Foreign investors aiming to establish a business presence in Bangladesh often find themselves considering whether to set up a liaison office or a branch office.
Both options serve distinct roles and can significantly influence how a business operates within the country.
A liaison office or branch office acts as a channel of communication between the main place of business or head office overseas and entities within Bangladesh.
This article will provide you the advantages of each company setup and guide you through the approval process required by the Bangladesh Investment Development Authority ( BIDA ).
What is the liaison office?
A Liaison Office is also known as a representative office that 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.
What is the Branch office?
When a foreign company seeks to establish its presence in Bangladesh, setting up a branch office can be a strategic decision. A Branch office is considered as a country office of a foreign entity. Usually, it is also restricted to undertake any business activity in Bangladesh and cannot have any income in Bangladesh. However, there are options to extend the parameters of the Brach office, whereby the Branch Office can with due pre-consent from BIDA engage in commercial activity. Establishing a liaison office in Bangladesh allows a foreign company to establish its presence in the country. This can be a strategic move to tap into the local market and benefit from the growing economy.
Minimum capital requirement for liaison office setup:
To establish a liaison office in Bangladesh, foreign companies or sponsors must adhere to specific financial requirements. One crucial stipulation is that a minimum of foreign exchange USD 50,000 must be brought in as inward remittance within two months of receiving prior approval from the Bangladesh Investment Development Authority (BIDA). This capital injection is essential for the smooth functioning of the liaison office and demonstrates a commitment to establishing a presence in the country.
The monetary threshold of foreign exchange USD 50,000 serves as a financial pillar for the liaison office’s operations for a private limited company. It not only ensures that the office has the necessary resources to initiate its activities but also signifies a level of investment in the Bangladeshi market. This financial commitment indicates seriousness on the part of the foreign company registration or sponsor in engaging with the local business landscape and fostering business relationships in Bangladesh.
By mandating the transfer of funds within a specified timeframe, authorities aim to expedite the process of establishing the liaison office also known as representative office. This requirement also underscores the importance of timely compliance with regulatory guidelines, reflecting the structured approach necessary for operating within the legal framework of Bangladesh. Moreover, the designated account for these funds, whether in the register liaison office, serves as a transparent mechanism for monitoring financial transactions and ensuring accountability.
When establishing a private limited company in Bangladesh, ensuring a minimum capital influx of USD 50,000 into the Liaison Office’s account is not just a regulatory requirement, but also a strategic move to kickstart operational activities seamlessly. This financial injection plays a crucial role in covering essential expenses like office rent, utility bills, staff salaries, and operational overheads. Moreover, it signals financial robustness, underscoring the credibility of the Bangladesh Liaison Office in its engagements with stakeholders, clients, and partners within the country.
Overall, the financial requirement of foreign exchange USD 50,000 for establishing a liaison office in Bangladesh for private limited company is a strategic step towards building a robust foundation for the office activity. It symbolizes a commitment to the local market, adherence to regulatory standards, and readiness to engage in business operations within the country. By meeting this financial threshold promptly and judiciously, foreign companies or sponsors can set a positive precedent for their presence in Bangladesh and lay the groundwork for a successful register liaison office venture.
Meeting of Operation expenses:
All expenses associated with operating the liaison office in Bangladesh will be covered by funds transferred from overseas through approved channels overseen by the Bangladesh Bank. This process involves utilizing traditional banking channels such as Sonali Bank account, the Reserve Bank, or the Central Bank account for the secure transfer of funds. Once the funds arrive, they will be efficiently converted into the local currency and deposited into the office’s designated account, in compliance with regulations set forth by the banking authorities in Bangladesh. This meticulous financial procedure ensures that the liaison office has the necessary resources in the local currency to conduct its daily operations seamlessly and in accordance with the established guidelines.
Outward Remittance:
No outward remittance from Bangladesh is allowed. However, in the case of the Branch office, it is possible with the pre-approval of BIDA.
Visa & Work Permit:
Sponsors can apply for a Private Investors Visa, which also extends to dependent family members. However, foreign national employees must obtain approval from the Ministry of Home Affairs. The Ministry of Home Affairs will approve within 45 working days.
Import & Export
Not permissible. However, Bangladesh liaison office or Branch Office may with due approval from BIDA obtain Import and Export company Registration Certificate and engage in import and export.
Registration and statutory formalities
Company Registration prior approval with BIDA.
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 permission or NOC required as per the relevant laws of Bangladesh.
Permission and Authorization Procedures by Bangladesh Bank
When establishing a liaison office in Bangladesh, obtaining permission and authorization from the Bangladesh Bank is a vital step in the process. Bangladesh Bank, as the central bank of the country, plays a crucial role in regulating and overseeing various financial activities, including the operations of liaison offices company setup by foreign investment.
To initiate the process, the foreign company seeking to establish a liaison office in Bangladesh must submit a formal application to the Bangladesh Bank. This application should include details about the parent company, the purpose of setting up the liaison office, proposed business activities, financial information, and any other relevant documentation as per the guidelines provided by the Bangladesh Bank.
Upon receiving the application, the Bangladesh Bank evaluates the proposal to ensure compliance with the regulations and policies governing liaison offices. Unlike the subsidiary company The review process may involve assessing the financial standing and credibility of the parent company, the potential impact on the local economy, and the overall benefit to Bangladesh from allowing the establishment of the liaison activity.
If the Bangladesh Bank is satisfied with the application and deems the establishment of the liaison activity to be in the country’s best interest, it issues the necessary permission and authorization for the parent company to proceed with setting up the office and commencing operations. This approval from the Bangladesh Bank is essential for legally operating a liaison office in Bangladesh and is a key requirement for obtaining other permits and licenses from relevant authorities.
Required Documents
- Prescribed Application Form duly filled in, signed and stamped
- MOA and AOA of the Principal Company & Certificate of Incorporation
iii. Audited Accounts of the last financial year
- Board Resolution to open a Branch/Liaison/Representative Office in Bangladesh
- Details of activities to be conducted in Bangladesh.
- Details of shareholders, promoters & directors.
- Proposed organogram of the office.
Item ii-iv must be attested by the Bangladesh Embassy/High Commission of the country of origin, Embassy/High Commission of the applicant’s country of origin, or Apex Chamber of Commerce of the country of origin. The proposed office must first apply online and then submit the documents to BIDA. 4 copies of all documents need to be submitted to BIDA.
Timeline for Liaison Office/ Branch Office Registration-
BIDA Registration timeline is 3-4 weeks upon submission. Other formalities are consequential and will take about 2 weeks.
Validity & renewal –
Normally permission is given to operate for three years, which is then renewable for further terms.
Cost of Establishment:
Approximately USD 3,000 for government fees, misc expenses, and legal fees for the above-mentioned licenses and permissions.
if you are a foreign investor and need professional help with liaison office foreign investment contact us.
And also you can read our article foreign investor. It will help you understand foreign investment.
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