With a Review Of Their Distinctions, Benefits, And Drawbacks
After being registered with the BIDA in Bangladesh, a branch or liaison office becomes a legal entity. It is regarded as a subsidiary of the foreign corporation rather than an independent legal entity.
In Short Discussion About Branch Office And Liaison Office
With the approval of the Board of Investment (“BIDA”), a foreign company’s branch office can participate in commercial activities.
In Bangladesh, a Liaison/Representative Office will have no local source of income. The parent firm will be responsible for all setup and operations expenditures, including pay for expatriates and local workers of the Liaison or Representative Office.
Key Facts About The Branch And The Liaison Office:
1. The Bangladeshi Branch or Liaison Office’s name must be the same as the international company’s name.
2. A Branch or Liaison Office must have a Bangladeshi office address.
3. If the foreign company wants to keep the Branch or Liaison Office open for longer than the BIDA-approved period, it must apply for the requisite renewal/extension in the specified form with all required documentation at least 2 (two) months before the present term expires.
4. Under Bangladesh’s current rules, the authorized Office is required to pay the duty, income tax, VAT, Tax identification number TIN certificate, revenues, and other taxes to the government. The VAT rate is 15%, and the income tax rate is 32.5%. Duty is calculated based on the assessable value of the imported goods.
Note: Clearance from Bangladesh Bank under section 18A of the Foreign Exchange Regulation Act, 1947 would be necessary if the approved branch or liaison office of the foreign company plans to employ any foreign people in its office.
Required Documents For BIDA Approval:
For the approval of a Branch or Liaison Office in Bangladesh, the following documents and information are required:
1. 4 copies of an application for the establishment of a branch, liaison, or representative office in the appropriate form, signed by the authorized person.
2. The parent company’s Memorandum and Articles of Association, along with its Certificate of Incorporation.
3. Names and nationalities of the parent company’s directors and promoters.
4. Accounting services audited for the parent company’s most recent financial year.
5. Resolution of the parent company’s board of directors regarding the establishment of a branch, liaison, or representative office in Bangladesh.
The pertinent Bangladesh mission or the respective country’s mission in Bangladesh / respective country’s apex business chamber / local business chambers must attest to the documents (items 2-5). Before submitting any documents that are not in English, they must be translated into English. It should also be mentioned that all documentation must be provided to the BIDA in 4 (four) copies. After analyzing the above-mentioned materials, the BIDA may request additional documentation.
Important: A fee of Tk. 25,000 must be paid by Bangladesh Bank’s treasury Chalan (code no. 1-3901-0001-1876) or any Sonali Bank branch, with the original copy of the Chalan.
Advantages Of Liaison Office Or Branch Office
1. An extension of a foreign company in Bangladesh that performs some but not all of the same activities as a foreign company. Bangladesh Investment Development Authority (BIDA) determines the scope of its permitted activities.
2. The organization is primarily responsible for introducing Bangladesh to foreign companies and promoting their products.
3. Establishing a local presence can help to build your brand recognition and reputation in the market, which can attract new customers and help to retain existing ones.
4. Having a local office can improve communication between your business and your customers, suppliers, and partners, which can help to build stronger relationships.
5. A local office can help you to provide better customer service by allowing you to respond more quickly to customer inquiries and issues.
Disadvantages Of Liaison Office Or Branch Office
1. Unlike a liaison office, it can engage in some revenue-generating operations in Bangladesh.
2. For certain purposes, it is a separate legal entity.
3. There are set-up fees, but there are fewer ongoing formalities.
4. Although it is not a separate legal entity, it does have an official presence in Bangladesh.
5. Repatriating profits earned by a liaison office or branch office can be subject to tax and currency exchange rate risks.
Final Thoughts
Companies and investors interested in taking advantage of Bangladesh’s liberalized FDI caps should carefully assess their investment alternatives and commercial opportunities in the country.
To facilitate and promote their parent company’s business setup activity, foreign firms can open a liaison office in Bangladesh.
