Setting up a subsidiary in Bangladesh is one of the foremost steps for business expansion. While it sounds like a simple deal, the process involves knowing various processes and documents. However, before delving into the nitty-gritty of establishing a subsidiary, it is essential to understand the process, required documents, and the established subsidiary laws.
Below is a detailed guide for understanding the subsidiary system in Bangladesh and why you should set up a subsidiary in the country.
What are the Types of Subsidiaries in Bangladesh?
1. Private Limited Company
In this type of subsidiary business in Bangladesh, the company’s liability is restricted to the amount of capital provided by the members. The foreign investors get 100% ownership in a private limited company.
The minimum paid capital is USD 1.
There is a requirement of two members or shareholders to start this form of company. Owing to its limited liability status, employers can use this entity for all business activities.
2. Public Limited Company
The shares are registered on a stock exchange in a public limited company. These shares can be publicly traded. Unlike the private limited company, forming this type of entity requires a minimum number of seven shareholders. The minimum share capital in Bangladesh for a public limited company is USD 1.
3. Subsidiary Company
A parent company usually controls this legal entity. Regulations dictate businesses appoint at least two shareholders when starting a subsidiary company.
The capital requirement is USD 1.
A foreign investor can invest up to 51% to 100% foreign investment in a subsidiary company.
4. Branch Office (Foreign Owned)
A branch office is an ideal option when a foreign company wants to set up business in Bangladesh. There is no minimum capital required for this business entity. Also, there is no stringent requirement for minimum members in the company.
100% direct foreign investment is allowed as the foreign parent company controls the company.
5. Representative Office (Foreign Owned)
Also known as the liaison office, this form of subsidiary business in Bangladesh manages the central office’s marketing and research & development activities. You don’t require a minimum capital to start a representative office in Bangladesh. Plus, there is no requirement for any minimum number of members to form the company.
How to Set Up Subsidiary in Bangladesh?
Businesses must follow the following procedure when setting up a subsidiary in Bangladesh.
The first step is to apply for name clearance. Employers must deposit a bank slip, and employers must pay 600 Taka to acquire a name for the company. After the payment is made, an official clearance will be issued by the RJSC website.
Corporate bank account
This is an essential step for the incorporation of a foreign subsidiary in Bangladesh. The company’s shareholding is crucial for opening a corporate bank account. After this step, the bank will issue an encashment certificate. The Registrar of Joint Stock Companies And Firms (RJSC) requires this certificate for incorporation. If the company plans to recruit a foreign employee in the future, an inward remittance of USD 50,000 is charged.
This is the final step for the incorporation of a foreign subsidiary in Bangladesh. Employers must submit all information on the RJSC website. In addition, employers must submit a bank slip confirming payment and stamp duty. On completion, the RJSC issues the certificate of incorporation.
Benefits of Setting Up a Bangladesh Subsidiary
Some of the benefits of a subsidiary company in Bangladesh are:
- It has a growth-oriented economy
- Foreign-invested allowed is allowed in the country
- Profits can be transferred to the home country
- No minimum capital is required to set up a subsidiary
- Tax exemptions for entrepreneurs are offered
Documents to Prepare When Opening a Subsidiary in Bangladesh
The following list of documents are required to form a subsidiary business in Bangladesh:
- Name Clearance Certificate issued by the RJSC
- Articles of Association (AOA) and Memorandum of Association (MOA)
- Schedules associated with the objects clause must be filled up
- Form IX-information
- The clause related to the company in 450 words as required by RJSC
- Directors’ and subscribers’ information
- The registered address of the business
- TIN (Taxation Identification Number)
- Shareholders information – If the shareholder is a foreigner, they must submit their passport
What Business Forms can Bangladesh Subsidiaries Take?
The three most popular business subsidiaries in Bangladesh are:
- Private Limited Companies (PLC)
- Branch Office
- Liaison Office
Among these PLCs can be 100% foreign-owned. The above subsidiaries don’t require any minimum capital.
Bangladesh Subsidiary Laws
Below are the laws associated with setting up a subsidiary business in Bangladesh:
- There must be a minimum of two shareholders and two directors. They can be individuals or legal entities.
- In Bangladesh, the minimum paid-up share capital is only USD 1.
- As a PLC, you must submit annual audited accounts to the Bangladesh Income Tax Authority.
- The average time to set up a PLC is five weeks in Bangladesh. It takes approximately four weeks to set up a bank account.
Post Incorporation Compliance
Here are some post incorporation compliances for the foreign subsidiary in Bangladesh:
- After getting the certificate of incorporation from RJSC, the company has to also apply for other trade licenses, VAT registration, and other necessary registrations.
- If the company plans to start a business related to import or export, an Import registration certificate or an Export Registration Certificate is required.
- Directors and shareholders must organize the company’s annual meeting after 18 months of incorporation. Post this meeting, a gap of 15 months must be there before the next meeting.
- Apart from the above requirements, the company must also file regular tax returns.
Taxes on Subsidiaries in Bangladesh
In Bangladesh, the taxation on a foreign subsidiary in Bangladesh are as follows:
- The taxes on resident entities are charged on worldwide business income
- The non-residents have levied tariffs on Bangladesh-source income
- The branches of any foreign company are taxed at approximately 35%
Tax Incentives for Businesses Setting Up a Subsidiary in Bangladesh
The tax incentives are provided to foreign companies planning to invest in special economic zones and hi-tech park zones (in receding tax discounts).
Other Important Considerations
Planning is essential when setting up a subsidiary in Bangladesh. You will need a significant amount of time to travel to and from your country. You must learn the country’s laws and hire employees for your business entity during this time.
How Multiplier’s Employer of Record Can Help You Hire & Expand in Bangladesh?
To ensure that setting up a subsidiary in Bangladesh is seamless, it is better to partner with a third-party service provider.
A global employment partner like Multiplier can be your guide in this journey. With our Employer of Record services, businesses can employ talent in a foreign country without a local entity.
With our SaaS-based solution aggregated upon our EOR infrastructure, Multiplier ensures employees are onboarded, adhering to the country’s employment laws. With our one-click payroll solution, employers can also pay employees worldwide accurately and promptly on time.