What Is a Branch Office?
A Branch office is considered a country office of a foreign entity. Usually, a branch office is also restricted from undertaking any business activity in Bangladesh, and it cannot have any income in Bangladesh. However, there are options to extend the parameters of the Branch office, whereby the Branch Office can, with due pre-consent from BIDA, engage in commercial activities. One of the two choices that are open to foreign investors looking to begin operating in Bangladesh is a branch or liaison office.
Branch office in Bangladesh: Key Information
- With prior BIDA approval, a branch office of a foreign company may participate in commercial activities.
- With the prior approval of BIDA, a Branch office may have a local source of income from the authorized business activities in Bangladesh.
What Is a Liaison Office?
A Liaison Office [also known as a representative office] can undertake only liaison activities, i.e., it can act as a channel of communication between the Head Office aboard and parties in Bangladesh. It is not allowed to undertake any business activity in Bangladesh and cannot have any income in Bangladesh.
The liaison office in Bangladesh: Key Information
- In Bangladesh, the Liaison Office and the Representative Office are identical.
- A liaison or representative office of a foreign company is only permitted to carry out a very small number of tasks, such as establishing interactions and coordinating with local agents, suppliers, and exporters’ agencies through letters, personal agreements, and other online platforms as specified in the approval letter, gather, assemble, analyze, and publicize business data relating to its field of activities.
- There will be no local revenue for a liaison or representative office in Bangladesh. The parent company outside will be responsible for covering all startup and ongoing expenses, including the wages of the local and expatriate staff members of the liaison or representative office.
Branch office: As a form of business entity
As soon as it has been registered with the BIDA in Bangladesh, a branch office is a lawful legal entity. It is not regarded as a separate legal entity but rather as a branch of the foreign company. The parent business of a Branch or Liaison Office is legally accountable for all of the obligations and liabilities of the Branch or Liaison Office, unlike a Bangladeshi subsidiary company.
Documents Necessary For BIDA Approval
General requirements for opening a branch office in Bangladesh include the following:
- Application for the formation of a branch office in the approved manner, signed by the appropriate person.
- The principal/parent company’s memorandum, articles of association, and certificate of incorporation.
- Name and nationality of the main company’s promoters and directors.
- Accounts of the main company’s most recent fiscal year that have been audited.
- Resolution of the Board of Directors of the company approving the establishment of an office in Bangladesh.
- The office’s proposed organogram indicates the positions that both expatriates and local staff will hold.
- Details of the activities to be carried out by the proposed Bangladesh branch office or representative office are also provided.
- Forwarding Letter to the BIDA.
As per a recent guideline, foreign company that intends to set up a branch must show that the parent company has been profitable for the last three years and must have a fixed asset of not less than USD 100,000. In case the company does not meet requirements, other group companies may provide an undertaking as per a standard format.
The Bangladesh Mission, national business chamber, and local business chamber must certify the documents:
The concerned Bangladesh Mission or the Embassy of the relevant nation in Bangladesh, as well as the national business chamber and local business chambers, must certify the documents (items 2-5). Before submission, any papers that are not in English must be translated into English. It should be mentioned that the BIDA must get 4 (four) copies of all the documents. After analyzing the documents mentioned above, the BIDA may request further papers.
Please note that the branch or liaison office can be opened remotely, and the concerned company does not need to visit Bangladesh to register.
Government Fees
Government fees are approximately USD 400 for registration with BIDA. An additional USD 100 is local govt. Fees for obtaining a Trade License.
Timeline and Registration Process
Now, the procedure is online. The documents must be uploaded to the BIDA’s online portal before being physically delivered later. Authorities from BIDA will apply supporting documentation to the Inter-Ministerial Committee after thoroughly reviewing all of the materials; the Committee may request furCommitteees or a physical presence. The committee will approve if they are pleased. Typically, the Inter-Ministerial Committee meets twice each month. The normal timescale is one month or less.
A branch office is often approved to open for 3(three) years at first, with the option of an extension.
Import & Export
Not permissible generally, however, Branch Office may with due approval from BIDA obtain Import and Export Registration Certificate and engage into import and export.
Minimum Capital Requirement:
Branch offices do not have a minimum capital requirement because they are not separate legal entities. However, after registration within 2 months, branches and representative offices must bring a minimum inward remittance equivalent to US$ 50,000. This is considered an initial start-up cost, and this inward remittance should cover six months’ worth of operating costs. Please note that recently, BIDA has published a guideline that requires USD 100,000 to be remitted to Bangladesh in case the Branch Office is required to employ a foreign national.
Validity & Renewal:
Normally, permission is given to operate for three years, which is then renewable for further terms.
Meeting of Operation Expenses:
All expenses will be met out of funds transferred from abroad through normal banking channels and converted to the local currency account
Outward Remittance & Profit repatriation:
No outward remittance from Bangladesh is allowed. However, in the case of the branch office, it is possible to do so with pre-approval of BIDA and subject to payment of taxes and compliance with other necessary permissions. For outward remittance, branches will be required to pay 30% of taxes.
Bank Account Opening
The next step is to open an account with any Bangladeshi bank after receiving approval to open a branch office there. A branch office is not required to have any minimum paid-up capital, as was already stated above. However, within two months from the date the BIDA permission letter was issued, it is necessary to remit US$ 50,000 to Bangladesh.
Obtaining the Bangladesh Bank’s approval
Following approval from BIDA, the newly approved branch office must submit a report to Bangladesh Bank within 30 (thirty) days. Branch offices are not permitted to submit this report to Bangladesh Bank directly. Instead, it should be done through the branch or representative office’s bank. Hence, immediately following receiving approval from BIDA, the newly approved Branch Office or representative Office needs to create a bank account.
Registration with the RJSC (Final Step)
Bangladesh is governed by the Registrar of Joint Stock Companies (RJSC). After receiving approval from Bangladesh Bank and BIDA, registering with the RJSC is the final step. For this, the following paperwork will be needed:
- Letter of approval from BIDA.
- Letter of approval from the Bangladeshi Central Bank.
- Certified copies of the Articles of Association and Memorandum of Association and other legal documents.
- Detailed address of the company’s registered or main office.
- A list of the company’s directors and secretaries, if any.
- A Bangladeshi person’s name and address could represent the business in processing and accepting documents.
- The complete address of the company’s Bangladeshi office.
Statutory formalities
- Registration with Bangladesh Investment Development Authority.
- Repatriation of Investment amount within 2 months from the date of registration with BIDA
- Trade License from the Local City Corporation
- Income Tax Registration & VAT Registration with the National Board of Revenue.
- Any other licenses or permissions or NOC are required as per the relevant laws of Bangladesh.
Trade License from the Local City Corporation
One needs to apply to the relevant city corporation to obtain a trade license. The following details and papers must be included with the application:
- Photocopy of Memorandum of Association and Articles of Association
- Photocopy of Managing Director or Chairman
- TIN of the Branch office
- The Rental agreement of the office
- Lastly, the Nature of Business
Duration
A trade license usually takes 3 – 4 working days to obtain.
Charge
A trade license requires the government to pay USD 100.
Income Tax Registration and VAT Registration
Once the branch office has been formed, it needs to obtain a special Business Identity Number to conduct regular commercial operations in Bangladesh (BIN). Hence, a VAT registration certificate must be obtained from the Department of the National Board of Revenue to receive a Company Identity Number (NBR).
Foreign workers must obtain a work permit to work in Bangladesh
Foreign workers need to obtain a work permit in order to work in Bangladesh. It is a multiple-entry visa with a 3-month initial validity period that may be extended.
Educational institutions and commercial (branch, representative, or liaison) offices registered with BIDA may hire foreign workers at a ratio of 5:1. (local worker: foreign worker) according to the Bangladesh Investment Development Authority.
Please note that once a work permit is issued, the concerned person needs to obtain security clearance from the Ministry of Home, Bangladesh, to obtain a visa. Jural Acuity can help the investors register the Branch Office, Liaison Office, and Representative Office and obtain all further licenses as required to operate. Contact +8801886119800 or email [email protected]
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