How to Set Up a Branch Office as a Foreign Company in Bangladesh

For foreign companies looking to expand into Bangladesh, establishing a branch office is a popular option. A branch office allows a foreign company to operate in Bangladesh while retaining its status as an overseas entity. Unlike a subsidiary or representative office, a branch office can directly engage in business activities, such as generating revenue, signing contracts, and conducting commercial operations. However, setting up a branch office in Bangladesh involves several steps and legal requirements that need to be followed carefully. This guide will walk you through the process of establishing a branch office as a foreign company in Bangladesh.

Step 1: Understanding the Legal Framework

In Bangladesh, the establishment and operation of a branch office by Foreign Company Registration in Bangladesh are regulated by the Foreign Exchange Regulation Act (FERA) and the Companies Act, 1994. Additionally, the Bangladesh Investment Development Authority (BIDA) is the governing body responsible for facilitating and overseeing foreign investment, including the establishment of branch offices. The Bangladesh Bank, which regulates foreign exchange transactions, also plays an important role in the process.

Before you begin, it’s important to understand the key requirements for a foreign company to open a branch office in Bangladesh. Branch offices are typically allowed in sectors such as manufacturing, trade, consulting, or financial services. However, there are certain restrictions on foreign investment in specific sectors, such as defense, media, and certain types of retail trade.

Step 2: Application to the Bangladesh Investment Development Authority (BIDA)

To establish a branch office, foreign companies must first submit an application to the Bangladesh Investment Development Authority (BIDA). The application should include the following documents:

A completed application form: Available on the BIDA website or can be obtained directly from their office.
Certificate of Incorporation: A copy of the foreign company’s registration or incorporation certificate from its home country.
Memorandum and Articles of Association: The company’s governing documents outlining the objectives and structure.
Board Resolution: A resolution passed by the parent company’s board of directors authorizing the opening of a branch office in Bangladesh.
Financial Statements: Recent financial statements of the parent company, including the balance sheet, profit and loss account, and auditor’s report.
Local Representative: Information about the designated local representative or manager who will be responsible for the branch office in Bangladesh.

Once the application is submitted, BIDA will review the documents and approve or reject the application based on compliance with Bangladesh’s laws and regulations. The process usually takes a few weeks, but delays can occur, so it’s important to allow ample time.

Step 3: Registering with the Registrar of Joint Stock Companies (RJSC)

After receiving approval from BIDA, the foreign company must register its branch office with the Registrar of Joint Stock Companies and Firms (RJSC). The RJSC is responsible for maintaining records of business entities operating in Bangladesh. The registration process requires submission of:

A copy of BIDA’s approval letter.
A copy of the parent company’s certificate of incorporation.
The memorandum and articles of association of the parent company.
Proof of the local representative’s appointment.
A passport-size photograph and identification documents of the local representative.

Once registered, the branch office will be issued a certificate of registration by the RJSC, which is required to open a local bank account, engage in business contracts, and hire employees in Bangladesh.

Step 4: Opening a Local Bank Account

To conduct business activities, the branch office will need to open a local bank account. This step is essential for processing payments, receiving funds, and conducting transactions in Bangladeshi currency (BDT). The bank account opening process requires the following documents:

A copy of the RJSC certificate of registration.
A copy of the BIDA approval letter.
Identification documents of the authorized signatories (local representative or manager).
Proof of address of the branch office in Bangladesh.
The parent company’s incorporation documents (if applicable).

Once the branch office has a local bank account, it can begin to handle its day-to-day operations in Bangladesh.

Step 5: Registering for Tax and VAT

For tax compliance, the branch office needs to register with the National Board of Revenue (NBR) for a Tax Identification Number (TIN). This will allow the branch office to pay taxes on income earned in Bangladesh. The required documentation for this includes:

Copy of the RJSC registration certificate.
Copy of the BIDA approval letter.
Copy of the branch office’s lease or property documents (if applicable).
National ID, passport, or other identification documents of the local representative.

Additionally, if the branch office will be involved in trading goods or services subject to VAT, it must register for VAT with the VAT and Customs Department. The VAT registration process requires the submission of similar documentation as for tax registration.

Step 6: Compliance with Local Employment Laws

Once the branch office is established, it will need to comply with Bangladesh’s employment laws. This includes adhering to regulations on hiring local and foreign employees, registering for the Employees' Provident Fund (EPF) and Gratuity Fund (GF), and complying with the minimum wage, working hours, and labor conditions specified by the government.

Foreign companies can hire expatriates to work at the branch office, but this requires obtaining a work permit from the Bangladesh Bureau of Manpower, Employment and Training (BMET). Work permits are generally granted for positions that require specific expertise not available in the local labor market.

Step 7: Ongoing Compliance and Reporting

After successfully setting up a branch office, it is essential to maintain ongoing compliance with local regulations, including:

Annual Filing with RJSC: The branch office must file annual returns with the Registrar of Joint Stock Companies.
Tax Filing: Regular tax filings with the NBR are required, including the submission of financial statements and payment of taxes.
Audits: Foreign companies must have their financial records audited by a certified auditor in Bangladesh.

Regular compliance with these requirements will ensure that the branch office operates legally and avoids penalties.

Conclusion

Setting up a branch office as a foreign company in Bangladesh is a relatively straightforward process but requires careful planning and adherence to local regulations. By following the necessary steps—from obtaining approval from BIDA to registering with the RJSC, opening a local bank account, and ensuring tax and labor law compliance—foreign companies can establish a strong presence in the rapidly growing Bangladeshi market. Engaging with local legal, financial, and tax advisors can streamline the process and ensure that all regulatory requirements are met efficiently.