Doing business in Bangladesh 2016
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Doing business in Bangladesh 2016 In association with:
Contents
Introduction ................................................................................................................................................................................. 3
– Country profile.................................................................................................................................................................... 4
Legal overview ............................................................................................................................................................................ 6
Conducting business in Bangladesh......................................................................................................................................... 10
Tax system ................................................................................................................................................................................ 13
Labour ....................................................................................................................................................................................... 17
Audit .......................................................................................................................................................................................... 20
Trade .......................................................................................................................................................................................... 22
Finance ...................................................................................................................................................................................... 23
Infrastructure ............................................................................................................................................................................. 25
This Guide has been prepared jointly by The Hongkong and Shanghai Banking Corporation Limited in Bangladesh and Grant Thornton for the purposes of providing a high-level general
overview of the business environment in Bangladesh for the information of businesses who may be interested in transacting or investing in Bangladesh. Any transaction or investment in
Bangladesh, however, should only be undertaken based on professional advice specific to such transaction or investment.
2
Introduction
This guide to doing business in Bangladesh will provide foreign investors with an insight into the key aspects of
undertaking business and investing in Bangladesh. The country offers a competitive market, business-friendly
environment and a growing population.
Bangladesh has a well-educated, In the past decade, Bangladesh’s current trends can be maintained, it
highly adaptive and industrious economy has grown at nearly six will be likely to meet this criterion in
workforce with the lowest wages per cent per year. Testament to the 2018-2021 review.
and salaries in the region. Over 50 the country’s continued growth,
per cent of the population is under the OECD upgraded its rating for While the economy is likely to
25, providing foreign investors with a Bangladesh from a 6 to a 5 in July retain its competitive advantage
youthful group for recruitment. 2015. This means the OECD now in producing clothing and apparel,
categorises Bangladesh as a new rising incomes, better regulation
Furthermore, Bangladesh’s frontier market, rather than a nation and improved infrastructure
location next to India, China and highly dependent on development will encourage a shift towards
the ASEAN markets provides aid. Bangladesh has set a target investment in higher value-added
foreign investors with a strategic to be in the middle income group sectors. In the long term, rising
status by 2021. This is expected to Foreign Direct Investment (FDI)
location to access these markets.
be achieved through simultaneous inflows will have a key role
Bangladesh has proved to be an
improvement of the political, in supporting investment in
attractive investment location
economic, social, technological, Bangladesh. Growing household
with its population of 168.9 million
legal and environmental incomes will also open up a
and consistent economic growth
infrastructure. Bangladesh was substantial market for consumer
substantiated by strong and
recently promoted as a lower middle goods, including high-tech products.
growing domestic demand.
income country (LMIC) from a low
income country (LIC) classification While this guide makes reference to
Bangladesh offers the most liberal by the World Bank. some of the most common issues
FDI regime in South Asia, allowing investors might face, it must be
100 per cent foreign ownership Bangladesh also has made noted that certain industries, such
with an unrestricted exit policy, substantial strides in improving the as the financial services sector,
easy remittance of royalties and Human Assets Index (a measure of are subject to special regulation
repatriation of profits and incomes. the level of human capital consisting and therefore companies wishing
Bangladesh also offers a number of four indicators: two on health to invest in this area should seek
of export-oriented industrial and nutrition and two on education) legal advice.
enclaves with infrastructural over the past few years and is only
facilities and logistical support for about 2.0 percentage points short of The information in this publication is
foreign investors. meeting the graduation criterion. If current at January 2016.
3
Country profile
Capital City Dhaka
Area 148,460 sq.km
Population 168,957,745
Language Official language is Bangla (Bengali). English though not having official status,
is prevalent across government, law, business, media and education, and can
be regarded as the de facto co-official language of Bangladesh.
Currency Bangladeshi Taka (BDT)
International dialling code + 88
National Holidays 2016 21 February – International Mother Language Day
17 March – Birthday of the Father of the Nation
26 March – Independence Day
14 April – Bengali New Year
1 May – May Day
21 May* – Buddha Purnima
23 May* – Shab e-Barat
1 July – Bank holiday
1 July – Jumatul Bidah
3 July* – Shab e Qadr
5 – 7* July – Eid ul-Fitr
15 August – National Mourning Day
25 August – Janmashtami
11 – 13* September – Eid ul-Adha
11 October – Durga Puja (Dashami)
12 October* – Ashura (Muharram)
12 December* – Eid e-Milad-un Nabi
16 December – Victory Day
25 December – Christmas 31 December – Bank Holiday
*Subject to the appearance of the moon
Business and Banking hours Generally 09:00 to 17:00 from Sunday to Thursday
Banking Transaction Hours: 10:00 to 16:00
Stock exchanges Dhaka Stock Exchange
Chittagong Stock Exchange
Political structure Parliamentary representative democratic republic
Doing Business rank 2016 174 (Dropped by two points from 2015 Rank 172)
4
Ease of Doing Business
Topics 2016 rank 2015 rank Change in rank
Starting a business 117 111 -6
Licenses and Permits 118 118 No change
Getting Electricity 189 189 No change
Registering property 185 184 -1
Financing 133 128 -5
Protecting Investors 88 87 -1
Paying Taxes 86 85 -1
Trading Across Borders 172 172 No change
Enforcing Contracts 188 188 No change
Resolving Insolvency 155 155 No change
Source: World Bank Group (Doing Business)
5
Legal overview
Political and legal system amendment can only be passed courts and tribunals established
Bangladesh is a constitutional through a vote of no less than two under the provisions of different
republic with a multi-party thirds of the members of Parliament. statutes. The Supreme Court of
parliamentary democracy. Elections If any other law is inconsistent Bangladesh is the highest court of
in Bangladesh are held on the with the Constitution that other law in Bangladesh. It consists of two
basis of universal suffrage. The law shall, to the extent of the divisions, an Appellate Division and
Parliament of Bangladesh is a inconsistency, be void. Part III and High Court Division. The Supreme
unicameral legislature consisting of Article 27 to 44 of the Constitution Court is independent of the
300 members, directly elected from provide 18 fundamental rights such executive branch and is able to rule
each constituency on the basis of as equality before law, equality of against the government.
a first-past-the-post system and 50 opportunity in public employment,
women members elected by the right to protection of law, protection Data protection
aforesaid members on the basis of right to life and personal liberty, There is no specific privacy or
of proportionate representation in freedom of movement, freedom of data protection law in Bangladesh,
the parliament. The President is the thought, etc. except for the Information and
head of the state elected by the Communication Technology
members of the parliament for a The present legal and judicial system Act, 2006.
five-year term. Executive power of of Bangladesh owes its origin mainly
the Republic is, in accordance with to the two centuries of British rule in Nevertheless, the right of privacy is
the Constitution, exercised by or on the Indian Sub-Continent, although a fundamental right in Bangladesh.
the authority of the Prime Minister. some elements are remnants of the Article 43 of The Constitution of
The President is responsible for pre-British period tracing back to Bangladesh declares that every
appointing the Prime Minister. Hindu and Muslim administration. citizen shall have the right to the
The Cabinet shall be collectively Most legislation in Bangladesh privacy of his correspondence and
responsible to Parliament. originates from English law and the other means of communication.
legal system is based on English
The present structure of the local common law. Under the Information and
government in Bangladesh had its Communication Technology Act
origin in the British colonial period. The term “law” has been defined 2006 unauthorised entry into any
The first attempt at establishing a in the Constitution of Bangladesh computer system is a punishable
local government institution was as any Act, ordinance, order, rule, offence. In addition, it is a
made during the latter part of the regulation, bylaw, notification or punishable offence to disclose any
nineteenth century. The structure, other legal instrument, and any record, book, register, message
function and financial management custom or usage, having the force of exchange, data or file to another
of local government institutions have law in Bangladesh. person, even if authorised to
undergone many changes from the view or process those materials
British colonial period to the present Besides, Article 111 of the without the permission of the
day. Currently, the rural/regional Constitution of Bangladesh provides concerned person(s).
local government of Bangladesh has that the law declared by the
three tiers, namely ‘Zila Parishads’, Appellate Division shall be binding The Information and Communication
‘Upazila Parishads’ and ‘Union on the High Court Division and Technology Act, 2006 is related
Parishads’. Due to the rapid growth the law declared by either division to the protection and legality of
of towns and cities, in sub-urban of the Supreme Court shall be information and communication
areas the ‘Union Parishad’ is binding on all courts subordinate technology, Cyber Crimes and
frequently replaced by the Municipal to it. Therefore, the statutory laws, relevant issues therein. According
Corporations (Pourashava) and City secondary legislation and judgment to the Right to Information Act
Corporations. laws or precedent, along with 2009, all individuals have the
customs and usage, all form the right to access information about
The Constitution of Bangladesh is sources of law in Bangladesh. state agencies apart from issues
the supreme law of the Republic. concerning national security or
However, it can be amended by an The judiciary of Bangladesh consists public interest. Nevertheless, no one
ordinary law-making procedure; this of a Supreme Court, subordinate has the right to intervene in one’s
6
personal information unless (s)he all current external transactions, repealing the MLPA, 2009 and
willingly discloses it. including trade and investment Anti-Terrorism Act (ATA), 2009 as
related transactions, through banks amended in 2012 and 2013. Both
Exchange controls in Bangladesh authorised to deal Acts have empowered Bangladesh
Bangladesh operates an in foreign exchange (Authorised Bank (BB), thus Bangladesh
exchange controlled economy Dealers) without prior approval from Financial Intelligence Unit (BFIU) to
under the Foreign Exchange Bangladesh Bank. perform an anchor role in combating
Regulation Act, 1947. All inward money laundering and terrorist
and outward remittances are Similarly, non-resident direct financing.
regulated by the Central Bank of investment in industrial enterprise
Bangladesh (that is, Bangladesh and non-resident portfolio According to section 25 (2) of
Bank). Foreign investor rights investment through stock MLPA, 2012, if any reporting
are protected under the Foreign exchanges do not require prior organisation violates the directions
Private Investment (Promotion approval of the Bangladesh Bank. mentioned in sub-section (1)
and Protection) Act, 1980 which of section 25 of MLPA, 2012,
ensures legal protection against Remittance of post-tax dividends Bangladesh Bank may impose a
nationalisation and expropriation. It or profits on non-resident direct fine of at least BDT50,000 but not
also guarantees non-discriminatory or portfolio investment does exceeding BDT2,500,000 on the
treatment between foreign and not require prior approval. Sales reporting organisations. Additionally,
local investment, and repatriation proceeds, including capital gains on Bangladesh Bank may cancel the
of proceeds from sales of shares non-resident portfolio investment, license or the authorisation for
and profits. Bangladesh Bank may also be remitted abroad without carrying out commercial activities
has outlined relevant procedures prior approval. of the said organisation or any of its
and formalities for all inward and branches, service centres, booths
outward remittance in its Guidelines Prior approval from Bangladesh or agents. Alternatively, the Central
for Foreign Exchange Transaction. Bank is required for the repatriation Bank shall inform the corresponding
The Guidelines cover the procedures of sale proceeds of non-resident registration or licensing authority
for, among others: equity investment in public limited about the violation for the relevant
companies that are not listed on authority to take appropriate
• Foreign dealings in securities
the stock exchange, and private measures against the organisation.
• Remittance of royalty/technical limited companies. In determining
assistance fees the repatriable amount, Bangladesh Intellectual Property Rights
• Foreign ownership Bank works out the net asset value Intellectual Property Rights are
• Mergers and acquisitions of the shares on the basis of audited established in the Constitution of
financial statements as on the date Bangladesh. Bangladesh’s main
• Divestments
of the sale and the net asset value intellectual property laws comprise:
• Remittance of profit, dividends, is thus calculated is considered the Trademarks Act, 2009, the
capital gains repatriable. Patents and Designs Act 1911 and
• Foreign and local borrowings the Copyright Act, 2000.
• Retention quota of exporters Money laundering regulations
In line with international initiatives Further intellectual property
Any transaction that has not been and standards, Bangladesh provisions can be found in a
outlined in the Guidelines for Foreign promulgated the Money Laundering number of sectorial specific
Exchange Transactions must Prevention Act (MLPA), 2002. regulations. Bangladesh is also a
obtain specific approval from the Subsequently, MLPA, 2009 was member of the World Intellectual
Bangladesh Bank. enacted to expand the definition Property Organization (WIPO)
of money laundering and coverage and signatory to the treaties
Bangladeshi ‘Taka’ (BDT) is of the offence. To strengthen the administered by WIPO. Provisions
convertible for current external AML/CFT regime of Bangladesh and with regard to protection of
transactions. Individuals or firms meet the international standards, Intellectual Property Rights can be
resident in Bangladesh may conduct MLPA, 2012 was promulgated summarised as follows:
7
COPYRIGHT
Copyright in Bangladesh is a right given by the law to creators of literary, dramatic, musical and artistic works and
producers of cinematography films and sound recordings etc. The rights given in the Copyright law include, inter alia,
rights of reproduction, communication to the public, adaptation and translation of the work. However, there may be slight
variations in the composition of the rights depending on the nature of the work. There is no copyright available for ideas.
Copyright subsists only in the material form in which the ideas are expressed.
Protection Sections 14 and 15 of the Copyright Act, 2000 laydown the broad scope of copyright protection.
granted Copyright provides the owner the right to do, and authorise the doing of, any of the following acts:
• Reproduce the work in any material form
• Publish the work
• Perform the work in public
• Produce, reproduce, perform or publish any translation of the work
• Make any cinematographic film or a record in respect of the work
• Communicate the work by broadcast or any other similar instrument
• Make any adaptation of work, etc
Infringements Copyright subsists in the following works:
(a) original literary, dramatic, musical and artistic works
(b) cinematograph films
(c) sound recordings
Also for published works, whether in Bangladesh or abroad, the author has to be citizen/permanent
resident of Bangladesh either at the time of publication or death.
Copyright is deemed to be infringed when any person other than the owner of the copyright, or an
authorised licensee, performs any of the above listed acts, eg publishes, reproduces, distributes or
imports any form of the copyrighted work.
Duration In Bangladesh the term of copyright varies according to the nature of the work and whether the
author is a natural person or a legal person. In the case of literary, dramatic, musical or artistic
works, other than a photograph, the copyright lasts: the lifetime of the author plus 60 years from
the beginning of the calendar year following the year in which the author dies.
PATENTS
Patents protect inventions. An application for patent has to be made in a prescribed form to the Department of Patents,
Designs and Trade Marks in the prescribed manner. In order to be patentable an invention should have the following
characteristics: the invention should relate to a manner of manufacture, the manner of manufacture should be novel, it
should be the outcome of inventive ingenuity, it should have utility and it should not be contrary to law or morality.
Protection A patent provides the owner with the exclusive right:
granted
• To make the product
• To sell the product
• To use the product
• To authorise others to do the above acts in whole or in part
Infringements The statute confers on the patentee exclusive monopoly rights to make, sell, use, exercise or
distribute the invention and infringement occurs when such rights are violated.
Duration Generally, the term of the patent 16 years from the application date; this may be extended further
by application.
8
TRADE MARKS
A trade mark must be a sign capable of distinguishing goods and services of one undertaking from those of another
undertaking. Those signs can be: words, personal names, designs, letters, numeral slogans, sounds, smells, signs and
distinctive colours.
Protection Trade marks are registered under the Trademark Act 2009 (as amended). A registered trade mark
granted allows the entrepreneur to plan the marketing of the products or service for which it is to be used.
One who has designed or used the trademark first is entitled to claim proprietorship thereof, unless
he/she has subsequently abandoned this right and it is taken up by someone else.
Infringements When a person uses any trade mark in the course of trade, in relation to the same goods for which
the mark is registered, without the authority of its proprietor, it will amount to an infringement of
that trademark.
A registered trade mark will be deemed to be infringed by a person (not being a registered
proprietor or a person using by way of permitted use) where he uses same mark, similar mark or
confusingly similar and such use is like to cause confusion on the part of the public, or which is
likely to have an association with the registered trademark.
Enforcement of a trademark right against any violation is undertaken through the courts; the right
can be enforced by order of injunctions, seizure and confiscation and relevant damages.
Duration A registered trade mark is valid for an initial period of seven years from the date of filing and
renewable thereafter for successive periods of ten years.
DESIGNS
The proprietor of a new or original design shall have the right to apply for registration of the said design under the Patents
and Design Act 1911. While this is also called copyright, it is different from the copyright conferred under the Copyright
Act 2000.
Protection When a design is registered, the proprietor of the design shall, subject to the provision of the Act,
granted have exclusive copyright in the design.
Infringements During the existence of any copyright in a design it shall be unlawful for any person:
• To apply the design, or cause the design to be applied, to any article in any class of goods in
which the design is registered or any fraudulent or obvious imitation thereof
• To import, for the purpose of sale, without consent of the proprietor, any article belonging to the
class in which a design has been registered
• To publish or expose, or cause to be published or exposed, for sale any article in any class of
goods in which a design has been registered
Enforcement of the design right against its violation is undertaken through the courts: the right can
be enforced by order of injunctions, seizure and confiscation and relevant damages.
Duration Once obtained, a design right is protected for a period of five years from the date of filing of the
application. It can then be renewed for one or two periods of five years each up to a total term of
15 years.
9Conducting business
in Bangladesh
Business entities Private Limited Company:
Any foreign company or individual The main characteristics of a Private
wanting to do business in Limited Company are:
Bangladesh will need to decide
under which form they want to • Restricts the rights to transfer the
operate. The various business shares
entities available in Bangladesh are • Limits the number of its members
described below. to minimum two and maximum
50 excluding the persons
It is important to note that those employed in the company
that do not create a legal entity
• Prohibits any invitation to the
in Bangladesh in order to carry
public to subscribe for the shares
business in the country might still
be subject to certain limitations
or debentures of the company and Annual financial
• Is entitled to commence business
and obligations under state law.
Companies wanting to provide from the date of its incorporation statements
goods or services in Bangladesh
need to carefully assess whether Public Limited Company: must be duly
A Private Limited Company may
their activities establish a presence
in Bangladesh which might make be converted into a Public Limited approved by
Company or a company can be
them liable to pay taxes in the
country and oblige them to make incorporated as Public Limited an approving
public filings. Company.
body within
As per the relevant publications Public limited company can be of
of the Board of Investment two types: i) listed and ii) unlisted six months of
(BOI), local investors may
setup a business under several The main characteristics of a Public the balance
organisational structures such as Limited Company are:
sole proprietorship, partnership sheet date.
and limited company. In the case • May issue invitation to the
of a foreign investor, only a limited members of the public to
company may be established. subscribe the shares and
debentures of the company
Companies limited by shares through a prospectus which
Business in Bangladesh may be complies with the requirements of
led by an organisation framed the Companies Act, 1994, Has a
and incorporated locally or by an minimum of seven members with
organisation incorporated abroad, no maximum limit
however enrolled in Bangladesh. • Has at least three directors
The incorporation or enrolment • Shall not commence any business
is carried out by the Registrar of until obtaining the Certificate of
Joint Stock Companies and Firms Commencement of Business
(RJSC) under the provisions of the
Companies Act 1994. The following For listed public limited companies
corporate forms are available: (which are listed with BSEC for
trading shares in public), in addition
• Company Limited by Shares
to the above, they must also comply
–– Private Limited Company with the requirements of the
–– Public Limited Company Securities and Exchange Ordinance
• Company Limited by Guarantees 1969 and the Securities and
• Unlimited Company Exchange Commission Act 1993.
10Formation • Export Registration Certificate shares of fixed amount and liability
To establish a company in (in the case of business related of its members.
Bangladesh, the promoters must to export)
register with the Registrar of Joint • License/Permission from the The AOA are the regulations
Companies & Firms (RJSC&F). authorities according to the nature governing the internal management
The following documents must of business/profession of the affairs of the company and
be registered: the conduct of its business. These
• Bank account
articles are subordinate to and
• Name Clearance: this involves • Membership of trade body
controlled by the MOA.
submitting an application to the
office of RJSC&F through the Foreign investors will also need
Management
website alongside the applicable to register with the Board of
The business of a company is
fees. The name cannot match or Investment. This comprises
managed by the Board of Directors.
closely resemble any other name submitting an application form,
The company may appoint or
already taken alongside the MOA/AOA, attested
employ any individual as its
copies of deed/documents in
• Memorandum and Articles of Managing Director for a term not
support of project land, background
Association: the Memorandum exceeding five years at a time.
of the promoters, a project profile
and Articles of Association must The business and all other affairs
(if the total project cost exceeds
be prepared and submitted, of the company are managed by
BDT100 million) and a fee. Further
alongside a scanned copy of the the Managing Director who is in
information may also be required if
encashment certificate received turn supervised by the Board of
the project is financed by a loan.
from a local bank. A registration Directors. The Board of Directors
fee must also be paid to the may elect a Chairman and decide
After receiving the application
designated bank his/her tenure of service and his/
duly filled in, signed and with the
• Registration: the promoters her function. The Chairman shall
required documents enclosed, the
of the new entity (having name BOI reviews the application and, preside all the meetings of the
clearance) apply for registration if found suitable, the registration Board of Directors and other
with necessary documents, certificate is issued. BOI registration meeting(s) whether an Annual or
prescribed forms & fees as makes the industrial unit eligible Extra-Ordinary General Meeting of
appropriate to the type of entity for all the incentives and facilities the Company. The Chairman and the
with the office of the RJSC&F. provided by the Government managing director shall not be the
of Bangladesh. same person.
• Certificate of Incorporation:
RJSC&F issues a Certificate of
Capital requirement Filing requirements
Incorporation upon satisfaction
Companies do not have any Companies must file annual reports
that the promoters submitted
minimum capital requirements and directors notes alongside
the above mentioned
unless they appoint expatriates audited accounts within 21 days of
documents properly
as employees. In this case, the the annual general meeting. Other
minimum capital requirement is statutory returns may be required,
Following registration, companies
USD50,000. eg tax and VAT returns.
must also obtain the following
before commencing business:
Constitution Partnerships
The constitution of the company A Partnership can be established
• Trade License from City
is set out in the Memorandum of with at least two and no more
Corporation/Municipality/
Union Council (Local Association (MOA) and Articles of than 20 persons, with the aim of
Government Bodies) Association (AOA). making and sharing profits among
themselves. An organisation
• Taxpayer’s Identification Number
The MOA states the name of the can emerge as an aftereffect
(Twelve Digit TIN)
company, whether it is public, of an agreement or contract,
• VAT Registration (in the cases private or limited and the location communicated or inferred between
where applicable) of the registered office. The MOA the partners. In Bangladesh, a
• Import Registration Certificate should clearly spell out the main partnership firm is to be structured
(in the case of business related objectives, the authorised capital, under the provisions of the
to import) the divisions of this capital into Partnership Act 1932.
11Under the Partnership Act 1932, the Generally, no outward settlement of
deed of partnership does not need any sort from Bangladesh sources
to be registered. Furthermore, the is permitted with the exception of
enrolment of such firm is not legally the cases allowed by the foreign
required. However, once registered, exchange regulations. The Branch/
a partnership firm may receive some Liaison/Representative office
legitimate rights and facilities. of a foreign entity must submit
an income tax return to the tax
Branch/Liaison/Representative authority concerned. Security
of Foreign Companies clearance may be needed from
For foreign investors that do not the Ministry of Home Affairs.
wish to incorporate a company in Liaison Offices need to bring
Bangladesh, a branch, liaison or
representative office may be the
inward remittance of a minimum of
USD50,000 within two months from Generally,
the date of the issue authorisation
most suitable forms.
letter as establishment expenses no outward
A branch office is established to and six months’ operational costs.
undertake the same business as settlement of
its head office. The activities of Formation
a branch office must be clearly Permission will be required from any sort from
stated in its letter of endorsement. BOI in order to open up a Branch/
These offices can have local Liaison/Representative Office. Bangladesh
sources of finance and carry out An application in the prescribed
business in approved foreign form along with the following sources is
investment sectors. documents must be submitted:
MOA/AOA of principal company, permitted with
A liaison office of a foreign certificate of incorporation, details
organisation is only permitted to of directors/promoters of principal
company, board resolution to open
the exception
provide services of contact or
coordination between its principal
and local agents, distributors/
the office, audited accounts of
the principal company for the last
of the cases
exporters’ establishments through
correspondences, individual
year, organisational structure of the
proposed office and list of activities
allowed by
contacts and other electronic media.
The office is not allowed to earn
of the proposed office. the foreign
income from Bangladesh sources.
No outward remittance of any
All papers must be attested by
the competent Bangladesh High
exchange
sort from Bangladesh sources will
be permitted with the exception
Commission/Commission of the
respective country in Bangladesh/
regulations.
of the sum accumulated from respective country’s apex business
abroad (the unspent part). The chamber. Permission must be
liaison office must acquire foreign sought from Bangladesh Bank for
currency in Bangladesh from the the opening of a branch/liaison office
guardian company and all costs in Bangladesh by foreign entities
should be covered from that inward including airlines and firms under
remittance. For this purpose, Section 18B of the Foreign Exchange
the office shall have to open an Regulation Act, 1947. The permission
account with any scheduled bank of is sought from Bangladesh through
Bangladesh as per the instructions the Authorised Dealer.
contained in the guidelines for
foreign exchange transactions. Following the above processes, any
foreign company which establishes
The activities of Branch/Liaison/ a place of business in Bangladesh
Representative offices of foreign shall, within one month of the
entities are restricted to those stated establishment, register the required
in the authorisation of the BOI. documents at the Registrar of RJSC.
12Tax system
Corporate Income Tax (CIT) Variation in rates:
Income tax in Bangladesh is administered under the
Income Tax Ordinance, 1984 and the Income Tax Rules, Particulars Incentive/Rate
1984, as well as notifications made under said Ordinance.
Manufacturer of Jute Products 15%
Scope Textile and Yarn Manufacturing
15%
For the purposes of CIT, no major distinction is Industries
made between foreign owned companies and
10% rebate
Bangladeshi-owned companies; although some Transfer of minimum 20% shares
on applicable
companies may qualify for certain tax incentives of paid-up capital of a non-publicly
income tax in the
depending on the nature of their business. Companies traded company through IPO
year of transfer
incorporated in Bangladesh and foreign companies
registered in Bangladesh (eg branch offices) are tax Capital Gain (General) 15%
resident. Tax resident businesses are taxed on their Capital Gain from sale of shares traded in stock
worldwide income, subject to International Financial exchanges:
Reporting Standards and any double taxation avoidance
agreements that may be in place. Non-tax resident General Individual Nil
businesses are subject to tax on any income accrued Company 10%
in Bangladesh.
Sponsor shareholder/ Sponsor
Taxable income and tax rates: director of specific type of 5%
companies
Shareholders holding more than 10%
Nature of Company Rate share in the paid-up capital of any
5%
publicly traded companies except
1 General: some specific type of companies
Publicly Traded Company 25%
Capital gains
Non-Publicly Traded Company 35%
Every company is liable to pay tax at the rate of 15 per
2 Bank, Insurance and Financing Institution cent on the capital gains derived from transfer of capital
(Other than Merchant Bank): assets and at 10 per cent on the capital gain derived from
Publicly Traded Company 40% the transfer of shares of listed company.
Non-Publicly Traded Company 42.5%
Groups
3 Merchant Bank 37.5% Bangladesh tax laws do not specifically address the issue
relating to tax on group consolidation. In practice, the
4 Mobile phone operators:
members of a group are taxed separately.
Publicly Traded Company 40%
Thin capitalisation
Non-Publicly Traded Company 45%
All foreign borrowing by private sector industrial
5 Cigarette Manufacturing enterprises requires permission from the Board of
45%
Company Investment. Approval is subject to the fulfilment of a
6 Registered Cooperative number of conditions namely:
15%
Society
• The debt-to-equity ratio must be within 70:30; this may
7 Minimum tax
vary as determined by BOI
0.30% (0.10% • The fund cannot be used exclusively as working capital
for first 3 years for
Minimum tax payable on
any manufacturing Losses
Business Turnover
industrial The Income Tax Ordinance 1984 provides for the
undertaking) offsetting of losses and carrying forward of losses under
13the relevant categories of income.
Losses can be carried forward for
Administration
A company is obliged to submit an Bangladesh
annual income tax return by 15 July
six years. Unabsorbed depreciation
can be carried forward for an following the income year or, where levies customs
unlimited time period. 15 July falls before the expiry of six
months from the end of the income duty on imports
Dividend income year, before the expiry of such six
Dividends paid to shareholders are months. using the
subject to withholding taxes at the
following rates: Controlled foreign companies Harmonised
The profits of a foreign subsidiary
• Resident/non-resident are not required to be imputed to a
parent company that is tax resident
Tariff System
Bangladeshi company:
20 per cent in Bangladesh. for tariff
• Resident/non-resident
Bangladeshi individual:10 or 15 per
Transfer pricing
The transfer pricing regulations in
classification.
cent (subject to having twelve
Bangladesh were enacted on 1
digit TIN)
July 2014 by the Finance Act, 2014.
• Non-resident non-Bangladeshi Under these regulations, the pricing
individual: 30 per cent of any income or expense arising
from international transactions
The rate of deduction of tax at between associated enterprises will
source from the remittance of need to be determined with regard
dividends to foreign investors is to the arm’s length price principle
determined upon the consideration applying the appropriate method(s)
of the provisions of the applicable prescribed in Section 107C of the
double taxation avoidance Income Tax Ordinance, 1984.
agreement. Tax credits are available
regarding tax deducted at source. The most appropriate method or
methods will be selected from the
Withholding tax prescribed methods on the basis
Interest payments are subject to a of the nature of transaction, the
withholding tax at a rate of 20 per availability of reliable information,
cent if paid to non-residents; the functions performed, assets
rates for companies are listed above. employed, risks assumed or such
other factors as may be prescribed.
Intellectual property royalties Every person who has entered
payable to non-residents are subject into an international transaction
to a withholding tax at a rate of shall provide, along with the annual
20 per cent; this is the final tax income tax return, a statement of
settlement. international transactions in the
14form and manner as may be prescribed. The statement The income liable to tax can be classified under the
of international transactions, to be provided under section following seven categories: employment income,
107EE of the Income Tax Ordinance, 1984, shall be in investment income, residential income, agriculture,
the form specified in Rule 75A of the Income Tax Rules, business income, capital gains and other sources.
1984, and signed and verified by the person responsible Some categories of income are exempt.
for signing the return of income under Section 75 of the
Income Tax Ordinance, 1984. Bangladesh has concluded double taxation treaties
with over 30 countries to mitigate the effects of
Tax incentives double taxation.
The following tax incentives are available for companies:
Individuals liable to Bangladesh income tax
• Newly established industrial undertakings and physical An individual’s liability to income tax is dependent on
infrastructure facilities set up between the periods of their status of residency. Bangladesh-resident individuals
July 2011 to June 2019 will enjoy exemption from tax at must pay income tax on their worldwide income, while
varying rates for certain periods non-residents must pay on any income accrued in
• Industrial undertakings engaged in the manufacturing of Bangladesh.
goods, not eligible for a tax holiday, set up between the
periods of July 2014 to June 2019 outside the territory Individuals are considered resident if they have been
of City Corporation will enjoy exemption from tax at in Bangladesh for a period of 182 days or more in the
varying rates for certain periods relevant year or 90 days or more in the relevant tax year
• Accelerated depreciation on the cost of machinery and and they have been in Bangladesh for a period of 365
plant is admissible for new industrial undertakings, set days or more during the four years preceding the relevant
up between the periods of July 2014 to June 2019, in tax year.
the first three years of commercial production at 50, 30
and 20 per cent respectively Individual responsibilities in relation to
Bangladesh tax
• Exemption on income derived on the export of
handicrafts for the period from July 2008 to June 2019 All taxpayers must file annual tax returns by 30
September, following the end of the tax year (30 June).
• 50 per cent exemption on income derived from export
This date may be extended by up to three months by
business
the Deputy Commissioner of Taxes by an individual
• Exemption on income derived from Information undergoing assessment.
Technology Enabled Services or software development
or Nationwide Telecommunication Transmission Tax rates – 2015
Network until 30 June 2024
• Exemption on income of Private Power Generation Total Income Rate (%)
Companies
• Initial depreciation in addition to normal depreciation First BDT 250,000 – For Male Nil
where any building has been newly constructed or any First BDT 300,000 – For Female
machinery or plant has been installed in Bangladesh
after the thirtieth day of June, 2002 First BDT 300,000 – For Individuals aged
65+ years
• Reduced tax rates are applicable for specific types of
business and certain areas subject to conditions set First BDT 375,000 – For Disabled
forth in the relevant provisions of laws Individuals
• Rebate on the amount spent to perform specified CSR First BDT 425,000 – For War-wounded
activities gazetted freedom fighters War
• Avoidance of double taxation on the basis of bilateral
Next BDT 400,000 10
Double Taxation Avoidance Agreements
Next BDT 500,000 15
Personal Income Tax (PIT)
Next BDT 600,000 20
Scope
Income tax provisions can be found in the Income Tax Next BDT 3,000,000 25
Ordinance 1984, the Income Tax Rules 1984 and all
Balance Income 30
relevant notifications under the Ordinance.
15Minimum Tax Payable for Individuals A registered VAT taxpayer is entitled to claim back the VAT
paid on purchase of inputs subject to compliance with the
Location of taxpayers Amount (BDT) provisions of VAT laws. 15 per cent VAT is applicable for
all business or industrial units with an annual turnover of
Dhaka City Corporation and 5,000 BDT8,000,000 and above, except in the cases specified in
Chittagong City Corporation VAT laws.
All other City Corporations 4,000
Turnover tax at the rate of three per cent is levied where
All areas/places other than City 3,000
annual turnover is less than BDT8,000,000. Truncated rate
Corporations
also applies in the cases specified by VAT laws which have
been determined on the basis of assumed percentage
In addition to payment of tax at the aforementioned rates,
of value addition. A taxpayer paying VAT at the truncated
an individual is supposed to pay a surcharge if he/she
rate will not be entitled to claim input VAT rebate. Under
has net wealth exceeding BDT22.5 million as shown in
the 2015-16 budget, the tax is reduced to 0.1 per cent of
the statement of assets and liabilities. The surcharge is
turnover for the first three years for industrial undertakings.
calculated on the amount of tax payable after deduction
of investment rebate. An individual that has net wealth
Supplementary Duty (SD) is applicable as per the 3rd
exceeding BDT22.5 million shall pay surcharge applying
Schedule of the VAT Act, 1991, at the rates specified for
the following rates determined on the basis of following
slab of net wealth: particular goods or services.
Exemption of VAT or imposition of VAT at zero per cent
Net wealth Rate (%) is regulated by Section 3 (Export or Deemed Export),
First BDT25,000,000 Nil Section 14 (goods/service declared by the government),
1st and 2nd Schedule of the VAT Act, 1991.
More than BDT25,000,000 but less 10
than 100,000,000 Customs duty
Bangladesh levies customs duty on imports using
More than BDT100,000,000 but less 15
the Harmonised Tariff System for tariff classification.
than 200,000,000
Imports are generally taxed at the following rates, unless
More than BDT200,000,000 but less 20 specifically exempted:
than 300,000,000
• Capital machinery: one per cent
More than BDT300,000,000 25
• Basic raw materials: five per cent
• Intermediate raw materials and semi-finished products:
In accordance with budget 2015-16, the tax free limit
10 per cent
for wealth tax will be raised from BDT20,000,000 to
BDT22,500,000, and a minimum surcharge is to be paid of • Finished products: 25 per cent
BDT3,000.
Exports are generally exempt from customs duties.
Other taxes
Value Added Tax Supplementary Duty
VAT is imposed on goods and services at the stages of Supplementary duty is levied on luxury goods imported
import, manufacturing, supply, and trading. VAT is imposed into Bangladesh as well as non-essential or socially
on services provided in Bangladesh and also on the services undesirable goods produced and supplied in the country.
rendered from outside Bangladesh. A uniform VAT rate of The rates vary from 10 to 500 per cent depending on the
15 per cent is applicable for both goods and services. nature of the goods.
16Labour
In Bangladesh, employment Moreover, as per the Bangladesh On 5 December 2013, the
is regulated by the contractual Labour Act 2006, organisations government of Bangladesh
agreement between employer and which do not fall within the scope of issued the Gazette on Minimum
employee. Other than the contract, the Act, cannot have any employee Wages which defined a new
the Bangladesh Labour Act 2006 (as rules, regulations and benefits less wage structure for the readymade
amended in 2013) and Bangladesh favourable than those provided garment (RMG) industry with an
Labour Rules 2015 govern the under the Act. increase of the gross monthly
employment of ‘workers’. ‘Worker’ minimum wage from BDT3,000 to
is defined under Section 2(65) of Under the Bangladesh Labour Act BDT5,300. No increases have been
the Bangladesh Labour Act 2006 2006, read with Bangladesh Labour announced since.
to mean “any person including Rules 2015, any contracting agency
an apprentice employed in any which, on contract, supplies workers Working time and leave
establishment or industry, either to different organisations in different As per the Bangladesh Labour Act
directly or through a contractor posts has to obtain a license from 2006 (amended in 2013), no adult
in whatever name referred to, to the Chief Inspector. shall ordinarily be required or allowed
do any skilled, unskilled, manual, to work in an establishment for more
technical, trade promotional or Employment contract than eight hours in any day and more
clerical work for hire or reward, In Bangladesh, a letter of than 48 hours in any week.
whether the terms of employment appointment is mandatory in the
be expressed or implied, but absence of a written contract. No women shall, without her
does not include a person The terms of the contract are consent, be allowed to work in an
employed mainly in a managerial binding between the employee and establishment between the hours
or administrative, supervisory role employer, providing they do not of 10.00 PM and 6.00 AM. Consent
or managerial capacity.” The main contravene the provisions of the must be given in a prescribed form,
issues covered in the Act include: Labour Act. as per the Bangladesh Labour Rules
2015.
• Conditions of service and Typically, the letter of appointment
employment or written contract will include: Where an employee works in an
• Employment of adolescents establishment on any day or week
• Provisions relating to health, • Working hours for more than the hours fixed under
hygiene • Salary Bangladesh Labour Act 2006, he
• Employee welfare • Role title shall, in respect of overtime worked,
be entitled to an allowance at the
• Working hours and leave • Nature of work
rate of twice his ordinary rate of
• Wages and payment • Working time and leave basic wage and dearness allowance
• Wages boards • Procedures for dismissal and ad-hoc or interim pay, if any.
• Workers compensation for injury
by accident Minimum wage The Bangladesh Labour Act 2006
Wages and benefits of (as amended in 2013) stipulates
• Trade union and industrial relations
public sector employees are, that any worker employed in a
• Disputes, labour court, labour determined by the government shop, commercial establishment or
appellate on recommendation from the Pay industrial establishment is entitled
• Tribunals, legal proceedings Service Commission. For the private to one and a half days of rest per
• Workers participation in sector, in certain sectors such as for working week. Those employed
companies’ profits workers in trade and industry the in a factory are entitled to one day.
• Regulation of employment and government through the Minimum Those employed in an establishment
safety of dock workers Wages Board fixes the minimum which is a road transport service
wages. Otherwise, there is no are entitled to 24 consecutive hours
• Provident funds
regulatory body for the private of rest in each working week.
• Apprenticeship sector to determine the wages This should not have any effect on
• Penalties and procedure and benefits. wage allowances.
17Annual leave employees. Provident funds be extended by an additional three
As per Bangladesh Labour Act are generally built through the months if it has not been possible
2006 (amended in 2013), every contribution of both the employees to determine the quality of the work
adult, who has completed one and employers. Provident funds for within the first three months.
year of continuous service in an ‘workers’ within the meaning of the
establishment, shall be allowed Bangladesh Labour Act 2006 have Dismissal
fully paid annual leave calculated to be as per the requirements set The termination of employment
as follows: out in the said Act. contracts can be done through
discretionary termination, discharge,
• In the case of a shop or Maternity benefit disciplinary termination or collective
commercial or industrial A woman is entitled to maternity redundancies.
establishment or factory or road leave of eight weeks before and
transport service, one day for eight weeks after the delivery Typically, to terminate a permanent
every 18 days of work provided she has worked with the employment contract unilaterally,
• In the case of a tea plantation, one employer for a minimum of six a period of notice must be given.
day for every 22 days of work months prior to the delivery. No The employer must give 120
• In the case of a newspaper maternity benefit shall be payable days’ notice, while the employee
worker, one day for every 11 days to any woman if at the time of her is required to give only 60 days’
of work confinement she has two or more notice. The period is shortened for
surviving children. However, she temporary workers, whereby both
Healthcare and benefits will get leave if she is entitled to employee and employer must only
Large local and multinational sick and/or annual leave. Thereafter, give 30 days’ notice.
companies typically provide if further leave is required, the
employees with private health employer can grant further leave Notice does not need to be given in
care, car facilities, subsidised meals without pay. A government female the case of disciplinary termination
and other fringe benefits. employee is entitled to maternity on the basis of conviction for
leave of six months, twice during a criminal offence. For other
Employers must also pay her job-life. disciplinary reasons, eg theft, fraud,
compensation to employees who habitual late attendance, negligent
suffer a personal injury arising Probation work or disorderly behaviour, the
out of and in the course of his The maximum probationary period employee is given seven days
employment. in Bangladesh is six months for to justify his misconduct. If the
workers operating in a role of a employee is unsuccessful in this,
Most of the companies in clerical nature and three months the employer is then obliged to call
Bangladesh provide provident and for other workers. The period of a hearing to determine whether the
gratuity benefits to permanent probation for skilled workers can employee should be dismissed.
18Social security documents, including: copy of the
Employees in Bangladesh are not employer’s incorporation certificate,
obliged to contribute towards any board resolution for the position of
social security funds. Companies employment, contract, a copy of the
satisfying the criteria set out in the advertisement for local recruitment
Bangladesh Labour Act 2006 (as and an encashment certificate of
amended in 2013) must pay five per inward remittance of a minimum
cent of their profits into a Workers of USD50,000.
Profit Participation Fund which is
provided to all employees except Trade unions
those who are the owner, partner The Bangladesh Labour Act 2006
or directors who have been in (amended in 2013) contains a
employment with the said employer
for a minimum of nine months.
number of provisions regarding the
establishment of trade unions.
Prospective
Employment of non-resident Employees have the right to join and
employers
employees
Non-residents require a work permit
form a trade union primarily for the
purpose of regulating the relations
must be
to take up employment contracts
in Bangladesh. This is subject
between employees and employers
or between employees themselves.
registered with
to a number of conditions. Only
residents of countries specified
Employers shall have the right to
form a trade union to regulate the
the appropriate
by the Bangladesh government
can apply for work permits.
relations between employers and
workers or between employers.
authorities (BOI)
Furthermore, employers cannot
employ expatriates if there is a local
They are also free to join any trade
unions of their choice.
before they
expert available for the position. The
number of expatriate employees in Trade unions of employees and can employ
an industrial enterprise should not
exceed 1:20 (foreign: local) ratio at
employers shall have the right to
form and join federations and any expatriates.
any time during regular production. such union and federation shall
The ratio for commercial offices is have the right to affiliate with any
1:5 (foreign: local). international organisation and
confederation of employees’ or
Prospective employers must be employers’ organisation.
registered with the appropriate
authorities (BOI) before they can Trade unions and employers’
employ expatriates. An initial work associations shall have the right
permit can be obtained for two to draw up their constitutions and
years; this may be extended as rules, to elect their representatives
reviewed by the relevant authorities. in full freedom, to organise their
administration and activities and to
To obtain a work permit, the formulate their programmes.
prospective employer must file
an application with the Board An application for the registration
of Investment for an E-visa of a trade union shall be made
recommendation. Once received, to the Registrar of Trade Unions
the Bangladesh Embassy provides of the relevant area. A trade
the employee with an e-visa which union of workers shall not be
lasts three months. Once the entitled to registration unless
individual arrives in Bangladesh, it has a minimum membership
the employer must apply to the of 30 per cent of the total
BOI for the work permit on behalf number of employees working
of the expatriate. This application in the establishment in which it
will be filed alongside a number of is formed.
19Audit
In Bangladesh, financial reporting standards. The Companies Act transactions at the branch office
is regulated under the Companies 1994 does not specify an applicable are to be kept at that office and a
Act of 1994. Annual accounts of accounting convention. properly summarised return, made
companies must be statutorily up to date at intervals of not more
prepared, audited and presented As per the Stock Exchange than three months must be sent to
to members in the annual Requirements and Securities and the company’s registered office.
general meeting. Exchange Rules, companies with
shares listed on Dhaka & Chittagong The statutory registers a company
International Accounting Stock Exchange Limited must must keep include:
Standards and International comply with additional requirements
Financial Reporting Standards are concerning disclosure and public • Register of Members to
increasingly being adopted and announcements as set forth in the record the names, addresses
practiced as Bangladesh Accounting listing regulations. Such companies’ and occupations, if any, their
Standards and Bangladesh Financial financial statements must be drawn shareholdings, amounts paid
Reporting Standards. up and reported upon by auditors for the shares and the dates on
in accordance with requirements which they become or cease to
As per the Companies Act 1994, of Securities and Exchange Rules be shareholders
annual auditing is compulsory for 1987. Additionally, auditors of such • Register of Directors, Managers
all the companies and must be companies have to report whether and Managing Agents to
conducted by independent qualified or not the financial statements record their names, addresses,
chartered accountants (certified audited have been duly prepared nationality, occupations; and,
by The Institute of Chartered in conformance with international for directors, details of their
Accountants of Bangladesh). accounting standards and have to other directorships of public
conduct their audits strictly following companies and subsidiaries of
Accounting standards the international standards of public companies
The primary source of accounting auditing.
• Register of Mortgages and
principles is the series of approved Charges to record the assets
accounting standards issued by the Accounting records
mortgaged or charged, the
To adequately explain its
Institute of Chartered Accountants amount of the charge, the date of
transactions and to facilitate an
of Bangladesh (ICAB). The ICAB creation and the parties entitled to
audit, a company must maintain
is a member of the International the charge
sufficiently detailed accounting
Federation of Accountants • Register of Debentures to
records. A company incorporated
(IFAC) and adopts International record details concerning
under Companies Act 1994 must
Financial Reporting Standards and debenture holders including their
keep proper books of accounts with
International Accounting Standards names and addresses and the
respect to:
as Bangladesh Financial Reporting debentures held
Standards (BFRS) and Bangladesh
• All sums of money received and
Accounting Standards (BAS). The registers are to be maintained
expended
at the company’s registered office
Listed companies and financial • All sales and purchases
in Bangladesh.
institutions are required to follow • Assets and liabilities of the
the BAS and BFRS. Though not company Filing and submission of
mandatory, private and non-listed • Particulars relating to the statutory financial statements
public limited companies, utilisation of materials, labour and Under the Companies Act 1994, a
and other government and other items of overhead cost company must present its statutory
non-government organisations, also accounts to its shareholders at the
follow the BFRS and BAS to the The books of accounts are to be annual general meeting (AGM). This
greatest possible extent. kept at the registered office of the first AGM must be held no later than
company. 18 months after incorporation.
The Companies Act 1994 sets forth
some disclosure requirements, but Where a company has a branch The statutory accounts comprise
does not promulgate any accounting office outside Bangladesh, the an audited statement of
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