A Branch or Liaison office is a legal entity that is considered an extension of a foreign company but not a separate legal entity. Also, this branch or liaison office is liable or can be held liable for all debts and liabilities. In a general sense, it can be said that the branch or liaison office is an option for foreign investors wishing to set up their presence in Bangladesh.
In order to open a branch or liaison office for foreign investors, permission must be required from BIDA. Firstly, the investors have to apply along with the required documents, which must be attested by the concerned Bangladesh Mission or the Embassy of the relevant nation in Bangladesh as well as the national business chamber and local business chambers As per the guidelines published by BIDA primarily they will provide license for three years. After this period, if these branches satisfy the authority, then the license may extend for more than two years.
Some required documents or Prescribed application forms for BIDA approval are- a memorandum of association and articles of association of the principal company, certificate of incorporation of the principal company, name and nationalities of the directors of the principal company, board resolution to open a branch office in Bangladesh, audited accounts of the last financial year, list of activities of the proposed office or representative office and others.
Some key facts about the liaison or representative offices in Bangladesh– these offices can perform very limited activities like maintaining coordination between principal and local agents, exporters or personal contracts and others. Then, they can collect, compile, analyze, and disseminate business information related to their field of activities, as mentioned in the approval letter.
Also, some other facts are that the liaison office has no jurisdiction or local source of income in Bangladesh. All setup includes any operational costs, including salaries and others that have to be borne by the parent company aboard.
Some key facts about the branch offices in Bangladesh– a branch office of a foreign company can engage in commercial activities but with the prior approval Also apart from liaison office a branch office may have local source of income from the approved field of business activities in Bangladesh and with the prior approval of BIDA.
Approval- the approval to open a branch or liaison office is for three years, but it can be extended or renewed.
The following discussion about registration and approval has been made in general. Still, in this article, we will focus on the closing of the branch or liaison or representative office.
- The first step to close a branch office is to publish a public notice in any recognized national media newspaper, and at least three months before the close, this notice has to be published,
- After that, in person must present in Bangladesh Investment Development Authority (BIDA) with a copy of permission from the main office, along a board resolution by parent company regarding the office closure.
- Also must bring the audit report up to date and the Income Tax Clearance Certificate of the organization under Section 89 of the Income Tax Ordinance 1984; income Tax Ordinance 1984 states that on the first day of July, the Deputy Commissioner of Taxes may make an assessment and a provisional assessment of the tax payable by the assessee on the basis of the return and the accounts and documents, if any, accompanying it and where no return has been filed then on the basis of the last assessment including an assessment under this section For the purposes of payment and recovery, the tax as determined to be payable upon provisional assessment shall have effect as if it were determined upon regular assessment.
- It is to be mentioned that nothing done or suffered by reason or in consequence of any provisional assessment made under this section shall prejudice the determination on the merit of any issue which may arise in the course of regular assessment. Also, there shall be no right of appeal against a provisional assessment made as per the Ordinance re a business is discontinued in any financial year then an assessment may be made in that year on the basis of total income between the end of the income year and the date of such discontinuance.
- Before such assessment,nt any person discontinuing any business shall give notice to the Deputy Commissioner of Taxes for such discontinuance within fifteen days of total income between the end of the f income year and the date of such discontinuance of the financial year shall be accompaniebyth such notice.
- After receiving such notice, the Deputy Commissioner of Taxes may serve an assessment case of the company to the principal office or person or partners in case a person fails to give the notice required. The Deputy Commissioner of Taxes may direct that a sum shall be recovered from him by way of a penalty not exceeding the amount of tax subsequently assessed on him with respect to any income from the business or profession up to the date of its discontinuance.
- Then, up-to-date bank statements and all dues settlement certificates,
- NOC from house owner Copy of cancellation of work permit of all expatriates,
- Declaration mentioning all liabilities, including all taxes (both organizational & individual) and other future financial dues, which the parent company will bear
- Lastly, additional information should be provided with proper documents (if any).
Chapter 10 of the Guidelines for Foreign Exchange Transactions-2018 states that some authorized Dealers (ADs) are permitted to remit profits of branches of foreign firms and companies operating in Bangladesh.
Under this guideline, it mentions that henceforth, all entities, including branches of foreign firms and companies established in Bangladesh with permission from competent authorities for business or profit motive and operation, are allowed to remit profits to their head offices abroad through their nominated ads without prior approval of Bangladesh Bank.
To rem, such an application has to be submitted within thirty days of profit remittance along with relevant documents to the Foreign Exchange Investment Department, Bangladesh Bank, Head Office, Dha. Relevant documents are as follows-
- Approval letter from competent authorities for closing office in Bangladesh,
- Approval of competent authorities waiving restrictions (if any) on outward remittance by local operation of foreign companies,
- Board resolution of the head office regarding the decision to close the office in Bangladesh,
- Audited Financial Statements for the last three years also Auditor’s certificate, which indicates the calculation procedure through which the remittable amount has been arrived at supported by audited financial statements of the applicant, and indicating the manner of disposal of assets, confirming that all liabilities in Bangladesh including arrears of gratuity and other benefits to employees etc., of the office have been either fully met or adequately provided for; and confirming that no income accruing from sources outside Bangladesh (including proceeds of exports) has remained un-repatriated to Bangladesh.
- Income tax clearance certificate of the office,
- Confirmation from the Head Office that no legal proceedings in any Court in Bangladesh are pending, and there is no legal impediment to the remittance,
- Work permit cancellation and income tax clearance certificate of the foreign expatriates working in the office,
- Encashment certificates for the funds received from head office abroad,
- Public notice for office closing,
- Document in support of final office rent settlement,
- Bank statement of the office for last year,
- If the branch or liaison or representative offices availed any local loan, then the CIB certificate,
- Approval letter from competent authorities for borrowing from Head Office abroad,
- Any other documents specified by Bangladesh Bank while granting the application.
In terms of residual amount repatriation to the head office or company of that branch or liaison or representative offices, recently BIDA has published a guideline as that-
At least two months before, in two national newspapers, a notice has been published about the closing of such, and the creditor may then demand the amount; it is not a fact whether the audit report mentions any loan or not.
Secondly, suppose that within two months, no creditor is found. In that case, the residual amount must be kept in any scheduled amount, such as the closing of the branch or liaison or representative offices. Any creditor may contact the bank to collect their credit, and the bank, with consent of the office, may release the amount. It is to be mentioned that the name and details of the scheduled bank must be stated in the newspaper advertisement.
As per the Limitation Act of 1908, if no creditor is found within three years of advertisement, then the time to rescue the amount by the creditor will expire, and the amount shall transfer to a government account.
It has to be considered that after recovering all the amount of the creditors, the residual amount may be transferred to the head office or company of a foreign state but subject to following the regulations of the Foreign Exchange Regulation Act, 1947 and Guideline for Foreign Exchange Transactions, 2018.
Lastly, following the formalities mentioned above, it will take sixteen working days to close a branch liaison or representative office subject to the approval of the inter-ministerial committee.
FAQs
Q: What is BIDA?
A: BIDA stands for Bangladesh Investment Development Authority, which is the government agency responsible for promoting and facilitating investment in Bangladesh.
Q: What are branch offices, liaison offices, and representative offices?
A: Branch offices, liaison offices, and representative offices are types of business establishments set up by foreign companies or organizations in a host country to carry out specific activities related to their operation. Se offices serve as extensions of the parent company and facilitate various functions such as marketing, business development, or coordination.
Q: What are the regulations regarding the closing of branch liaisons or representative offices as per BIDA?
A: The regulations regarding the closing of branch liaison or representative offices in Bangladesh are governed by BIDA-specific requirements. The procedures for closing these offices may vary based on the applicable laws and regulations, and BIDA provides guidelines and assistance in this process.
Q: What are the common reasons for closing a branch liaison or representative office?
A: There can be various reasons for closing a branch or liaison or representative office. Common reasons include the completion of the intended purpose, strategic changes in business operations, financial considerations, market conditions, or changes in the regulatory environment.
Q: What are the steps involved in closing a branch liaison or representative office as per BIDA regulations?
A: The exact steps involved in closing a branch or liaison or representative office will depend on the specific circumstances and the applicable regulation ev; some general steps may include notifying BIDA and other relevant government authorities, settling any outstanding liabilities, fulfilling reporting requirements, obtaining necessary approvals, and completing the necessary documentation for closure.
Q: Are there any specific timelines or notice periods to be followed for closing these offices?
A: The timelines and notice periods for closing branch or liaison or representative offices may be outlined in the applicable laws and regulations. It is advisable to consult with BIDA or seek legal advice to ensure compliance with the specific requirements and timelines.
Q: Are there any financial obligations or penalties associated with closing these offices?
A: Depending on the circumstances and the applicable regulations, there may be financial obligations or penalties associated with closing a branch liaison or representative office. Se obligations may include settling outstanding taxes, fees, or any other financial liability. It is important to consult with BIDA and other relevant authorities to understand and fulfil these obligations.
Q: Can a branch liaison or representative office be transferred or converted into another type of business entity?
A: The possibility of transferring or converting a branch liaison or representative office into another type of business entity will depend on the local laws and regulations governing such conversation. It is recommended to consult with BIDA and legal professionals familiar with the local regulations to explore the available options and procedures.
Q: What are the implications of non-compliance with the regulations for closing these offices?
A: Non-compliance with the regulations for closing branch or liaison or representative offices can lead to legal and administrative complications, which may include fines, penalties, or other enforcement actions by the relevant authorities. It is essential to adhere to the prescribed procedures and fulfil all obligations to avoid any potential negative consequences.
Q: Where can I find more information or guidance regarding the regulations for closing branches or liaison or representative offices as per BIDA?
A: For more detailed information and guidance on the regulations for closing branches or liaison or representative offices in Bangladesh, you can refer to the official website of the Bangladesh Investment Development Authority (BIDA) or contact their office directly. Can provide the most up-to-date and accurate information related to the specific requirements and procedures.
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