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A liaison office and a representative office are similar in Bangladesh. When a foreign company, incorporated outside of Bangladesh, establishes a company in Bangladesh with an aim to represent, facilitate, and performs as a coordinator amongst the foreign company and the local agents, distributors, and exporters from Bangladesh through correspondence through the proposed company in Bangladesh, is called the liaison or representative office. The foreign company is called the parent or principal company. The prime purpose of the office is to represent the parent company or to maintain the liaison in Bangladesh. Albeit, a liaison office performs its activities in a similar manner of a branch office incorporated in Bangladesh, there are trivial disparities between these two forms of
business. To know more about branch office read our short guide here or contact ABC Partners to find out how could we assist you with your need.
The key distinction between the liaison office and the branch office is that the branch office could perform commercial activities which eventually would generate income for the company in Bangladesh provided they register and obtain approval from the Bangladesh Investment Development Authority or BIDA, in short. The liaison office, on the contrary, could not engage in any sort of commercial activities which would generate revenue. The sole responsibility of the liaison office is to represent its parent company and to maintain the liaison between the principal company and its agents, distributors, and exporters or importers.
Another difference between these two companies is that the operational cost of the branch office could be maintained by the branch office itself provided they do not fall short on their revenues, whereas the liaison office, is entirely reliant on the parent company for the operational cost. An additional dissimilarity between a branch office and a liaison office is that, since the liaison office do not engage itself in any kind of income earning activities, it is exempted from the tax on profit liability whereas the branch office is under the liability to pay tax on profit.
The incorporation or registration process of a liaison office is very analogous to the incorporation of a branch office. The incorporation or registration process of a liaison office is illustrated below.
The Procedure:
Step 1: Letter of Approval from the BIDA:
In order to incorporate a liaison office, the foreign investors or the parent company intending to establish a liaison office in Bangladesh requires a prior approval from the Bangladesh Investment Development Authority or in short BIDA. To obtain the approval there are few documents which must be submitted to the BIDA and compulsorily be attested by the Bangladesh Embassy or the High Commission or the Apex Chamber of Commerce of the country of origin where the parent company is incorporated. Here is the list of all the documents those are required for the BIDA approval:
N.B.: 1. Four copies of all the documents should be submitted with the application.
Inspection by the Inter-Ministerial Committee of the BIDA:
Once all the documents are submitted to the BIDA, the Inter-Ministerial Committee of BIDA would assess the authenticity of those documents. If the Committee is content with the documents, they would provide the approval for a specific period of time depending on the nature and type of the business of the company and upon the discretion of the Committee, to the parent company to invest and to incorporate a liaison office in Bangladesh. If the Committee is not satisfied, it may ask for more relevant documents. Therefore, the applicants or the parent company should prepare the documents meticulously without any mistake in order to expedite the process.
The approval provided to the Parent company or the representative of the parent company to establish a liaison office in Bangladesh, is usually for three years. if the company decides to extend the approval or to renew the approval, they must submit an application to the BIDA at least 2 (two) months prior to the expiration of the existing approval along with relevant documents which are more or less similar to the documents submitted for the initial approval.
Time and Cost for the Approval:
The average time required for an approval from the Inter-Ministerial Committee is about one month, unless the Committee asks for a physical representation of the documents by the representative of the parent company. If the Committee requires a physical representation, the process would take much more time than one could anticipate. Therefore, for an expedited process please contact ABC Partners’ skilled and experienced lawyers who could assist you in preparing the documents meticulously.
The government cost for obtaining an approval letter from the Inter-Ministerial Committee is approximately USD 300 (three hundred) and it may increase if they require any further inspections of other relevant documents or a physical representation of the documents.
Step Two: Opening a Bank Account:
Upon receiving the approval from the Inter-Ministerial Committee of the BIDA, the next step would be to open a bank account in any scheduled bank of Bangladesh. Albeit, no paid capital is required to open a Liaison office in Bangladesh, an inward remittance of USD 50,000 (fifty thousand) or equivalent of estimated initial establishment and operational cost for six months is needed to be deposited in the account within two months from the date of issuance of the approval letter by the Committee.
In order to open a bank account in any scheduled bank of Bangladesh, there is a list of documents which are to be submitted to the Bank. The list of documents could vary depending on the Banks internal framework; however, it is more or less similar for most of the Banks.
Step Three: Approval of Bangladesh Bank:
The Parliament of Bangladesh has revised the Foreign Exchange Regulations Act 1947 in 2015.
The reason for these amendments is to scale down the red tape which used to cost a great deal of time of the parent company. For example, previously, an approval was required for the companies to open a bank account in Bangladesh from the Bangladesh Bank. Moreover, under section 18A of the Foreign Exchange Regulations Act 1947 the parent company or the representative had to obtain permission for their employees of foreign nationals for the employment and remittance purposes. The new Act not only amended the previous Act but also abolished this requirement and shifted the onus of these requirements directly to the subscribing bank of the parent company where they opened the bank account initially in Bangladesh. The new Act also equalizes the treatment of both foreign and local nationals whereas, previously, only the foreign nationals had to comply with these requirements. Under the new Act, the Bangladesh Bank has the authority to investigate details of the assets, movable and immovable properties, foreign currency holdings, and investments in foreign securities from both the local and foreign employees of the company.
The new Foreign Exchange Regulation (Amendment) Act 2015, section 8 has amended section 18B of the Foreign Exchange Regulations Act 1947 which requires that after obtaining the approval from the BIDA, the parent company or the representative has to report of the same to the Bangladesh Bank, the Central Bank of Bangladesh through their existing bank in which they opened their account within thirty calendar days. Therefore, it is very crucial that the report is made by the representative or the parent company through their existing bank without any delay. This process is to be repeated when they renew their approval after the expiry of the existing one. Should the liaison office wish to switch their current bank they could do so by obtaining a ‘No Objection Certificate’ (NOC) from the current bank and by submitting the NOC to the nominated bank. All the information of this change needs to be corresponded to the Bangladesh Bank and all other relevant departments.
Step 4: Registration of Liaison office with the RJSC:
Upon receiving the approval from the BIDA and reporting to the Bangladesh Bank, the representative is required to register the liaison office with the Registrar of Joint Stock Companies and Firms (in short RJSC), the Company House of Bangladesh. In so doing, the representative has to submit few documents which are essential for the registration. The list of the documents is:
Once the RJSC is provided with these documents, the representative or the principal company has to obtain trade license and other relevant documents from the relevant authorities.
Step 5: Trade License:
A trade license is the authorization which is required to perform the business activities of a company. In Bangladesh trade licenses are issued by the responsible city corporations where the company is situated. In order to obtain a trade license an application is to be made to the city corporation along with few essential documents. The list of the documents is given below:
Upon receiving these documents, provided the city corporation’s trade license department does not require any further documents, would issue a trade license within 5 (five) working days. The Government fee for the trade license is USD 100 (one hundred)
Step 6: Income Tax Registration & VAT Registration for the Liaison office:
After setting up the liaison office in Bangladesh, in order to perform its usual business activities, the liaison office is required to obtain a unique Business Identification Number (in short, BIN). However, to obtain the BIN, the liaison office is required to obtain a Value Added Tax (VAT) Certificate by registering itself with the National Board of Revenue (in short, NBR). The VAT registration is free of cost and could be done easily online. Please Contact ABC Partners’ skilled workforce for VAT registration.
The list of the documents is as follow:
Once these documents are submitted to the NBR, a VAT Registration Certificate would be issued in the company’s name. This certificate could be used to obtain the BIN from NBR.
Employing Foreign Employees at the Liaison office in Bangladesh:
To be able to stay and work at the liaison office in Bangladesh, the foreign employees are required to have a valid work visa. If all the requirements are met, an employee would usually be granted a multiple entry visa for three months with an option to renew the visa if the company reckons that the service of the employee is necessary for the business.
The manager of the liaison office could be an expatriate, however, he or she needs to be residing in Bangladesh during the tenure of his or her employment. The law pertaining to employing expatriates in Bangladesh, imposes a restriction on the number of foreign nationals in Bangladesh. The restriction is in the form of ratio. For instance, at the initial stage the ratio of local and foreign worker is 10: 1 (local: foreign) and 20:1 during the operational stage if the company is an industry registered with the BIDA. For a Liaison office, on the other hand, the ratio of local to foreign is 5:1 (local: foreign).
ABC Partners is one of the prominent consultancy firms in Bangladesh with ample expertise in incorporation of business in Bangladesh. We, the ABC Partners would be more than happy to consult with the foreign nationals on how to incorporate a liaison office or any other type of business in Bangladesh. Please contact ABC Partners for a free consultation.
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