auditor registered in Bangladesh)
- Income tax return
- VAT return
- Report to BIDA
- New data regarding activities and remittances.
Advantages of Opening a Branch Office in Bangladesh
A branch office has a number of strategic and financial benefits.
- Complete Control over the Bangladesh Market.
Businesses are able to offer services, enter into contracts and make profits.
- 100% Foreign Ownership
There is no need for any local investor or directors.
- Low Entry Barriers
The branch model does not involve complete company incorporation, making it less complex.
- Parent Company Direct Control
Any liability and responsibility are left to the foreign parent entity.
- Tax Benefits based on industry
There are tax breaks or vacation perks for specific industries.
- Bangladeshi Consumer and Industrial Strong Market
The increasing number of middle-income people and industrial development is a long-term opportunity.
Common Challenges While Setting Up a Branch Office in Bangladesh
- Regulatory Approvals: The BIDA and Bangladesh Bank clearance may be a lengthy process, and in the case of sensitive industries.
- Document Legalisation: Foreign certificates have to be notarised, signed by the embassy and in certain cases apostilled.
- Capital Requirements: Some of the companies may find it difficult to meet the minimum inward remittance (e.g. USD 50,000).
- Tax and VAT Compliance: Annual audit, income tax return and VAT filing are obligatory and should be taken seriously.
- Continuous Reporting: BIDA Financial statements, activity reports, and updates should be provided regularly.
- Expatriate Work Permits: Foreign employees have to be hired on permission and well-documented.
- Local Recruitment: It may be difficult to get professional local workers and meet the labour laws.
- Operational Prohibitions: Branch offices are prohibited from conducting operations freely, as they can only carry on in the activities that are approved.
Conclusion
The establishment of a branch office in Bangladesh is a well-organised process that requires BIDA permission, banking permission, tax registration, and reporting. A branch office, when properly put in place, enables a foreign company to grow well, tap into new opportunities and conduct business lawfully in the Bangladeshi market.
If you want to know more about how to start a branch office in Bangladesh, feel free to reach out!