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Tips on Rules and regulations applicable to Liaison

Tips on Rules and regulations applicable to Liaison

Flow Chart for setting up of Liaison Office of a Foreign Company in
Bangladesh will be as under:

A: Permission from BIDA:
The Bangladesh Investment Development Authority (BIDA) governs the
permission of Liaison office and the application should be made in prescribed
form and should be accompanied by some specified documents.
Meeting of the committee of Bangladesh Investment Development Authority
(BIDA) usually held twice in a month. The Decision of the meeting usually
communicated after ten days of holding of the meeting. Ideal time schedule for
obtaining the permission of BIDA could be 45 days which may vary both ways
depending on the practical circumstances.
The initial permission of BIDA is granted for a limited period with in the range
of one year to five year, however extension of such permission is usually
granted:

Attestation of documents by
Bangladesh High Commission
Application to BIDA for LO
Permission

Approval of BIDA

Bank A/c Opening

Application to Bangladesh Bank

registration

Bangladesh Bank Permission
TIN certificate

In case of renewal of permission of BIDA, the Tax clearance Certificate is
required and the application should be made two months before expiry of
the permission.
B: Initial address:
Ideally, before obtaining the permission of BIDA the Liaison may not enter
into any lease agreement for office premises, in which case MOU for the rental
could be preferred instead of lease agreement. The address of C.A or lawyer of
the company may be used as the official address of the company for the time
being. On having the legal set up the address may be changed with proper
notifications to the respective authorities.
C: Initial Inward Remittance:
BIDA approval will be made subject to initial inward remittance of USD
50,000 towards setting up and operational cost of the liaison office for the
initial period. Such remittance should be made within 2 months of the
permission. Utilization of the fund will be at the discretion of the company.
D: Opening of Bank Account:
The Liaison office shall have to open an account with any schedule Bank of
Bangladesh for receipt of remittance to meet its operational cost. The required
documents which are needed for opening the bank account are as under:
 Copy of Permission of BIDA;
 Copy of Memorandum and Articles of Association of the company;
 Board resolution for opening a Bank Account of the name of Company in
Bangladesh;
 Board resolution for authorization to operate bank account in Bangladesh;
 Copy of passport of the foreign national, who will operate the bank account
on behalf of the company;
 Three copy Photographs of the foreign national who will operate the Bank
account;
 Work Permit of the foreign national; and
 Prescribes form for opening a bank account issued by respective bank.
If the account is operated by any local employee then copy of passport and
work permit of foreign national will not be required.

E: Bangladesh Bank (Central Bank) Permission

After having the permission of BIDA, the Liaison office will be required to
register with Bangladesh Bank (Central Bank) u/s 18B of the Foreign Exchange
Regulation Act 1947 ((FERA). The application should be made through
Authorized Dealer Bank
In case of renewal of permission of Bangladesh Bank, the Tax clearance
Certificate is required.
F: Setting up Completion Program:
Standard time schedule for setting up of the liaison office are as under:
Activity Weeks

1 2 3 4 5 6 7 8 9

BOI
Permission
TIN Certificate
S. clearance
Bank Account
Bangladesh
Bank
permission
The above schedule is ideal one, which may be varied to some extent (both
way) based on the practical circumstances.
G: Security Clearance:
The liaison office shall have to obtain security clearance from the Ministry of
Home, Govt. of Bangladesh. The clearance will be granted following
investigation by SB of police and NSI.
H: Area of activity and opportunity for the Liaison office:
Liaison office is prohibited to enter into business dealings directly but it can
explore the business opportunity, Quality control, Information
transmission & correspondences. Such liaison office has to confine its
activity for which it got the permission from the Board of Investment.

I: Repatriation:

 Outward remittance of any kind from Bangladeshi source is prohibited.
 Unspent inward remittance can be remitted at the closure subject to
approval of Central Bank and having the tax clearance certificate.
 Expatriate can make remittance of 50% of his salary upfront and the
residue after paying tax can be repatriate at the time of Exit.
J: Filing of Quarterly statement to Bangladesh Bank etc.
After getting the permission the Liaison office will require to file with
the Quarterly statement of accounts for the inward remittance and its
disbursement to Bangladesh Bank in Prescribed form along with the
encashment certificates within 30 days from the end of each quarter,
copy of that should also be filed with the Board of Investment and
Income tax authority.
K: Sources of Fund:
 All operational, functional and establishment cost of the LO should be met
on receipt of remittance from abroad.
 Receipt of any amount from local source is strictly prohibited.
L: Taxation
1. General:
Imposition of income tax on Liaison office is guided by the Income Tax
Ordinance –1984 and the Double taxation treaty between the GOB of
Bangladesh and respective country.
Assessment of Liaison office is covered by Rule 34 of the Income Tax Rule-
1984 and Section 18 of the Income Tax Ordinance 1984. Assessment of an
assessee is based on the residential status of the assessee and personal status of
the assessee. Usually Liaison offices are assessed with nil income.
2: Residential Status:
 A Company shall be treated as resident if the control and management
affairs are situated wholly in Bangladesh. Liaison Office is treated as non-
resident and company.
 An Individual shall be treated as resident
 if he has been in Bangladesh for a period or periods of 182 days or more in
Bangladesh during the income year; or
 If he has been in Bangladesh for period of ninety days or more during the
income year and total 365 days in preceding four years.

A person who is not a resident shall be treated as non-resident.
3: Scope of Total Income chargeable to tax:
 In case of resident: World income.
 In case of non-resident: Income deemed to accrue or arise in Bangladesh
4: Assessment:
 Every Liaison office in Bangladesh shall be assessed to tax for every year
and may be taxed if there are any income accrue or arise in Bangladesh u/s
18(2) of the Income Tax (IT) Ordinance 1984.
 Referring to the PE under DTA with respective country and subject to
fulfillment of certain terms and conditions liaison office may be assessed
with nil income.
M: Registration with Value Added Tax Authority:
 Liaison office are not required to registered with VAT authority but
provisions of withholding VAT is applicable such office.
N: Trade License:
 As the liaison office will not be involved in any trade hence obtaining of
Trade License is not applicable for the liaison office.
O: Application of Labour Law:
Labour law 2006 shall be applied and important features are as under:
 Every worker shall be allowed one and half day’s consecutive holiday in
each week.
 Shops and Establishment shall be closed for at least one and half
consecutive days in each week.
 Festival holiday with full wages 10 days.
 Casual Leave with full wages for 10 days.
 Sick leave –14 days.
 Maintenance of Attendance register, Pay Register, Leave Register,

P: Service Rule:
There is no mandatory provision for adoption of any service rule. Adoption of
service rule will stand for good practice and standard corporate policy.

However, Labor laws will be applied for the workers only and as for officer
and executives there are no legal bindings for the employers.
Q. Registration with Bangladesh Bank:
Foreigner’s working in any company incorporated outside Bangladesh shall require
registration with Central Bank under Section 18A of Foreign Exchange Regulation Act 1947
R: Ratio of Employment:
There should be at least five local employments against employment of one
foreign national in the Liaison Office.

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