Table of Contents
Branch office
A Branch office is considered a country office of a foreign entity. The branch office is restricted from undertaking any business activity in Bangladesh and 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. A branch or liaison office is one of the two choices open to foreign investors looking to begin operating in Bangladesh.
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.
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.
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 minimal amount 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, collect, 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 liaison or representative office’s local and expatriate staff members.
Subsidiary
A subsidiary is a distinct legal entity that a parent company owns a majority of. It runs separately from its controller and has its board of directors. The parent company, which may be fully or partially owned, retains a controlling interest in its subsidiaries.
Choosing a structure for your business
A major decision that you will have to make when starting a company is how it will be structured. The size, nature, and desired management style of your organization will determine the structure you select. To choose an appropriate business structure, a comparison needs to be made between branch liaison and subsidiary companies. The comparisons between the branch liaison and subsidiary company are given below:
| SL No. | Key points | Branch | Liaison/Representative office | New Company /Subsidiary | Comment |
| 1. | Purpose | To carry out commercial activities in Bangladesh. | To promote and facilitate business activities of the parent company | Subsidiaries can operate independently to achieve the objectives of the parent company . | |
| 2. | Paid-up capital | A branch office does not need paid-up capital. | No minimum paid-up capital is required | Paid-up capital can be increased at any time following the incorporation of a company in Bangladesh. | |
| 3. | Initial investment Requirement | The parent company must invest no less than USD 50,000 or 6(six) months of operational costs with the expense of initial office set-up cost included. | Initial cash is required, normally at least USD 50,000 | No minimum capital is required to set up a subsidiary | |
| 4. | Type of Business Entity | A Branch Office is a proper legal entity after it is registered with the BIDA in Bangladesh. | A Liaison Office is a proper legal entity after it is registered with the BIDA in Bangladesh. | Separate legal entity from its parent company; | However, branch and liaison offices are seen as extensions of foreign companies rather than separate legal entities. |
| 5. | Permission | Requires permission from BIDA | Requires permission from BIDA from the Bangladesh Bank | The proposed company name needs to be cleared—that is, approved by RJS before incorporation. | |
| 6. | Licensing | Renewal of trade license, IRC & ERC; | Renewal of trade license | Renewal of trade license, IRC & ERC; | |
| 7. | local revenue sources | A Branch office may have a local source of income from the approved field of business activities in Bangladesh. | In Bangladesh, a liaison or representative office will be without any local revenue sources. The parent company operating the liaison or representative office is required to pay all setup and operational costs, including the salary of the local employees and expatriates. | ||
| 8. | Income generative operation | The income generated is subject to approval by BIDA. | The parent company has to bear all operational expenses of the liaison office in Bangladesh. | Allowed to generate income, incur expenses out of income. | |
| 9. | Taxation | Subject to corporate tax in Bangladesh. | Not subject to corporate tax in Bangladesh | Full-fledged corporate taxation | |
| 10. | Outward remittances | Allowed direct involvement and earning of commission through import and export activities | Outward remittances are only allowed if the money is brought in from abroad and remains unused. | ||
| 11. | Memorandum and Articles of Association | No separate constitution/MOA/AOA from the foreign company | No separate constitution/MOA/AOA from the foreign company | Having its constitution/MOA/AOA; | The Branch and Liaison Office do not have their separate Memorandum and Articles of Association. |
| 12. | Employment | Hires employees under the parent company’s terms and conditions | Hires employees under the parent company’s terms and conditions | Hires employees under the company’s terms and conditions | |
| 13. | Registration | Requires to be RJSC registered. | Requires to be RJSC registered. | Requires to be RJSC registered. | A fee is applicable for the registration of commercial offices along with a 15% VAT imposed by the Government of Bangladesh. |
| 14. | Required Documents |
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| 15. | Trade License | required to apply for a trading license from the local government | required to apply for a trading license from the local government | The Trade License can be obtained from any local government body (City Corporation or Pouroshova).
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| 16. | Commercial activities | It allows a foreign company to carry out commercial activities within Bangladesh. | Commercial operations by a liaison office are not permitted in Bangladesh. | As commercial activity is unrestricted, it is permissible to do any form of business that is independent of the parent company. | |
| 17. | Liability | Fully liable for debts and obligations in Bangladesh. | Not liable for debts and obligations in Bangladesh. | Shareholders of the Subsidiary company have limited liability | |
| 18. | Validity | Till the validity of the BIDA permission period | Till the validity of the BIDA permission period | Till the company is closed |
You may be wondering which option is better for your growing company now that you know the difference between a branch, a liaison, and a subsidiary. You should assess your business needs to decide which business structure is suitable.
Whichever will best serve your business’s needs should be taken into consideration when comparing a branch liaison and a subsidiary Company.
Disclaimer: Consult a relevant professional’s advice before making any decisions based on this article.
