What are The Compliances for a Branch Office in Bangladesh

The branch office is a leading choice for foreign investors to establish their operations in Bangladesh since it is easy to exit the Bangladeshi market and can preserve the parent company’s brand image. The foreign business must abide by Bangladeshi rules to open a branch office here. For this, you must have a thorough understanding of the compliance requirements for opening a branch office in Bangladesh. This is why, in this blog, we have explored the compliances for the branch office in Bangladesh.

What is a Branch Office?

A branch office in Bangladesh serves as an extension of a foreign parent firm with the ability to operate autonomously and flexibly. Any action that a branch office engages in Bangladesh that isn’t specifically approved by BIDA is prohibited. According to the Companies Act of 1994, it is necessary to register with the Registrar of Joint Stock Companies and Firms and follow all procedural requirements. Although branch offices are simple to operate and close, their tight exchange control regulations may make them unsuitable structures for plans including expansion or diversification. If a foreign company’s branch office obtains prior approval from BIDA, it can carry out commercial activities and earn local revenue from authorized business activities in Bangladesh, provided that it provides adequate documentation and reason. The branch office may carry out limited manufacturing operations and then contract out to a company in Bangladesh. The BIDA permission letter will provide more details about the activities of the branch office. 

A Comprehensive Compliance Guide for a Branch Office in Bangladesh

Due to the complexity of compliances, many foreign businesses hesitate to use the golden opportunity of investing in Bangladesh. But once you get through the nooks and crooks of the compliances, you can easily start your business here. This blog addresses the compliances for a branch office in Bangladesh and its permissible activities. 

Characteristics of a Branch Office

• The branch office is an extension of the overseas parent firm. 
• The administration and infrastructure are governed by the articles of association and memorandum of the parent foreign firm. 
• The parent foreign firm is accountable for all obligations related to its business-related debt and losses. 
• The branch office’s activities have to adhere to the guidelines established by the Business Investment Development Authority (BIDA).
• The business must present documentation attesting to its consistent profitability over the last three fiscal years and to having net assets of at least one lakh US dollars. If not, the business must have demonstrated profitability in the past notwithstanding its losses, and have minimum net assets of one lakh US dollars. 
• The RJSC Register Company must approve the name of the branch office. 

Permitted Activities for a Branch Office

• A branch office may carry out commercial activities (specified in the BIDA application letter) on behalf of the parent firm in Bangladesh.
• The parent foreign firm or any other foreign company that is interested in collaborating with the new Bangladesh company may offer financial and technical support of any type.
• A branch office may conduct research on behalf of the foreign parent firm. 
• In Bangladesh, a branch office may serve as the representative for international shipping and foreign airlines. 
• For the parent company, a branch office serves as the sales agent in Bangladesh. 
• In accordance with the job description of the parent company, a branch office may provide advisory services or operate as a contractor or subcontractor. 
• To ensure proper marketing and distribution, a branch office can handle sales and after-sales.
• A branch office can import and export after receiving the required approval. 
• With approval from the Inter-Ministerial Committee or the authorities, a branch may also engage in other commercial activities. 
• Within 10 years of receiving the license, a branch office engaged in the production of products and services must develop an industry in Bangladesh. After ten years, branch office certification renewal will not be viable. 

Compliances for a Branch Office

• The branch office’s operations will be governed by the parameters and time periods mentioned and approved in the BIDA approval letter. If the business intends to continue operating its office beyond the permitted time, it must submit an application for the necessary renewal or extension using the appropriate form and the necessary funds at least two months before the present term expires. 
• If the approved company wants to employ any foreign nationals in its office, they must get work permits from the BIDA. 
• A certificate of income tax exemption or clearance must be shown by foreign nationals working in branch offices in Bangladesh. 
• Approval of the branch office and work permits for foreign nationals are subject to Ministry of Home Affairs security clearance. Security clearance will be provided in compliance with the current Visa Policy 45 days after the authorisation letter is sent. 
• BIDA must be informed of any potential changes to the existing address before they are implemented in order to allow for the necessary action and approval to be done. 
• If the foreign company wants to establish more than one permitted branch office in Bangladesh, it needs to get a separate prior authorization from the BIDA. 
• The approved branch office is required by national regulation to apply for permissions and approval from appropriate government entities as needed. 
• To pay the office’s operational costs for the first six months as well as the startup fee,  foreign exchange worth at least US$50,000 or its equivalent must be brought into Bangladesh as an inward remittance within two months of the BIDA approval letter being issued. The office must open an account in compliance with the Guidelines for Foreign Exchange Transactions with any scheduled bank in Bangladesh in order to receive remittances. 
• The Bangladesh Bank, the National Board of Revenue, the relevant bank, and the BIDA must all receive a quarterly report outlining the earnings and outlays from foreign remittances. 
• Bangladeshi law mandates that all duties, income tax, VAT, and other taxes due to the government be paid by the designated branch office. 
• When paying invoices for goods, services, contract labor, office, rent, salaries, and other expenses, taxes are required to be deducted at the source in compliance with the Bangladesh Income Tax Ordinance 1984. Next, the money that was withheld needs to be transferred to the official government accounts. To do this, companies need to obtain a TIN (Taxpayer Identification Number).

The branch office’s annual, health-yearly, quarterly, and monthly compliances are compiled in the following table.

Once you have gone through the compliances for a branch office, you are ready to set up the branch office and start daily operations in Bangladesh. For further help and advice, contact Khan Akber & Co. now!

Summary

A branch office in Bangladesh is an extension of a foreign parent firm with the ability to operate autonomously and flexibly. Due to the scope for making revenue, many foreign businesses opt to set up a branch office in Bangladesh. For this, one must first know about the compliances for a branch office in Bangladesh. This blog first goes over what a branch office is, its characteristics, and the permissible activities for a branch office. Then the blog delves into the compliances for a branch office in Bangladesh. If you need help or advice in this case, you can reach out to Khan Akber & Co. We strive to assist foreign firms in establishing their businesses in Bangladesh in addition to performing regular accounting and compliance functions. 

Frequently Asked Questions (FAQs)

How much money is needed in fees to open a branch office?

The parent form must transfer USD 50,000 as an initial investment to the branch office’s bank account, along with a BDT 25,000 government charge.

What are Bangladesh’s tax laws for branch offices?

The branch office can generate profit. The branch office is therefore subject to all standard taxes. 

What is the duration required to obtain BIDA approval?

The BIDA takes thirty to forty-five days to accept the submission of the required documentation, which is necessary to approve the branch office’s formation. 

What are the age requirements for the parent firm to be eligible to open a branch office in Bangladesh?

The foreign parent firm must have been properly registered outside of Bangladesh for at least two years. 

Is it possible to employ foreign workers?

By obtaining a work permit, you can employ foreign workers.