Investment in Bangladesh

BANGLADESH IS THE BEST CHOICE IN THE REGION | FIND OUT WHY

GDP (nominal) total:
$347.991 billion

GDP growth rate (%):
5.24 (2019-20)

International reserves:
USD $37.287 Billion (July 2020)

Total exports:
USD $ 33.67 US Billion (FY 2019-20)

GDP per capita:
USD $2064 (2020)

FDI Inflows:
USD $1.764 (Net) Billion (FY –July 2019-March 2020)

Currency:
USD 1 = BDT 84.9054 (13 August 2020)

Total imports:
$56.06 Billion (FY 2018-19)

INVESTMENT Policy OF BANGLADESH

Bangladesh offers the most congenial investment regime in South Asia. According to the Industrial Policy 2016, Bangladesh welcomes foreign private investment in all areas of the economy and there is no restriction on the amount of share of the investment. Foreign investors are eligible to take advantage of a wide range of generous tax concessions and other fiscal incentives and facilities.

  • Foreign investment in Bangladesh is secure vis-à-vis nationalization and expropriation.
  • The Foreign Private Investment (Promotion and Protection) Act 1980 ensures full protection to foreign investors.
  • Furthermore, Bangladesh is a signatory to MIGA, OPIC, ICSID, WAIPA, WIPO and WTO.
  • Bangladesh also has signed bilateral investment treaties with following 32 countries for promotion and protection of investment:
  • Austria, DPR Korea, Thailand, Belgium, Republic of Korea, UK, Canada, Malaysia, USA, China, Pakistan Uzbekistan, France, Poland, Vietnam, Germany, Romania, Singapore, Indonesia, Switzerland, Denmark, Iran, The Netherlands, India, Italy, The Philippines, UAE, Japan, Turkey, and Belarus.
  • Bangladesh has signed Avoidance of Double Taxation Treaty (DTT) with 28 countries: Canada, Poland, Norway, China, Romania, Turkey, Denmark, Singapore, Vietnam, France, Republic of Korea, Philippines, Germany, Sri Lanka, Indonesia, India, Sweden, Switzerland, Italy, Thailand, Oman, Japan, The Netherlands, Malaysia, UK.
  • Bangladesh has also signed multilateral and regional treaties such as APTA, BIMSTEC, IORA, SAPTA, SAFTA, SAFAS, COMCEC, TPS-OIC, Preferential Trade with D-8 Countries etc. to conveniently access market and investment opportunities.
  • In addition, Bangladesh has signed trade agreements with 45 countries for trade facilitation among the countries.

For downloading the Prospectus of Walton Hi-Tech Industries Limited (abridged version), please click here 

One Stop Service Center of Bangladesh Investment Development Authority (BIDA)

For investing in Bangladesh, the first contact point is the Office of the Bangladesh Investment Development Authority (BIDA). It operates under the Prime Minister’s office and is the principal government agency for encouraging investment.

The BIDA offers a range of valuable business-related services to the international and national investment community. The office helps prospective investors in obtaining official permits and documents required for conducting business, including visas, work permits and permanent residency permits. The BIDA also assists investors in gaining access to utilities such as water, electricity, gas, land and telecommunications.

BIDA’s One Stop Service Centre offers the following:

  • Trade License from respective city corporation and local government body are given within 48 hours, assuming all required documents are provided. Bangladesh Investment Development Authority with local government division insures this service.
  • Company registration from Joint Stock Register’s office company registration complete within 48 hours.
  • Registration of Bangladesh Investment Development Authority is complete within a day, assuming all required documents are provided.
  • Electricity connection’s result are given within 10 days after receive the application from BIDA where representative of power development board authority is working.
  • Environmental certificate are given within 10 days from BIDA where respective officer from Environment Department are working.
  • From Bangladesh Investment Development Authority representative of Titas Gas Authority the result of gas connection are given within 10 days from the date of application received.
  • Foreign loan borrowing application disposed within 30 days assuming all required documents are provided.
  • Tax related complication is taken from BIDA by respective National Board of Revenue officer after getting application from entrepreneur and result are given within 10 days.
  • Online services also provided by BIDA.
  • Assistance for Land acquire are supported by BIDA

Tax Holiday and Tax Exemption: 5 to 10 years of Tax Holiday is offered to investors and tax is exempted depending on the area, the rate of which is specified below:

Dhaka and Chittagong divisions, excluding Dhaka, Narayanganj, Gazipur, Chittagong, Rangamati, Bandarban and Khagrachari districts, for a period of five years beginning with the month of commencement of commercial production of the said undertaking:

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Rajshahi, Khulna, Sylhet, Barisal and Rangpur divisions (excluding City Corporation area) and Rangamati, Bandarban and Khagrachari districts, for a period of ten years

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-100% tax exemption on income and capital gain for certain projects under Public Private Partnership (PPP) for 10 years.
-100% tax exemption from software development, Nationwide Telecommunication Transmission Network or Information Technology Enabled Services.
-50% of income derived from export is exempted from tax
-Tax exemption on royalties, technical knowhow and technical assistance fees and facilities for their repatriation
-Tax exemption on interest paid on foreign loan

Double tax avoidance under DTTs

Tariff concessions

  • capital machinery
  • import of raw materials

Bonded warehousing for export oriented industries

Cash incentives

  • Exporting selected products at the rate of 5-20% based on the FOB value of the exportable goods.

ROADMAP TO INVESTMENT IN BANGLADESH

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 AREAS ALLOWED FOR FOREIGN INVESTMENT

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INCENTIVES FOR FOREIGN INVESTORS

  • Foreign investment is protected by Foreign Investment Promotion & Protection Act, 1980;
  • 100% foreign equity is allowed;
  • Presence of unrestricted exit policy;
  • Tax holiday for 5-7 years for 23 selected sectors;
  • Private power companies are allowed a tax holiday for 15 years;
  • Accelerated Depreciation Allowance (ADA) is allowed instead of tax holiday for newly industrial units under specified schedule;
  • Concessionary duty on imported machinery: 1% import duty on capital machinery and spares for 80% to 100% export oriented industry. This is applicable for initial installation or BMR/BMRE of the existing industries;
  • 3% import duty on capital machinery and spares for other industries. This is applicable for initial installation or BMR/BMRE of the existing industries;
  • Value Added Tax (VAT) is not payable for imported capital machinery and spares;
  • Avoidance of double taxation on the basis of Double Taxation treaties;
  • Full repatriation facilities of dividend and capital in the event of exit;
  • Provision for granting permanent residence permit on investing US$ 75,000 and citizenship offer investing US$ 5,000,000

ADDITIONAL INCENTIVES:

  • Lower living costs for the expatriates;
  • Wages and salaries are lowest in the region;
  • Duty draw back facilities;
  • Consistent adaptation of market liberalization and privatization policies;
  • Investment by NRBs is considered as FDI;
  • Up to 10% of public shares are retained for NRBs;
  • NRBs are allowed to retain foreign currency deposits in NFCD accounts;
  • Highest remittance senders are awarded with CIP;

INCENTIVES IN GENERAL

Accelerated Depreciation

Accelerated depreciation for machinery and plants

Exemption on Import Duties

Exemption of customs duties on capital machineries
Exemption of import duties on raw material used for producing export goods

Tariff Refund

Tariff (if paid) refund on import of raw materials for export

Double Taxation Prevention

Benefits for countries with double taxation avoidance treaty.

Bonded warehousing Facilities

For export-oriented industries
For large import for local selling in certain items

Ownership

100% ownership is allowed

Repatriation of invested capital and dividend

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 dividends and or retained earnings, those will betreated as new investment.

Others

·         No restrictions on issuance of work permits to project related foreign nationals and employees

·         Facilities for repatriation of invested capital, profits and dividends

·         Provision of transfer of shares held by foreign shareholders to local investors

·         Reinvestment of remittable dividends would be treated as new investment

·         Remittance of royalty, technical know-how and technical assistance fees

·         The Foreign Private Investment (Promotion & Protection) Act. 1980 ensures legal protection to foreign investment in Bangladesh against nationalization and expropriation

·         Equal treatment of both local and foreign investment.

·         Bilateral and multilateral investment agreements ensure protection of investment

·         100% FDI, Joint Ventures, Partnerships, PPPs, Non-equity mode (Technology transfer, licensing Franchising, contracting etc.), and Foreign Lending are allowed

·         100% FDI or Joint Venture FDIs are allowed to participate in the primary and secondary stock markets.

·         Foreign Investors are allowed to have access to local banks for working capital requirements.

·         Intellectual Property right is protected by Law.

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Enhancing Competitiveness and Investment Facilitation

  • Offers an attractive and competitive package of tax incentives.
  • Imposes no foreign equity restrictions on manufacturing activities or on some service.
  • Provide assistance in the provision of visas and work permits to facilitate entry and subsequent operation for a foreign-owned business.
  • Waives restrictions on land ownership by foreign entities.

 Business Support Services

  • Provides comprehensive information and advice on establishing operations in Bangladesh.
  • Arranges site visits.
  • Identifies potential suppliers, subcontractors, joint-venture partners.
  • Provides useful contacts with key public and private organizations.
  • Coordinates between the foreign business community and other public agencies.
  1. REGISTRATION OF A FOREIGN COMPANY IN BANGLADESH

A foreign company needs to register its entity to the office of the Registrar of Joint Stock Companies and Firms (RJSC) and also has to obtain a trade license from the local City Corporation office and get an income tax and VAT certificates from the National Board of Revenue for operating in Bangladesh.

To register a company, it has to submit the following papers to the RJSC office along with applicable registration fee. However, it does not need to have the Name Clearance from RJSC which is however mandatory for a local company.

  • Memorandum and Articles of Association of the Company (Form No. XXXVI);
  • Address of the registered or principal office of the company (Form No. XXXVII);
  • List of directors and managers (Form No. XXXVII);
  • Return of persons authorized to accept service (Form No. XXXIX);
  • Notice of situation of the principal place of business in Bangladesh (Form No. XLII);
  • A board meeting resolution that takes a decision to set up a company in Bangladesh;
  • Encashment certificate obtained from any scheduled bank;
  • Permission from Bangladesh Investment and Development Authority (BIDA);

Note: All the above-mentioned forms are available the RJSC website at:

http://www.roc.gov.bd/site/forms/1a138a8a-7a30-4f11-adc8-a2db55a773dc/Company/TO-forms

FEES FOR REGISTERING A FOREIGN COMPANY

A company has to pay the required fees for registering with RJSC. For filing 6 documents (5 filled in forms @ BDT 200.00 per document plus 1 Memorandum & Articles of Association, @ BDT 200.00) BDT 1,200.00).

TAXES TO BE PAID BY FOREIGN COMPANIES

Similar to the local entities, foreign companies and investors are liable to pay income tax and corporate tax as per existing rules and procedures.

  1. Income Tax
    Income tax is dependent on whether an individual is classified as resident or non-resident in a given tax year. An individual is classified as a resident if they stay in Bangladesh for at least 182 days in one income year, or for 90 days if they have previously resided in Bangladesh for more than 365 days in the four preceding years. Residents are subject to progressive rates of income tax, which range from 10% to 30%. Non-residents, with the exception of Bangladeshi non-residents, are subject to pay a flat rate of 30%.
  2. Corporate Tax
    The following table provides a description of corporate tax rates presently prevailing in Bangladesh:

Sl. No.

Nature of the Company

Rate (%)

Condition/Rebate

01

For publicly traded companies (except bank, insurance, leasing and other financial institutions)

27.5%

Any listed company which declares a     dividend at 20% or higher, will benefit from a tax abatement at 10%.

 

 

 

Any listed company which declares a dividend at 10% or lower, or does not distribute a dividend approved/ declared by SEC, will be required to pay tax at 37.5%.

02

For non-publicly traded companies (except bank, insurance, leasing and other financial institutions)

37.5%

 

03

Bank, insurance, leasing and other financial institutions

42.5%

04

For mobile phone operator companies

45%

If the mobile phone operator company transforms to a publicly traded company offering at least 10% of paid up capital in an IPO, then the tax rate will be 35%.

Source: Bangladesh Board of Investment Guidelines (Page 60)

 OPENING OF BANK ACCOUNTS BY FOREIGN COMPANIES

A non-resident may open a Non-Resident Taka Account (NRTA) in the name of the proposed company/enterprise of foreign investors wishing to invest or set up a business in Bangladesh, without requiring prior approval from Bangladesh Bank. However, the account may only receive inward remittances from abroad.

After registration/commencement of the business, a new account in the name of the company may be opened following usual procedures and the account opened previously should be closed immediately and balances lying therein shall be transferred to the new Foreign Currency (FC) accounts and Non-Resident Foreign Currency Deposit (NFCD) accounts with foreign exchange brought from outside. Balance of these accounts are freely transferable abroad.

If for any reason, the proposed investment/incorporation does not take place, then the balance of the account, after meeting the required expenses, may be allowed to be repatriated without prior approval from Bangladesh Bank.

A foreign investor may also open and operate a Taka account freely with any bank while he is a resident in Bangladesh.

Non-residents may also open a Non-Resident Investor’s Taka Account (NITA) with any Authorized Dealer (AD) bank in Bangladesh with foreign exchange remitted from abroad through normal banking channel or by transfer of funds from non-resident investor’s foreign currency account for portfolio investment in Bangladesh.