Bangladesh’s growing economy and business scope make it an attractive destination for foreign investors looking for lucrative business opportunities. Liaison offices are used by foreign companies who want to establish a location in Bangladesh but do not intend to start operations. The Liaison Office in Bangladesh can only be established with the approval of the Bangladesh Investment Development Authority (BIDA). Even though the office can not engage in commercial or revenue-generating activity, it can encourage trade by acting as a representative of the parent company. The following article will cover the steps involved in opening a liaison office in Bangladesh.
The Process of Setting up a Liaison Office in Bangladesh
Foreign investors can establish a liaison office in Bangladesh without creating a private limited company because of the flexible laws in Bangladesh that encourage foreign investment. They can engage in limited marketing, supervisory, and monitoring activities. This blog provides an in-depth overview of the procedures and requirements to open a liaison office in Bangladesh.
What is a Liaison Office?
A liaison office serves as an interface for communication between the parent company’s subsidiaries and its Bangladeshi counterparts. Foreign corporations establish liaison offices in Bangladesh to look into and find business opportunities in the country. It encourages import and export in Bangladesh as well as does market study, financial, technical engagement, and so on.
Activities of the Liaison Office That Are Permitted in Bangladesh
A liaison office in Bangladesh would be permitted to execute a limited number of operations. The office would be authorised to conduct market analyses, feasibility research, and service quality evaluations to ascertain the level of quality of the intended product, as well as to oversee the operations of local agents. In addition, they can oversee the work of local officers and offer customer service.
The following are some of the main permitted activities of the liaison office in Bangladesh-
- The liaison office acts as the overseas parent company’s representative.
- The liaison office ensures coordination and communication between the foreign company and the parties in Bangladesh.
- The liaison office usually acts as a mediator between the main office and other companies when the time comes to deal with another firm based in Bangladesh.
- The liaison office encourages trade (import and export) connections between nations.
- The liaison office establishes financial and technological cooperation between Bangladeshi businesses and foreign enterprises.
It’s important to note that a liaison office in Bangladesh is not permitted to engage in any profitable activities since it is not formally recognized as a corporate entity. Such actions can include signing a legally binding contract, renting space to other companies, offering technical assistance, generating invoices, and even shipping or storing products in Bangladesh without the need for a local representative from the country. All outgoing remittances from sources in Bangladesh are prohibited, with the exception of the sum taken from the foreign parent firm that hasn’t been used.
Eligibility Criteria for a Liaison Office set-up in Bangladesh
There are some eligibility criteria you need to meet before setting up a Liaison office in Bangladesh. They are as follows-
- Name and Approval of the Liaison Office: The name needs to be similar to the parent company and approval from BIDA (Bangladesh Investment Development Authority).
- Age of the Parent Company: The parent company needs to have at least 2 years as a formally registered company outside of Bangladesh.
- Prerequisite Minimal Investment: The parent company has to invest at least $50,000 or 6 months of operational expenditures with the cost of initial office set-up included.
- No Income Generative Operation: The parent company has to bear all operational expenses of the liaison office in Bangladesh. The office can not have any source of income in Bangladesh.
- Taxation in Bangladesh: All kinds of taxes except for profit taxes are applicable to the Liaison office in Bangladesh. This is because the liaison office is not permitted to engage in any revenue-generating operation.
If you can comply with all these eligibility criteria, you are ready to gather all the prerequisite documents and get into the process of setting up a liaison office in Bangladesh!
Required Documents to Set Up a Liaison Office in Bangladesh
Prerequisite documents for BIDA permission:
- Foreign Company Incorporation Certificate
- Memorandum and Article of Association (AOA)
- Audited Financial Statements of the Foreign Parent Company (Previous Two Years)
- Board Resolution the for Liaison Office set-up in Bangladesh
- Perfect Information of Directors
- Complete Details of the Shareholders of the Applicant Company
- Declaration That Details the Nature of the Activity of the Parent Company
- Declaration That Details the Nature of the Activity of the Proposed Liaison Office
- The Employee List of the Proposed Liaison Office.
- Authorization Letter of the Consultant who will Process the Application on Behalf of the Applicant
The first four mentioned prerequisite documents need to be translated into English and attested by the concerned Bangladesh High Commission of the respective country.
Prerequisite documents for bank account opening:
- Foreign Company Incorporation Certificate
- Memorandum and Article of Association (AOA)
- Audited Financial Statements of the Foreign Parent Company (Previous Year)
- Board Resolution for Opening the Bank Account
- Sharee Tree Analysis of the Parent Company
- Perfect Information of the Shareholders of the Applicant Company
- BIDA Permission Letter
- Tax Registration Certificate of the Liaison Office in Bangladesh
- Photograph and Passport Copy of the Bank Signatories
- Passport Copy and Photograph of the Directors and Shareholders of the Foreign Parent Company
A Comprehensive Guide to the Liaison Office Set-Up
Step-1: Get BIDA Permission
- Create an Account with the BIDA web portal- You need to create a user ID after submitting the government fee for account creation.
- Filling out the Applicant to BIDA- Fill out your application for the liaison office set-up to BIDA online.
- Get the Approval of the Application by the Executive Committee- The executive committee (EC) of the BIDA has two meetings every month. After checking the documents and the decision taken by the executive committee, BIDA will approve the application. The average time needed to get an approval is one month.
- BIDA Permission Letter- BIDA provides an e-letter for BIDA permission which is the fundamental legal document needed to get the recognition as an approved liaison office. The BIDA license will be valid for three years. You must reapply two months before the expiry of the current term for renewal of the BIDA license.
Step-2: Receive the Tax Identification Number
Bangladesh’s Income Tax Department gives an exclusive 12-digit number known as TIN (Tax Identification Number). It is also termed E-TIN. Once the E-TIN is received, the liaison office can successfully open its bank account.
Step-3: Open a Bank Account
After receiving the approval from BIDA, a bank account needs to be opened in any bank in Bangladesh. This must be done within two months after receiving the BIDA permission.
Step-4: Inward Remittance of Initial Investment
An amount of $50,000 as an initial investment needs to be remitted within two months from the date of the BIDA approval. In the cases of non-compliance with the mentioned two-month tenure, an additional 5 percent of the total remittance is needed to be brought to Bangladesh as a penalty.
Step-5: VAT Registration
After submitting the initial investment, a 13-digit online VAT Registration/ Business Identification Number (BIN) will be issued.
Once you have gone through all the steps, you can officially set up your liaison office and start daily operations!
Now, the process may get overwhelming for you. Don’t worry! Khan Akber & Co. can provide you with their expert services and help you in the process.
Summary
Bangladesh has emerged as a prospective nation for foreign investment due to its economic growth. Some foreign companies may want to take advantage of that and want to establish a business in Bangladesh without fully creating a limited company. A liaison office is perfect for that. A liaison office acts as a representative of the foreign company in Bangladesh and can engage in limited operations like market study, encouraging export and import, and so on. This blog covers what the liaison office actually entails and all the permitted activities it can engage in. It also discusses the eligibility criteria and prerequisite documents for setting up a liaison office in Bangladesh. Finally, it goes on to explain the process of liaison office set-up comprehensively. Once you have followed all of the steps, you can begin your operations as a liaison office. If you need expert help in setting up a liaison office in Bangladesh, Khan Akber & Co. is perfect for you. We can also help you with other types of foreign company registration in Bangladesh.
Frequently Asked Questions (FAQs)
Can a foreign entity establish a liaison office in Bangladesh?
Foreign nationals can be directors or shareholders in Bangladeshi companies without any restrictions.
Is a liaison office regarded as a distinct legal entity?
The Liaison Office is a legally recognized organisation that has registered with BIDA. Rather than being a distinct legal corporation, it is referred to as a multinational business extension.
Does the liaison office require a Bangladeshi address?
A liaison office must have an office address situated in Bangladesh.
What is required for a liaison office to establish itself in Bangladesh?
If the foreign corporation applying for the liaison office has demonstrated financial stability and revenue generation over the last three years, you can set up the liaison office.
