What are The Compliances for a Liaison Office in Bangladesh

Many foreign businesses are keen to establish liaison offices in Bangladesh to handle liaison operations on their behalf. This is because of the profitable opportunities for foreign investments in Bangladesh. These liaison offices serve as a conduit for information between international businesses and their Bangladeshi clientele. However, there are a number of challenges that they may encounter when establishing their operations in Bangladesh, with compliance being a prominent one. Not to worry! To ease you from this overwhelming stress, we have described the compliances that a liaison office must adhere to in order to operate in Bangladesh in this blog. 

Liaison Office

A liaison office acts as a communication channel between the parent company’s subsidiaries and their Bangladeshi equivalents. Establishing liaison offices in Bangladesh allows foreign firms to investigate and identify potential commercial prospects there. These kinds of offices are typically started by foreign businesses looking to further their commercial interests in the nation by promoting their goods and services and looking into possible permanent locations. In addition to doing market research, financial, technical, and other engagements, it prompts import and export in Bangladesh. 

A Comprehensive Compliance Guide for a Liaison Office in Bangladesh

The foreign company must comply with the laws here to establish a liaison office and continue its operations in Bangladesh. For this, you need a well-rounded understanding of the compliances for a liaison office in Bangladesh. This blog dives into the compliances for the liaison office in Bangladesh while also exploring the permitted activities for a liaison office in Bangladesh. 

Permitted Activities of Liaison Office in Bangladesh

Only a restricted number of operations can be carried out by a liaison office located in Bangladesh. The office would have the authority to supervise the activities of local agents and carry out feasibility studies, market analysis, and assessments of service quality to determine the quality of the product. They can also provide customer care and supervise the operations of local workers. 

Some of the primary authorized activities of the liaison office in Bangladesh include the following: 

• The liaison office represents the parent corporation that is based overseas. 
• The liaison office makes sure that coordination and communication between the foreign firm and the parties in Bangladesh are maintained. 
• The liaison office gathers, aggregates, evaluates, and distributes business information about its area of expertise. 
• When dealing with another company that is based in Bangladesh, the liaison office typically serves as a mediator between the main office and other businesses. 
• International trade (import and export) is promoted by the liaison office.
• Through the liaison office, foreign and Bangladeshi businesses can collaborate financially and technologically. 

Without the permission from Bangladesh Investment Development Authority (BIDA), a liaison office in Bangladesh is not permitted to do business or receive revenue. The overseas parent firm is required to pay foreign exchange inward to cover all setup and operating costs, including local and expatriate employee salaries. Profitable operations such as rental spaces, providing technical support, creating invoices, and product shipping without a local representation are prohibited for liaison offices. Except for money acquired from the overseas parent company that has not yet been utilized, all outgoing remittances from sources in Bangladesh are forbidden. 

The Compliances for a Liaison Office

• The area and time frames specified and authorized in the approval letter issued by BIDA shall govern the activities of the liaison office. The company must apply for the required renewal or extension in the specified form with the required at least two months before the current term expires if they plan to keep their office open after the authorized period. 
• The permitted company gets work permits from the BIDA if they want to hire any foreign nationals in their office.
• Foreign nationals employed in Bangladesh in liaison offices are required to present an income tax clearance certificate or an income tax exemption certificate. 
• Foreign nationals’ work permits and the liaison office approval are contingent upon receiving security clearance from the Ministry of Home Affairs. In accordance with the current Visa Policy, security clearance will be granted within forty-five days of the authorization letter being issued.
• Before any potential changes to the present address are implemented, BIDA must be notified of any changes to the current address so that necessary action and approval can be taken. 
• The foreign firm must obtain a separate prior authorization from the BIDA in order to build more than one office of the allowed liaison office in Bangladesh. 
• In accordance with the national regulations, the authorized liaison office must seek approval and permits from the relevant government agencies as needed. 
• Within 2 months of the BIDA permission letter’s issuance, foreign exchange equal to at least US$ 50,000 or its equivalent must be brought into Bangladesh as an inward remittance to cover the office’s operating expenses for six months and the initial establishment cost. To receive remittances, the office must open an account with any scheduled bank in Bangladesh following the guidelines outlined in the Guidelines for Foreign Exchange Transactions. 
• A quarterly report detailing the income and expenses from overseas remittances must be filed to the Bangladesh Bank, the National Board of Revenue, the relevant bank, and the BIDA. 
• The authorized liaison office is required by Bangladeshi law to pay all duties, income tax, VAT, and other taxes that are owed to the government.
• Per Bangladesh Income Tax Ordinance 1984, taxes must be withheld at the source when paying invoices for goods, services, contract labor, office rent, salaries, and other expenses. The withheld funds must then be deposited to the authorized government accounts. For this, businesses must get a TIN (Taxpayer Identification Number)

The following table summarizes the annual, half-yearly, quarterly, and monthly compliances for the liaison office. 

Now that you know about the compliances for a liaison office, you can tell that it can get a little overwhelming to understand and comply with them. Khan Akber & Co. is a prominent industry expert who can help and advise you with the compliances for a liaison office in Bangladesh. 

Summary

The Liaison Office is essentially a communication channel between the foreign parent company’s subsidiaries and their Bangladeshi equivalents. The compliances for a liaison office are much more lenient than for a subsidiary office. Before establishing a liaison office in Bangladesh, you must learn about the compliances for a liaison office here. The blog first discusses what a liaison office is and the activities that are permitted for a liaison office in Bangladesh. Then it goes on to describe the compliances for a liaison office in Bangladesh. If you need help maintaining the compliances for a liaison office, reach out to Khan Akber & Co. now!

Frequently Asked Questions (FAQs)

Does a Liaison office have its own legal status?

The liaison office is a duly authorized entity that has obtained BIDA registration. It is called a global business extension representing the foreign firm instead of a separate legal entity. However, the liaison office is not allowed to engage in profit-making activity. 

What is the prerequisite minimum investment for a liaison office set-up?

The parent foreign firm has to invest at least $50,000 or 6 months’ worth of operations costs with the expenditure of initial office set-up included. 

Is a Bangladeshi address required for the liaison office?

A liaison office needs to be located in Bangladesh with an office address.

What are the taxation rules for liaison offices set up by foreign firms in Bangladesh?

All kinds of taxes except for profit taxes will be applied to the Liaison office in Bangladesh. This is precisely because the liaison office can not do any revenue-generating operation. 

What is required for a liaison office to get established in Bangladesh?

The foreign firm can establish the liaison office if the foreign firm has proven over the previous three years that it is financially stable and generates money.