How to Setup a Liaison Office in Bangladesh?

Liaison Office

Table of Contents

Global success requires expanding into new markets, and Bangladesh’s booming economy presents a promising market. Setting up a liaison office is a good initial step for organizations not ready to commit fully to the market. What is a liaison office, and why should you open one in Bangladesh?

What is a Liaison Office?

A liaison office, also known as a representative office, acts as an intermediary between the parent company and its potential clients or business partners in a foreign country. The primary function of a liaison office is to collect data, perform market research, and establish communication channels. However, it cannot engage in any commercial or revenue-generating activities.

Why Set Up a Liaison Office in Bangladesh?

Bangladesh has been experiencing steady economic growth, making it an attractive destination for foreign businesses. Setting up a liaison office allows companies to understand the market, establish connections, and build brand presence without the full financial commitment of establishing a branch or subsidiary.

Understanding the Role of a Liaison Office

Functions of a Liaison Office

A liaison office serves several key functions:

  • Market Research: Understanding consumer behavior and market trends.
  • Business Liaison: Building and maintaining relationships with local businesses and government bodies.
  • Brand Promotion: Representing the parent company in a new market.

Restrictions on Activities

It’s important to note that a liaison office in Bangladesh is strictly prohibited from engaging in any commercial activities. This means it cannot:

  • Enter into contracts on behalf of the parent company.
  • Earn any income or generate revenue within Bangladesh.
  • Issue invoices or accept payments.

Legal Framework for Liaison Offices in Bangladesh

Relevant Laws and Regulations

Setting up a liaison office in Bangladesh involves compliance with several laws and regulations, primarily governed by the Bangladesh Investment Development Authority (BIDA). The Companies Act 1994 and the Foreign Exchange Regulation Act 1947 are also relevant in this context.

Compliance Requirements

Once established, a liaison office must adhere to ongoing compliance requirements, such as submitting regular reports to BIDA, renewing its registration, and ensuring all operations remain non-commercial.

Eligibility Criteria for Establishing a Liaison Office

Who Can Set Up a Liaison Office?

Foreign companies, including those engaged in manufacturing, trading, or services, can apply to set up a liaison office in Bangladesh. However, the parent company must be financially sound and should have a good reputation in the global market.

Minimum Requirements

The parent company must provide evidence of its financial stability, and a clear plan outlining the purpose of the liaison office in Bangladesh. Typically, companies with a successful track record and international presence are preferred.

Documents Required for Liaison Office Registration

Necessary Documentation

To register a liaison office, the following documents are typically required:

  • Application Form: Filled out and signed by the parent company.
  • Certificate of Incorporation: A notarized copy of the parent company’s incorporation certificate.
  • Board Resolution: A resolution from the parent company’s board approving the establishment of the liaison office.
  • Detailed Business Plan: A plan outlining the intended activities of the liaison office.
  • Financial Statements: Audited financial statements of the parent company for the last financial year.
  • Background of the Company: A brief overview of the parent company’s business and history.

Common Pitfalls in Documentation

Errors in documentation, such as incomplete forms or missing signatures, can delay the registration process. It’s crucial to double-check all documents before submission.

Step-by-Step Process to Set Up a Liaison Office

Step 1: Application to the Bangladesh Investment Development Authority (BIDA)

The first step is to submit an application to BIDA, including all required documents. BIDA will review the application and assess the parent company’s credibility and the intended purpose of the liaison office.

Step 2: Approval Process and Timeline

After submission, BIDA typically takes 4-6 weeks to process the application. If approved, BIDA will issue a Letter of Permission, which is valid for a specific period, usually three years.

Step 3: Post-Approval Steps

Once approved, the liaison office must:

  • Register with the Registrar of Joint Stock Companies and Firms (RJSC).
  • Obtain a Trade License from the local city corporation.
  • Register for a Tax Identification Number (TIN).
  • Open a bank account in Bangladesh.

How BIDA Facilitates Liaison Office Registration

BIDA assists foreign companies by providing guidelines, reviewing applications, and issuing necessary permissions. It also helps liaison offices navigate legal and regulatory requirements in Bangladesh.

Cost Involved in Setting Up a Liaison Office

Registration Fees

The fees for registering a liaison office in Bangladesh are relatively modest and include application fees to BIDA, registration fees with RJSC, and other administrative costs.

Other Associated Costs

In addition to registration fees, companies should budget for legal fees, translation services, and other miscellaneous expenses.

Bank Account Opening for Liaison Offices

Requirements for Opening a Bank Account

To open a bank account, the liaison office must provide its BIDA approval letter, TIN, and other corporate documents. The account will be used to manage operational expenses.

Choosing the Right Bank

Choosing a bank with experience in dealing with foreign companies is advisable. Several banks in Bangladesh offer specialized services for liaison offices.

Taxation for Liaison Offices

Tax Obligations

Liaison offices are generally exempt from income tax in Bangladesh since they do not engage in commercial activities. However, they must comply with other tax-related obligations, such as withholding tax on employee salaries.

Exemptions and Reliefs

Since liaison offices are non-revenue generating, they are typically exempt from corporate taxes. However, it’s crucial to maintain clear records to support this exemption during audits.

Renewal and Compliance of Liaison Office

Renewal Process and Deadlines

The approval for a liaison office is typically valid for three years, after which it must be renewed. The renewal process involves submitting a renewal application to BIDA along with updated documentation.

Ongoing Compliance Requirements

Liaison offices must regularly file reports with BIDA and comply with local regulations. Non-compliance can lead to penalties or the revocation of the office’s permission to operate.

Challenges and Considerations

Common Challenges Faced

  • Complex Documentation: Ensuring all documents are correctly prepared can be challenging.
  • Bureaucratic Delays: The approval process can sometimes be delayed due to bureaucratic red tape.
  • Compliance: Ongoing compliance requires careful attention to detail and regular updates.

Tips for Smooth Operation

  • Hire Local Experts: Working with local legal and financial experts can help navigate the process more smoothly.
  • Plan Ahead: Start the process well in advance of your intended start date to accommodate any delays.

Benefits of Setting Up a Liaison Office in Bangladesh

Strategic Advantages

  • Market Entry: A liaison office allows you to explore the market without significant financial risk.
  • Brand Presence: Establishing a local presence helps in building brand recognition.
  • Networking: A liaison office provides a base for building relationships with local businesses and government bodies.

Market Entry Insights

Operating a liaison office offers valuable insights into the Bangladeshi market, helping companies make informed decisions about future investments.

Conclusion

Setting up a liaison office in Bangladesh is a strategic way for foreign companies to explore this dynamic market without a significant financial commitment. By following the steps outlined in this guide and ensuring compliance with local regulations, your business can establish a successful presence in Bangladesh, paving the way for future growth and expansion.

FAQ

1. What is the difference between a Liaison Office and a Branch Office?

  • A Liaison Office cannot engage in commercial activities, whereas a Branch Office can conduct business and generate revenue.

2. Can a Liaison Office in Bangladesh engage in commercial activities?

  • No, a Liaison Office is restricted from engaging in any commercial or revenue-generating activities.

3. How long does it take to set up a Liaison Office in Bangladesh?

  • The process typically takes 4-6 weeks, depending on the completeness of the application and the efficiency of the approval process.

4. What are the renewal requirements for a Liaison Office?

  • Renewal requires submitting an updated application to BIDA along with relevant documentation before the current approval expires.

5. Is there a minimum capital requirement for a Liaison Office?

  • No, there is no minimum capital requirement for establishing a Liaison Office in Bangladesh.

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