Setup Business in Bangladesh

How to Setup Business in Bangladesh

Setup Business in Bangladesh – An investment destination in South Asia

Table of content: Business in Bangladesh.

1. Abstract:
(i) The Legal Structure
(ii) Governing Commercial/Business Laws
(iii) Entrepreneurship in Bangladesh
2. Limited Companies:
(i) Company Limited by Shares:
(a) Public Limited Company and
(b) Private Limited Company
(ii) Company Limited by Guarantees:
(a) Unlimited Companies:
(i) Formation of a company
(ii) Memorandum of Association
(iii) Articles of Association
(iv) Returns to the Registrar
(v) Shareholders’ Meeting
(vi) Board of Directors
(vii) Mergers & Acquisitions
(viii) Winding Up

3. Foreign Investment:

3.1 Investment options for foreign entrepreneurs business in Bangladesh:

  • Joint venture/100% foreign investment proposals in the private sector
  • Self financed local investment proposals including industries sanctioned/financed by financial institutions or commercial banks
  • Joint venture industrial units with the public sector corporations

3.2 Infrastructural Facilities and Utility Services in Bangladesh
3.2.1 General
3.2.2 Utility Services
3.2.3 Infrastructural Facilities
3.2.4 Other Facilities
3.2.5 Incentive Details
3.2.5.1 Tax Holiday Facility (THF)
3.2.5.2. Depreciation Allowance.
3.2.5.3. Duty Exemption and Concessions on Machinery
3.2.5.4 Avoidance of Double Taxation
3.2.5.5. Remittance
3.2.5.6 Customs Duty:
3.2.5.7. Repatriation
3.2.5.8. Exit
3.2.5.9. Ownership
3.2.5.10.  Investing in the stock market
3.2.5.11.  Incentives to Non Resident Bangladeshi (NRBs)
3.2.5.12.  Additional Incentives for EPZ Industries
3.2.5.13.  Other Incentives
3.3. Investment Protections / International Agreements
3.4. Required Permits & Procedures
3.4.1. Registration with the Labor Code
3.4.2. Obtaining Utility Connections
3.4.3 Obtaining Work Permit
3.4.4. Registration/Approval for Foreign Loan, Suppliers’ Credit, PAYE Scheme etc.
3.4.5. Procedure for import of raw & packing materials and spare parts by industrial units
3.4.6. Obtaining Industrial Plot
3.4.7. Environmental Legislation
3.4.8. Currency Regulations
3.4.8.1. Relaxation / Liberalisation of Exchange Control Regulations
3.4.8.2. Investment Facilitating Measures
3.4.8.3. Export Encouragement Measures
4. Customs Regulations
5. Taxation
6. Labor Regulations
6.1. Appointment and Conditions for Employment
6.2. Settlement of Labor Disputes & Labour Court
6.3. Wages and Fringe Benefits
6.4. Working Hours, Holiday and Leave
6.5. Social Security
6.6. Labor Union
7. Intellectual Property
7.1 Patents and Designs
7.2 Design
7.3 Trademarks
7.4 Copyright
8. Purchasing immovable property
9. Epilogue

1. Abstract

Bangladesh has seen a dramatic increase in foreign direct investment. In December 2005, the Central Bank of Bangladesh projected GDP growth around 6.5%.

In order to enhance economic growth, the government set up several export processing zones to attract foreign investments. Recently it has received interest from international energy companies attracted by the existence of significant onshore and offshore gas reserves.

The industry now employs more than 3 million workers, 90% of whom are women. According to the World Bank, “Bangladesh’s most significant obstacles to growth are poor governance and weak public institutions”

2. The Legal Structure:

The Supreme Court of Bangladesh comprises the Appellate Division and the High Court Division. It is the apex Court of the country and other Courts and Tribunals are subordinate to it. There are a wide variety of subordinate courts and tribunals. The civil courts are created under the Civil Courts Act of 1887. The Act provides for five tiers of civil courts in a district, which are as follows:

The Code of Crimanal Procedure, 1898 provides for different Criminal Courts:

  • Courts of Sessions
  • Courts of Metropolitan Sessions
  • Special courts/tribunals (Criminal)
  • Courts of Metropolitan Magistrate and
  • Courts of Magistrate.

Company matters in Bangladesh are dealt by the Company Bench of The High Court Division.

3. Governing Commercial / Business Laws:

  • The Companies Act 1994
  • The Partnership Act, 1932
  • The Societies Registration Act 1860
  • The Trade Organization Ordinance, 1961
  • The Contract Act, 1872
  • The Sale of Goods Act, 1930
  • The Bank Companies Act, 1991
  • The Bankruptcy Act, 1997
  • The Islamic Development Bank Act, 1975
  • The Money Loan Courts Act, 2003
  • The Financial Institutions Act, 1993
  • The Negotiable Instruments Act, 1881
  • The Securities Act, 1920
  • The Securities and Exchange Ordinance, 1969
  • The Investment Board Act, 1989
  • The Foreign Private Investment (Promotion & Protection) Act, 1980
  • The Labour Code, 2006
  • The Patents and Designs Act, 1911
  • Trade Marks Act, 2009
  • The Consumer Rights Protection Act, 2009
  • The Imports and Exports (Control) Act, 1950
  • The Patents And Designs Act, 1911
  • Trade Marks Act, 2009
  • The Insurance Act, 2010
  • The insurance Development & Control Authority Act, 2010
  • The Insurance Corporations Act, 1973
  • Income Tax Ordinance 1984

4. Entrepreneurship in Bangladesh:

Entrepreneurship in Bangladesh may be of two sorts:

  • A company formed and incorporated locally.
  • A company incorporated abroad but registered in Bangladesh.

The classification of establishments as provided by the Act is as follows.

4.1 Limited Companies:

(i) Company Limited by Shares:

(a) Public Limited Company:

Characteristics:

(b) Private Limited Company:

Characteristics:

Restricts the rights to transfer the shares.
Limits the number of its members to minimum 2 and maximum 50 excluding the persons employed in the company.
Prohibits any invitation to the public to subscribe for the shares or debentures of the company.
Must register its Articles of Association with the Registrar of Company.

Entitles to commence Business from the date of its incorporation.

(ii) Company Limited by Guarantees:

4.2 Unlimited Companies:

Unlimited companies and companies limited by guarantees may or may not have share capital.

(i) Formation of a Company:

To register a company with the Registrar of Joint Stock Companies and Firms (RJSC&F), promoters have to undertake activities in following steps:

  • When the Promoters will desire to form a company, at first they will have to select its name and will apply to the Registrar for the same in a plane paper with a fee of BD Tk. 10/- for each name along with the properly executed deed of settlement or the minutes of their first meeting.
  • The Promoters may primarily select the name of their proposed company through searching the list of companies.
  • For the purpose of registration of a company the special adhesive stamp worth Tk. 500/- to be affixed on the Memorandum of Association irrespective of authorized capital and stamp worth Tk. 1500/-, 4,000/- and 10,000/- to be affixed on the Articles of Association for the authorized capital of Tk. 10,00,000/-, Tk. 3,00,00,000/- and above Tk. 3,00,00,000/- upto any amount respectively.

4.2 Memorandum of Association:

The memorandum should clearly spell out the main objectives, the authorized capital-division of this capital into shares of fixed amount and liability of its members. In brief it may be defined structurally to contain details as follows:

  • The company’s name, with the words ‘Limited’ or ‘Private Limited’ (in the case of a private company), at the end;
  • The nature of liability of members;
  • The amount of authorized share capital divided into shares of a fixed amount; and
  • The names of subscribers and the number of shares taken by each of them.

4.3 Articles of Association:

The Articles of Association are the regulations governing the internal management of the affairs of the company and the conduct of its business. Articles usually contain the regulations on the following subjects:

  • Share Capital
  • Share Certificate
  • Transfer And Transmission Of Shares
  • Increase, Reduction And Alteration Of Capital
  • Borrowing Powers
  • Statutory And General Meeting
  • Proceedings At General Meeting
  • Quorum
  • Votes Of Members
  • Form Of Proxy
  • Directors
  • Disqualification Of Directors
  • Power Of Directors
  • Delegation Of Directors’ Power
  • Chairman
  • Managing Director
  • Operation Of Bank Account
  • Notice
  • The Common Seal
  • Reserves And Dividend
  • Accounts
  • Audit
  • Winding Up
  • Secrecy Clause
  • Arbitration
  • Indemnity And Responsibility etc.

4.4 Returns to the Registrar:

How to start a Business in Bangladesh

The companies having share capital and incorporated under the Companies Act, 1994 shall have to file the following statutory returns to the Registrar every year:-

  • The Annual List of Members and Summary [Schedule- 10]: To be filed within 21 days after the date of holding the annual general meeting.
  • Consent of Auditor (AC) [Section 210]: The Company shall inform the auditor or auditors in respect of his/their appointment within 7 days from the date of annual general meeting and the auditors shall inform the Registrar whether the appointment has been accepted or refused by him or them within 30 days from the date of receipt of such information [Section 210].
  • Statutory Report (SR): Applicable in the case of public limited companies [Section 83].
  • The consent of the Directors to act (CD) [Form IX] [Section 92].

4.5 Shareholders’ Meeting:

Sections 81 to 89 of the Companies Act, 1994 deal with meetings and proceedings of the Company.

(i) General Meeting:

Section 81 of the Companies Act, 1994 provides that every company must hold general meeting called annual general meeting every year but not more than fifteen months elapse between the meetings. A Company must hold annual general meeting within 18 months of its incorporation. The Registrar has power to call general meeting.

Before 60 days, from the date of the annual general meeting, a return containing prescribed particulars regarding:

  • The states of the company’s affair;
  • Proposed amount for reserve in balance sheet;
  • Recommended dividend;
  • Material changes on commitment;
  • Nature of business;
  • Reservation qualification and adverse remarks contained in the auditors report;
  • Its directors, managing directors, managers, and secretaries, past and present.

(ii) Statutory Meetings:

Section 83 of the Companies Act, 1994 provides that every company limited by shares and every company limited by guarantee and having a share capital shall, within a period of not less than one month and not more than six months from the date at which the company is entitled to commence Business, hold a general meeting of the members of the company; in this Act such meeting is referred to as “the statuary meeting”.

(iii) Extraordinary General Meeting:

A meeting of its board of directors shall be held at least once or at least four such meetings  in every year. There are certain powers of the company that can be exercised by the directors only at board meetings.

4.6 Board of Directors:

The Board is the Company’s executive authority. The Company Act 1994 contains detailed rules regarding the appointment, remuneration, powers, duties and liabilities and various other matters concerning directors.

As per Companies Act, usual duties of boards of directors include:

The duties apply to each director separately, while the powers apply to the board jointly. This does not mean that directors can never stand in a fiduciary relationship to the individual shareholders; they may well have such a duty in certain circumstances.

The exercise by the board of directors of its powers usually occurs in board meetings. Also, there are certain powers exercisable by the board of directors only with the consent of the company in a general meeting.

  • Sell or dispose of the undertaking of the company; and
  • Remit any debt due by a director.

The Companies Act, 1994 Section 106 provides rules regarding removal of directors:

The welfare of the shareholders and of the company depends upon who the directors are and how they carry out their duties and responsibilities. To protect the interest of the Company and the Shareholders, the directors of a company play vital role.

4.7 Mergers & Acquisitions:

There are many different reasons to merge with or acquire another company. Many companies turn to mergers or acquisitions as a way to answer the constant pressure from stockholders and stakeholders to show marked, continuous growth.  Such goals might include any of the following:

  • Product extension: Identifying a target company that offers a slightly different but related product so you can extend your market presence.
  • Geographic extension: Identifying a target company in the same industry that serves a geographical area that your company does not currently reach.
  • Increased customer base: Finding a target company that could increase or broaden your customer base.
  • Acquiring key management or other personnel: Identifying a target company with strong management talent to help your team succeed.
  • New distribution channels: Finding a target company with sophisticated marketing or supply chain operations in place so you can better or more economically distribute your goods or services.

Sections 12-14 of the Companies Act, 1994 contain the main section that deals with the reconstruction and amalgamation (acquisition & merger) of the companies.

4.7.1 Procedure of Merger:

(i) Observing Memorandum of Association of Transferee Company:

It has to be ensured that the objects of the MOA cover the objects of the transferor company or companies. If not then it will be necessary to follow the procedure for amendment of objects by passing a special resolution at an EGM convened for this purpose.

(ii) Convening a Board Meeting:

Board Meeting is to be convened and held to consider and approve in principle amalgamation and appoint an expert for valuation of shares to determine the share exchange ratio.

(iii) Preparation of Valuation Report:

Chartered Accountants are requested to prepare a Valuation Report & the swap ratio for consideration by the Boards of both the companies and if necessary it may be prudent to obtain confirmation from merchant bankers on the valuation to be made by the Chartered Accountants.

(iv) Preparation of Scheme of Amalgamation or Merger:

Auditors, legal advisors and practicing company’s secretary of both the companies must interact with each other and should report the result of their interaction to their respective BOD. The boards of the involved companies should discuss and determine details of the proposed scheme of amalgamation and merger. After such meetings a final draft scheme will emerge.

The acquisition procedure is quite straightforward in Bangladesh. Also, if possible, they enter into some kind of arrangement as a basis of further steps. In exercising its discretion as per the Act, the court:

  • Shall have regard to the rights and interests of the members of the company as well as to the rights and interests of the creditors; and
  • give such directions and make such orders as it may think expedient for facilitating or carrying into effect any such arrangements.

If the court allows for the proposed acquisition, a confirmation of alteration is to be certified by the Registrar of the Joint Stock Companies and Firms of Bangladesh. The new or altered Memorandum of Association then represents the Memorandum of the acquired enterprise.

4.8 Winding Up:

The liquidator represents the interests of all creditors. The liquidator supervises the liquidation, which involves collecting and realizing the company’s assets (turning them into cash), discharging the company’s liabilities, and distributing any funds left over among the shareholders in accordance with the company’s constitution or the Companies Act, 1994 if there is no constitution.

The law classifies liquidations into two types:

  • Voluntary (by a shareholders resolution) and
  • Compulsory (by a court order).

On receiving the statements the liquidator will submit to the court within 160 days of the order a report comprising amount of cash, debt due, movable and immovable properties and unpaid calls. The official liquidator will then take all the properties into his custody .

The liquidator has the power to sell or transfer the movable or immovable properties of the company by public auction or contract. Transfer of property after commencement of proceeding without the knowledge of the liquidator is void.

4.8.1 The Procedures for Winding Up a Company:

All procedures relating to winding up of a company are regulated by the Companies Act, 1994. Sections 234-321 of this Act provide how a company winds up.

Broadly speaking, the liquidation process is as follows:

  • The liquidator collects the assets of the company (including uncalled capital; that is, amounts unpaid on shares) and pays the creditors in order of priority.
  • The liquidator distributes any surplus funds to the shareholders.
  • The company is then formally dissolved.
  • Setup Business in Bangladesh

The main consequences of the company being liquidated are as follows:

  • The company no longer has the power to dispose of its property.
  • The company may carry on business only for the limited purpose of completing the liquidation process.
  • The powers of the company directors come to an end when a liquidator is appointed.
  • A liquidation order operates as a notice of dismissal to all of the company’s employees.
  • Setup Business in Bangladesh

After this is paid out, any remaining debts are paid in the following orders of priority:

  • The costs, charges and expenses involved in the liquidation,
  • All revenue, taxes, excesses and rates payable to the Government or to a local authority,
  • All wages and salaries payable to employees,
  • Secured creditors,
  • Unsecured creditors,
  • Any debt owed to shareholders of the company, such as dividends or profits.

An order for winding up of the company shall operate in favor of all the creditors and contributors of the company. For the purpose of winding up, the court may fix an official receiver known as liquidator. On the making of a winding up order, the petitioner will file the order in the Office of the Registrar of the Joint Stock Companies and Firms.

5. Foreign Investment:

Major Functions of BOI include:

  • Providing necessary facilities and assistance in the establishment of industries,
  • Implementing investment related to GOB policies,
  • Preparing investment schedule,
  • Registering private sector industrial projects, and
  • Identifying competitive investment sectors and facilitating investment by providing information and services.

How to invest in Bangladesh

(i) Joint venture/100% foreign investment proposals in the private sector:

The government of Bangladesh delineates a more liberal attitude towards foreign direct investment by offering no prior approval or no objection certificate for setting up of a joint venture / 100% foreign direct investment. It also provides facilities and the institutional support services to the entrepreneur /investors.

(ii) Self financed local investment proposals including industries sanctioned/financed by financial institutions or commercial banks:

The entrepreneurs of such projects are to fill up a simple prescribed application form and submit to BOI for registration. After a first-hand scrutiny of the information, BOI issues registration letter.

Documents to be enclosed with the application are:

  • Application in prescribed form duly filled in. 2 (two) copies.
  • If the total project cost exceeds Tk. 50 (fifty) million, submit Project Profile. 2 (two) copies
  • Background of the promoters in official letterhead pad describing Name, Permanent and Mailing Address, Position and Nationality. 7 (seven) copies

Pay order / bank draft amounting required amount in favor of “Executive Chairman and Member-Secretary, Board of Investment.”

BOI registration makes the company eligible to avail the incentives and facilities provided by the Government. (D3)

(iii) Joint venture industrial units with the public sector corporations:

Any individual entrepreneur either local or foreign can set up an industry with Public Sector Corporation. For any public sector which makes contribution out of its own fund needs approval of the concerned ministry.

5.2 Infrastructural Facilities and Utility Services in Bangladesh:

5.2.1. General:

Bangladesh has a number of positive attributes, infrastructural facilities and utility services which attract the attention of foreign investors from both developed and developing countries. Geographical location of the country is ideal for global trades with very convenient access to international sea and air route.

5.2.2. Utility Services:

(i) Water:

Water is supplied by the Water and Sewerage Authority (WASA) in the metropolitan areas. Very high priority is attached regarding availability of water in industrial areas.

(ii) Gas:

Natural gas supply is available in major industrial areas.

(iii) Telecommunication:

Comprehensive telecommunication services such as fully automatic telex, fax, e-mail, internet, telephone including international direct dialing are available.

(iv) Electricity:

In Bangladesh, electric power is generated in hydro steam, gas-turbine and diesel power plants. All the generating stations are interconnected through a national grid.

5.2.3. Infrastructural Facilities:

(i) Communication:

Bangladesh’s geographic location is also an advantage for foreign investment. The transport sector of Bangladesh consists of a variety of modes.

More than half of Bangladesh has access to an all-weather hard surface road within three miles distance. It connects all the administrative and business points of the country. Railway container services from Chittagong port to Dhaka are available.

There are two major ports in the country. Chittagong Port, the oldest port, has been an entry point for at least 1000 years. The Mongla Port in Khula region serves the western part of Bangladesh.

(ii) Industrial Land:

The primary objective of an EPZ is to provide special areas where potential investors would find a congenial investment climate, free from cumbersome procedures. Bangladeshi EPZs are excellent places for setting up labor-intensive high-tech industries from abroad. As part of its development of industrial infrastructure, the country has set up 8 Industrial Parks and High-tech Parks.

(iii) EPZs in Bangladesh:

Bangladeshi EPZ’s at a glance:

  • EPZ-Chittagong
  • EPZ-Dhaka
  • EPZ-Mongla
  • EPZ-Ishwardi
  • EPZ-Comilla
  • EPZ-Uttara
  • EPZ-Adamjee
  • EPZ-Karnaphuli

5.2.4. Other Facilities:

(i) Industrious low-cost workforce

(ii) Strategic location, regional connectivity and worldwide access

(iii) Strong local market and growth

(iv) Low cost of energy:

Energy prices in Bangladesh are the most competitive in the region. Transportation on green compressed natural gas is less than 20% of the diesel price.

(v) Proven export competitiveness

(vi) Competitive incentives

(vii) Export Processing Zones:

In order to stimulate rapid economic growth of the country, particularly through industrialization, the government has adopted an ‘Open Door Policy’ to attract foreign investment to Bangladesh. Bangladesh’s Export Processing Zones Authority (BEPZA) is the official organ of the government to promote, attract and facilitate foreign investment in the Export Processing Zones.

(viii) Positive climate

5.2.5. Incentive Details:

The democratic government is highly keen to stimulate the economy and transform a poverty-stricken economy into a developed one within short time. In accordance with that, the Government’s policy on investment offers a lucrative package to attract foreign investment. In addition, Bangladesh offers citizenship, permanent residentship and multiple entry visas for the foreign investors.

Some salient features of the package are:

  • Tax Holiday Facility (THF)
  • Depreciation Allowance
  • Duty Exemption and Concessions on Machinery
  • Avoidance of Double Taxation
  • Remittance
  • Repatriation
  • Exit
  • Ownership
  • Investing in the Stock Market
  • Incentives to Non Resident Bangladeshi (NRBs)
  • Incentives to Export-Oriented and Export-Linkage Industries
  • Additional Incentives for EPZ Industries
  • Other Incentives

(i) Tax Holiday Facility (THF):

Tax holiday is allowed to industries subject to the relevant rules and procedures set by the National Board of Revenue (NBR) for the following period according to the location of the establishment. NBR issues tax holiday certificate within 90 days of submission of application.

(ii) Depreciation Allowance:

Only New Industrial undertakings will enjoy accelerated depreciation allowance in lieu of tax holiday as per following schedule:

  • Industrial undertaking set up in the areas of Dhaka, Narayangonj, Chittagong and Khulna falls within a radius of 10 miles from the municipal limits of those cities: @ 100% on the cost of a machinery for the first year only.
  • Industrial undertaking set up elsewhere in the country: @ 80% on the cost of machinery in the first year and @ 20% in the second year.

(iii) Duty Exemption and Concessions on Machinery:

For 100% export oriented industry, no import duty is charged in case of capital machinery and spares up to 10% value of such capital machinery. For other industry, import duty, 2 7.5% ad valorem, is payable on capital machinery and spares imported for initial installation or BMR/BMRE of the existing industries. The value of spare parts should not, however, exceed 10% of the total C&F value of the machinery.

Value Added Tax (VAT) is not payable for imported capital machinery and spares. Investors can avail this opportunities by applying for import duty exemption certificate at BOI. BOI, then, issues certificate within 7 days from the date of application

(iv) Avoidance of Double Taxation:

DTA is an agreement between two countries seeking to avoid double taxation by defining the taxing rights of each country with regard to cross-border flows of income and provide tax credits or exemptions to eliminate double taxation. It also provides exchange of information between treaty partners regarding evasion of tax. Exemption of income tax up to 3 years, from the expatriate employees in industries, is specified in the relevant schedule of Income Tax ordinance.

(v) Remittance:

Foreign entrepreneurs are, therefore, entitled to the same facilities as domestic entrepreneurs with respect to tax holiday, payment of royalty, technical know-how fees etc.

(vi) Customs Duty

(v) Repatriation:

Full repatriation of capital invested from foreign sources will be allowed. Similarly, profits and dividend accruing to foreign investment may be transferred in full. If foreign investors reinvest their repatriable dividends or retained earnings, those will be treated as new investment.

(vi) Exit:

An investor can wind up an investment either through a decision of an annual or extraordinary general meeting. Once a foreign investor completes the formalities to leave the country, he or she can repatriate the net proceeds after securing proper authorization from the central bank (Bangladesh Bank).

(vii) Ownership:

Thus, Foreign investor can set up ventures either wholly owned or in joint collaboration with local partner. Non-resident institutional or individual investors can make portfolio investments in stock exchanges in Bangladesh.

(viii) Investing in the Stock Market:

Foreign investors are allowed to participate in initial primary offerings (IPOs) and right issues without any regulatory restrictions. Also, incomes from dividends are tax-exempt for investors.

(ix) Incentives to Non-Resident Bangladeshi (NRBs):

Moreover, they can buy newly issued shares/ debentures of Bangladeshi companies. A quota of 10% has been fixed for NRBs in primary public shares.

(x)  Incentives to Export-Oriented and Export-Linkage Industries:

To make investment in 100 percent export-oriented industries attractive, the following incentives and facilities will be provided:

  • Concessionary duty as per SRO (Special Revenue Order) is allowed on the import of capital machinery and spare parts for setting up export-oriented industries or BMRE of existing industries. For 100% export-oriented industries no import duty is payable.
  • System for duty drawback is being simplified and concise. The exporter will be able to get back the duty draw-back directly from the concerned commercial bank.
  • Bank loans of up to 90% if the value against irrevocable and confirmed letters of credit/sales agreement, are available.

(xi) Additional Incentives for EPZ Industries:

Investment in the Export Processing Zones enjoys the following special incentives:

(a) Fiscal Incentives:

  • Tax holiday for 10 years.
  • Duty free import & automatic bonded warehouse facility.
  • Exemption from dividend tax
  • Remittance of Royalty, Technical and Consultancy Fees allowed
  • Duty & Quota Free Access to EU, Canada, Australia etc.

(b) Non-fiscal incentives:

  • Investment protected under Foreign Private Investment (promotion and protection) Act, 1980.
  • 100% foreign ownership permissible.
  • No ceiling on foreign investment.
  • Foreign currency loan from abroad under direct automatic route.
  • Non-resident Foreign Currency Deposit (NFCD) Account permitted.

(xii) Other Incentives

5.3. Investment Protections / International Agreements:

(i) Legal Protection:

The policy framework for foreign investment in Bangladesh is based on ‘The Foreign Private Investment (Promotion & Protection) Act, 1980’, which ensures legal protection to foreign investment in Bangladesh against nationalization and expropriation.

(ii) International Agreements

(iii) Bilateral Agreements:

These treaties included such assurances as unrestricted currency transfers, avoidance of double taxation, compensation for expropriation, dispute settlement procedures, and taxation treatment.

(iv) Investment Treaty:

Belgium, Canada, France, Germany, Iran, Italy, Japan, Malaysia, Pakistan, Philippines, Poland, Republic of Korea, Romania, Switzerland, Thailand, The Netherlands, Turkey, United Kingdom, USA, Indonesia. Negotiations are ongoing with India, Hungary, Oman, Maldova, DPRK, Egypt, Austria, Mauritius, Uzbekistan.

5.4. Required Permits & Procedures:

5.4.1. Registration:

The Labour Code, 2006 regulates working conditions and ensures safety in the industrial establishment. The CI&E office issues registration within the stipulated period.

5.4.2. Obtaining Utility Connections:

Entrepreneurs may apply either directly to the concerned authority for obtaining utility services or approach BOI for assistance along with copy of registration/ sanction letter. Utility Service Cell is specially responsible within BOI to help investors in obtaining necessary utility services.

5.4.3. Obtaining Work Permit:

Work permit for foreign nationals is a pre-requisite for employment in Bangladesh. Private sector industrial enterprises desiring to employ foreign nationals are required to apply in advance in the prescribed form of BOI. For expatriate employment the guidelines are as follows:

  • Employment of foreign nationals is normally considered for the job for which local experts / technicians are not available and persons below 18 years of age are not eligible for employment.
  • Number of foreign employees should not exceed 5% of the total employees including top management personnel.
  • Initially employment of any foreign national is considered for a term of 2 years which may be extended on the basis of merit of the case.
  • Necessary security clearance has to be obtained from the Ministry of Home Affairs.

5.4.4. Registration/Approval for Foreign Loan, Suppliers’ Credit, PAYE Scheme etc.:

A copy of the foreign loan agreement signed by both parties should be submitted to BOI for registration. Period approval of BOI required for the proposals which do not fall within the aforesaid guide-lines.

5.4.5. Procedure for Import of Raw & Packing Materials and Spare Parts by Industrial Units:

No permission is required for import of free list items. For items in the restricted list, BOI, BEPZA and BSCIC are responsible for issuance of import entitlement. BOI/BEPZA/BSCIC provides all other assistance relating to imports in the private sector in their respective jurisdictions.

5.4.6. Obtaining Industrial Plot:

Most of the industrial areas/estates are owned/controlled by city development authorities in three divisional head quarters; RAJUK in Dhaka, CDA in Chittagong and DA in Khulna. Besides these, there are a few industrial estates owned and controlled by some other government agencies namely:

(a) Public Works Department and

(b) Housing and Settlement Directorate.

BOI also recommends for acquisition of land to the concerned if required by the industrial units.

5.4.7. Environmental Legislation:

Environment Conservation Act, 1995 made it mandatory to all industrial projects to obtain Environmental Clearance Certificate from the Department of Environment. Investors may apply in prescribed forms for Environmental Clearance Certificate to BOI Utility Service cell (USC) enclosing required documents. The USC arranges necessary clearances from the DOE within the stipulated period.

5.4.8. Currency Regulations:

5.4.8.1. Relaxation / Liberalisation of Exchange Control Regulations:

Bangladesh Bank (BB) is the central bank of the country and responsible for issuing Bangladeshi currency and maintaining its value. BB administers the foreign exchange regulations. It has been continuing to liberalize foreign exchange regulations in conformity with the government’s reform agenda in macro economic policies with a view to creating an environment conducive to investment and productivity.

Restrictions exist on import and export of currency, gold or silver jewellery or precious stones without prior approval. For detailed instructions, investors should consult the relevant guidelines/circulars.

The major aspects of exchange control include:

(i) Convert Ability to Bangladeshi Taka:

Bangladeshi ‘Taka’ is convertible for current external transactions.

(ii) Opening of Bank Account by a Foreign Investor:

A non-resident may open with any Authorized Dealer (AD) branch of a bank’s Foreign Currency (FC) accounts and Non-resident Foreign Currency Deposit (NFCD) accounts with foreign exchange brought in from outside. Balances of these accounts are freely transferable abroad.

(iii) Bringing in Cash from Abroad by a Foreign Investor:

A foreigner can bring in foreign exchange in any form including cash without limit.

(iv) Transfer of Capital and Capital Gains:

Transfer of shares and securities from one non-resident to another non-resident requires no prior BB approval.

(v) Remittance of Proceeds from Liquidation of Industrial Undertaking:

Remittance of proceeds arising out of liquidation of industrial undertaking requires prior Bangladesh Bank approvals.

(vi) Remittance of Royalty, Technical Know:

Agreements not in conformity with these general guidelines require prior permission of BOI. Authorized Dealers may remit royalty, technical know-how/technical assistance fees payable as per agreements subject to approval of BOI.

(vii) Transfer of Profit and Dividend Accruing to a Foreign Investor:

Branches of foreign firms/companies including foreign banks, insurance companies and financial institutions are to remit their post-tax profits to their head offices through ADs.

(viii) Repatriation of Savings, Retirement Benefits & Salary of Foreigners Employed in Bangladesh:

Foreigners employed in Bangladesh with the approval from the government may remit 50% of salary, actual savings and admissible retirement benefits through an AD.

(ix) Local Borrowing

(x) Borrowing from Abroad:

Borrowing from abroad in foreign currency requires prior BOI approval. A 100% foreign owned and joint venture unit in EPZs may, however, obtain foreign currency loans from overseas banks and financial institutions without prior BOI or BB approval. However joint ventures in EPZ cannot make changes on their assets favoring non-residents.

5.4.8.2. Investment Facilitating Measures: 

Prior approval of Bangladesh Bank is no longer required for:

  • Remittance of profits to the head office of foreign investors.
  • Issuance of share to non-residents against investment in industrial setup in Bangladesh.
  • Remittance of dividends on such shares to the non-resident investors.

5.4.8.3. Export Encouragement Measures:

Government has re-fixed annual foreign exchange retention quota for exporter at 40% of FOB export earning.

6. Customs Regulations

There has been a lot of alteration in exchange rates, rates of duty and tariff value and they keep on changing in short span of time. Law provides that the rates as in force on the date of presentation of the bill of entry for home consumption will be applicable.

If the importer has paid short or excess of the custom duty, there is the provision to demand if the payment is short and to refund if the payment is in excess. Similarly the person is aggrieved by the custom authorities, he has the opportunity to file an appeal to the Commissioner of Customs (Appeals). A second appeal lies to the Appellate Tribunal.

7. Taxation:

Taxation one of the major sources of public revenue to meet a country’s revenue and development expenditures with a view to accomplishing some economic and social objectives, such as redistribution of income, price stabilization and discouraging harmful consumption. It supplements other sources of public finance such as issuance of currency notes and coins, charging for public goods and services and borrowings.

It is a non-penal but compulsory and unrequited transfer of resources from the private to the public sector, levied based on predetermined criteria.

The present land revenue system of Bangladesh has its base in the East Bengal state acquisition and Tenancy Act, 1950 which established a direct contract between the taxpayer and the government. The most important tax on the value of transferred property is the non-judicial stamp tax (levied under the Stamp Act, 1899), which has been in existence since January 1899.

Current rates of non-judicial stamp duty are provided in the First Schedule of the Finance Act, 1998. The judicial stamp tax is being levied under the Court Fees Act 1870, although the levy of court fees originated in the introduction of the Bengal Regulation No. 38 of 1795.The first sales tax was introduced in the former Central Provinces of India in 1938. In Bengal, sales tax was adopted in 1941.

In 1948, sales tax was transferred as a central tax under the General Sales Tax Act of 1948. The Sales Tax Act, 1951 came into force on 1 July 1951 by repealing the Pakistan General Sales Tax Act of 1948.Until 1982, sales tax was being collected under the 1951 Act, which was replaced by the Sales Tax Ordinance 1982. The VAT law was promulgated by repealing the Business.

Income taxpayers (assessees) are classified as individuals, partnership firms, Hindu undivided families (HUF), associations of persons (AOP), companies (publicly traded and private), local authorities, and other artificial juridical persons. Tax rates and scope of taxable income differ based on residential status of assessees (resident or non- resident). From fiscal or assessment year, (AY) 2010-011, there is a filing threshold of annual total income of Tk. 165,000 applicable for individuals (including non resident Bangladeshis), partnership firms, HUF, AOP and assessees other than companies and local authorities.

In case an identity of this group has a total annual income less than this level, he is not required to submit tax return but if someone’s income is higher, he is to pay a minimum tax of Tk. 1,000. Bangladesh inherited a system of taxation from its past British and Pakistani rulers.

Many countries are using income tax as an incentive to allure investment; both by reducing tax rate and simplifying the taxation laws. In Bangladesh, tax rates on company profits are 45% to 42.5% for bank, insurance, mobile phone, financial companies. It is 37.7% for all other companies.

Bangladesh tax rates rank among the highest in the world.

Some of the countries having low corporate income tax rates are as follows: Albania- 10%, Brazil- 15%, Cambodia- 20%, Chile- 17%, China- 25%, Egypt- 20%, Germany- 15%, India- proposed 25%, Indonesia- 28%, Iran- 25%, Ireland- 12.5%, Malaysia- 20% to 25% (20% small co.), Mexico- 28%, Pakistan- 20% for companies with turnover upto Rs. 250 million; above that 35%, the Philippines – 30%, Russian Federation- 20%, South Africa- 28%, Sri Lanka- 15% to 35%, Thailand- listed 20% – 25%, non-listed 20% – 30%, Turkey- 20%, the United Kingdom- 28%, small co. 21%, the United States- income upto $50,000 at 15%, maximum tax slab for income above $18,333,333 at 35%, Vietnam- 25%.

Most countries including India & Pakistan are no longer taxing the corporate income twice; instead they impose additional dividend distribution tax on the company and keep dividends exempted for the shareholders.

Any income collected or gained by a company doing business in Bangladesh, whether resident or not is taxable.

Companies enjoying tax holiday are required to invest only 25% to 30% of their income in other activities as per rules of the National Board of Revenue (NBR). Income tax is levied on all companies and individuals for the previous year and payable for the year of assessment of fiscal year (July to June). If a company adopts an accounting period different from the fiscal year, the business period is a 12 month accounting period preceding the year of assessment. Taxable income is calculated after adjusting for incurred expenses in the production of income.

Tax holiday is allowed to industries subject to the relevant rules and procedures set by the National Board of Revenue (NBR) for the following period according to the location of the establishment. In Dhaka and Chittagong Divisions (excluding 3 hill districts): 5 years. In other divisions (including 3 hill districts of Chittagong Division): 7 years.

Bangladesh exempts agriculture and worker remittance from income tax. And export incomes are either exempted or taxed at a lower rate. The situation is same in other developing countries including India & Pakistan.

It eliminates possibility of protracted legal battle between the tax department and tax payers. This is a great hardship on tax payers in terms of time & cost. It also increases government’s cost of tax collection.

In Bangladesh the tax rate for first Tk 165,000/- nil, next Tk 275,000/- 10%, next Tk 325,000/- 15%, next Tk 375,000/- 20% and for rest of the amount 25%.

India has proposed & Pakistan has introduced new tax laws adopting mostly global best practices; and it is high time that Bangladesh should overhaul its tax policy, procedure and rates in line with the countries that are competing to encourage local and foreign investment. This will help create jobs, provide social security and produce more goods and services as most developing countries are in the league.

How is the period for assessment determined?

Income tax is levied on all companies and individuals for the previous year and payable for the year of assessment of fiscal year (July to June). If a company adopts an accounting period different from the fiscal year, the business period is a 12 month accounting period preceding the year of assessment. Returns filed received by or due to foreign technician under contract if it is accompanied by audited accounts and certified by a chartered accountant as to the correctness of the total income of the assessed.

Any remuneration received in Bangladesh for the work done by an individual is taxable. The individual tax rate is as follows:

Personal Income Tax Assessment other than Company:

First1,65,000/-Nil
Next2,75,000/-10%
Next3,25,000/-15%
Next3,75,000/-20%
Rest Amount 25%

8. Labor Regulations:

Labour law is the body of laws, administrative rulings and precedents which address the legal rights of, and restrictions on, working people and their organizations. However, there are two broad categories of labour law. The labour movement has been instrumental in the enacting of laws protecting labour rights in the 19th and 20th centuries. Labour rights have been integral to the social and economic development since the Industrial Revolution.

8.1. Appointment and Conditions for Employment:

The Bangladesh Labour Code 2006 provides that, the minimum age for workers in Bangladesh is 18 years in factories and establishments. Contracts are made in the form of a letter of offer.

8.2. Settlement of Labor Disputes & Labour Court:

Settlement of industrial disputes is usually dealt as per the provisions of Sections 209-231 of the Bangladesh Labour Code 2006. In case of any industrial dispute, firstly the parties shall try to resolve the same through negotiations.

Award of the Arbitrator will be final and no appeal will be allowed against such award. On the other hand, if the parties do not agree to appoint an arbitrator, the party raising the dispute, may go for strike or lockout as the case may be. The government may, however, prohibit the same after one month in the interest of the public. In case of utility services like, (a) electricity, gas, oil & water supply etc. (b) hospital & ambulance service, (c) fire brigade, (d) railway & Bangladesh Biman and (e) ports etc., strike is prohibited.

Again in case of strike or lockout, either party may refer it to the Labour Court.

8.3. Wages and Fringe Benefits:

Sections 120 to 137 of Bangladesh Labour Code 2006 provide about procedure of payment. Section 138 provides that the government shall establish a Wage Board for the purpose of fixing a minimum wage for the labour. Section 140 of this code provides that the Wage Board has power to declare minimum rates of wage.

Such commissions were appointed in 1973, 1977, 1984, 1989 & 1992. Wages & fringe benefits declared by the government in 1977 having 20 grades of wages.

9. Intellectual Property in Bangladesh:

Besides the national laws in this respect, Bangladesh is the member of several International treaties. It is a member of the Universal Copyright Convention (UCC) since 5th May, 1975; Being a member of these treaties Bangladesh is enjoying cooperation from the respected authorities at the concerned field.

The Department acts under the supervise Ministry of Industries located at Shilpa Bhaban, Annex Building 91, Motijheel C/A, Dhaka 1000. The Department is divided into two wings i.e. Patents and Designs Wings for dealing with the functions related to patents and designs and Trademarks Wing to deal with the functions regarding trademark.

9.1 Patents and Designs:

The Patent and Design Act, 1911 was enacted with the purpose of protecting invention and design. An application must be made in the prescribed form and must be left at the department of patents, designs and trademarks in the prescribed manner. However, an application for patent should contain the following particular namely-

(a) Name of the inventor (applicant),

(b) Address(s) and nationality of the inventors,

(c) Two sets of specification and one set of drawing on tracing paper (transparent),

(d) One set Legalized Deed of Assignment (if any),

(e) Power of Attorney [Form no.- 31],

(f) Certified copy of the foreign patent (in case of claiming priority).

9.2 Design:

“Design” means only the features of shape, configuration, pattern or ornament applied to any article by any industrial process or means, whether manual, mechanical or chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye; but does not include any mode or principle of construction or anything which is in substance a mere mechanical device, and does not include any trade mark as defined in section 478, or property mark as defined in section 479 of the Penal Code.

The Registrar may, on the application of any person claiming to be the proprietor of any new or original design not previously published in Bangladesh, register the design under this Part.

(a)   Name of the inventor (applicant),

(b)   Address(s) and nationality of the inventors,

(c)   Two sets of specifications of design,

(d)   Four sets of 3D pictures of the products from 4 sides,

(e)   Power of Attorney [From – 31].

The Registrar shall grant a certificate of registration to the proprietor of the design when registered.

The term piracy as used in the Act has the similar meaning of infringement. There is civil remedy for the violation of copyright of design. In case of piracy of the design the owner of the design may file suit to the Court of District Judge.

9.3 Trademarks:

An applicant has to file application for the registration of a trademark to the Trademark Registry Wing of the Department of Patents, Designs and Trademarks.

An application for the registration of a trademark shall include the following:

  • Full name, street address and nationality of applicants.
  • Whether applicants are manufacturers/merchants/provider of services.
  • Black and white bromide prints (on photographic quality paper) for a label or design.
  • It is not necessary to notarize or legalize the authorization.

After filing the application, the Registrar may either accept or reject or order to correct or modify the application. Section 16 states that, the Registrar may reject an accepted application. The Registrar shall register the trademark if-

  • An application for registration of a trade mark has been accepted; and
  • it has not been opposed, or
  • the time for notice of opposition has expired, or
  • having been opposed, or
  • has been decided in favour of the applicant.

On the registration of a trade mark the Registrar shall issue to the applicant a certificate in the prescribed form of the registration thereof sealed with the seal of the Trade Marks Registry.

Where the rights of a proprietor of a registered trademark has infringed, he can initiate Civil proceeding (i.e. action for infringement and action for passing off), or Criminal Proceeding for having remedy. An action for infringement is statutory remedy. Passing off means to misrepresent that of one’s business or connected with another, in way likely to cause damage. Passing off is tort and its remedy is based solely on the common law of principles.

9.4 Copyright:

The enjoyment of copyright does not depend upon any formalities like registration. Although there is provisions for registration of copyright but it does not differ a work from any unregistered work. Copyright in a work automatically subsists as soon as the work comes into existence, if the work is original. The Copyright Act, 2000 confers on the owner of the Copyright exclusive right to multiply copies of his work for commercial exploitation. It also grants the negative right to refrain others from illegally multiplying the copies of his work. The Copyright protection exists in published as well as, unpublished works.

Where the author of literary, dramatic, musical, or artistic work is a natural person, the term of copyright shall usually be the lifetime of the author plus sixty years. But where the author is a juristic person term of copyright shall be sixty years from the year of its first publication.

10. Purchasing Immovable Property:

Right to property predominantly revolves around owning landed property. One of the means by which a company owns property is purchasing of land. Precisely for this reason a buyer of land should have to be diligent in order to avoid the post-buying hazards. There are some points which can help a prospective buyer in purchasing a piece of land.

  • Firstly, the purchaser has to scrutinize how the seller (owner) had owned the land. Failure of this may render a purchaser liable to pay the land revenues due by himself. The duty of the buyer is to examine the consistency between the latest document and the earlier one (popularly known as baya deed) in terms of the amount of land, holding number, khatian number etc
  • The purchaser also needs to be sure that the land which he is going to buy is free from all encumbrances. Free from encumbrances means that the land is not a mortgaged one or is not a subject matter of a legal dispute, or is not a government khas land or not a declared vested property land or land decided for acquisition. If there is a certificate case or there is a litigation pending, the land is not worth buying.(Setup Business in Bangladesh)
  • The purchaser also should be aware that the intended land is also not subject to prohibitory land area. The Government at times forbids selling of land in particular locality for development or environmental purposes.
  • There is a cardinal principle of land transfer, ‘no person can hand over a better title than he himself has’. If the seller’s title to the land is faulty, he has no authority to sell the land. His transfer would be void.

10.1 Procedure of Purchase:

Step 1: Verify the record of rights from the Land Office (also known as Land Revenue Office)
Completion Time Frame: 15 – 60 days (simultaneous with procedures 2 and 3)
The land administration system in Bangladesh separates records of ownership and those on revenue as such:
a. Land Records Office for land records, surveys, publication and maintenance of records under the directorate of land records and survey (Ministry of Land).
b. Land Office or Land Revenue Office under Ministry of Land. There are 11 administrative offices in each upajela.
c. There are 64 districts in Bangladesh but 61 registration districts. 3 hill districts do not have registration centers. In Dhaka, the district land registration office has 11 sub registrar offices under the Ministry of Law.

11. Epilogue:

The country has a policy of private sector led, liberal economic approach; export oriented, gradually transforming into assembling & manufacturing; seeking for rapid expansion of the service sector. Also looking for substantial joint venture and Direct Foreign Investment (DFI) from abroad in medium and large-scale industries and enterprises, including infrastructure building.

Government is offering unparalleled facilities to investors. We have eliminated licensing system and simplified government approval procedure for investment in Bangladesh. Cost of production especially cost of labor both skilled and semi-skilled is comparatively lower. Cost of living is also quite low and reasonable and there is no communal or ethnic problem. That’s why Bangladesh has become an attractive investment destination in South Asia.