text:
Bangladesh – An investment destination in South Asia
Table of content:
1. Abstract:
(i) The Legal Structure
(ii) Governing Commercial/Business Laws
(iii) Entrepreneurship in Bangladesh
2. Limited Companies:
(i) Company Limited by Shares:
(a) Public Limited Company and
(b) Private Limited Company
(ii) Company Limited by Guarantees:
(a) Unlimited Companies:
(i) Formation of a company
(ii) Memorandum of Association
(iii) Articles of Association
(iv) Returns to the Registrar
(v) Shareholders' Meeting
(vi) Board of Directors
(vii) Mergers & Acquisitions
(viii) Winding Up
3. Foreign Investment:
3.1 Investment options for foreign entrepreneurs in Bangladesh:
- Joint venture/100% foreign investment proposals in the private sector
- Self financed local investment proposals including industries sanctioned/financed by financial institutions or commercial banks
- Joint venture industrial units with the public sector corporations
3.2 Infrastructural Facilities and Utility Services in Bangladesh
3.2.1 General
3.2.2 Utility Services
3.2.3 Infrastructural Facilities
3.2.4 Other Facilities
3.2.5 Incentive Details
188.8.131.52 Tax Holiday Facility (THF)
22.214.171.124. Depreciation Allowance.
220.127.116.11. Duty Exemption and Concessions on Machinery
184.108.40.206 Avoidance of Double Taxation
22.214.171.124. Remittance
126.96.36.199 Customs Duty:
18.104.22.168. Repatriation
22.214.171.124. Exit
220.127.116.11. Ownership
188.8.131.52. Investing in the stock market
18.104.22.168. Incentives to Non Resident Bangladeshi (NRBs)
18.104.22.168. Additional Incentives for EPZ Industries
184.108.40.206. Other Incentives
3.3. Investment Protections / International Agreements
3.4. Required Permits & Procedures
3.4.1. Registration with the Labour Code
3.4.2. Obtaining Utility Connections
3.4.3 Obtaining Work Permit
3.4.4. Registration/Approval for Foreign Loan, Suppliers' Credit, PAYE Scheme etc.
3.4.5. Procedure for import of raw & packing materials and spare parts by industrial units
3.4.6. Obtaining Industrial Plot
3.4.7. Environmental Legislation
3.4.8. Currency Regulations
184.108.40.206. Relaxation / Liberalisation of Exchange Control Regulations
18.104.22.168. Investment Facilitating Measures
188.8.131.52. Export Encouragement Measures
4. Customs Regulations
5. Taxation
6. Labor Regulations
6.1. Appointment and Conditions for Employment
6.2. Settlement of Labor Disputes & Labour Court
6.3. Wages and Fringe Benefits
6.4. Working Hours, Holiday and Leave
6.5. Social Security
6.6. Labor Union
7. Intellectual Property
7.1 Patents and Designs
7.2 Design
7.3 Trademarks
7.4 Copyright
8. Purchasing immovable property
9. Epilogue
1. Abstract
Bangladesh, officially the People's Republic of Bangladesh is a country in South Asia. It is bordered by India on all sides except for a small border with Myanmar to the far Southeast and by the Bay of Bengal to the South. Bangladesh is a unitary state and parliamentary democracy. Direct elections in which all citizens, aged 18 or over, can vote are held every five years for the unicameral parliament known as Jatiya Sangsad or House of Nation. Currently the parliament has 345 members including 45 reserved seats for women, elected from single-member constituencies. The Prime Minister, as the head of government, forms the cabinet and runs the day-to-day affairs of state. The President is the head of state but mainly a ceremonial post elected by the parliament. The highest judicial body is the Supreme Court. Justices are appointed by the President. Bangladesh has a three-tier local government system. The whole country is divided into seven administrative divisions headed by commissioners. Divisions are subdivided into sixty-four districts.
Bangladesh pursues a moderate foreign policy that places heavy reliance on multinational diplomacy, especially at the United Nations. In 1974 Bangladesh joined both the Commonwealth of Nations and the United Nations and has since been elected to serve two terms on the Security Council in 1978–1979 and 2000–2001. In the 1980s, Bangladesh played a lead role in founding the South Asian Association for Regional Cooperation (SAARC) in order to expand relations with other South Asian states. Bangladesh's most important and complex foreign relationships are with India. These relationships are informed by historical and cultural ties and form an important part of the domestic political discourse. Bangladesh also enjoys relatively warm ties with the People's Republic of China.
Although two-thirds of Bangladeshis are farmers, Bangladesh is in the process of a transition from a predominantly agrarian economy to an industrial and service economy. The private sector is playing an increasingly active role in the economic life of the country, while the public sector concentrates more on the physical and social infrastructure.
Bangladesh has seen a dramatic increase in foreign direct investment. A number of multinational corporations and local big business houses such as Beximco, Square, Akij Group, Ispahani, Navana Group, Transcom Group, Habib Group, KDS Group, Dragon Group and multinationals such as Unocal Corporation and Chevron, have made major investments, with the natural gas sector being a priority. In December 2005, the Central Bank of Bangladesh projected GDP growth around 6.5%. In order to enhance economic growth, the government set up several export processing zones to attract foreign investments. These are managed by the Bangladesh Export Processing Zones Authority. The country's main exports are ready made garments & knitwear, jute, tea, seafood and leather products. Recently it has received interest from international energy companies attracted by the existence of significant onshore and offshore gas reserves. A large part of foreign currency earnings also comes from the remittances sent by expatriates living in other countries.
More than three quarters of Bangladesh's export earnings come from the garment industry, which began attracting foreign investors in the 1980s due to cheap labour and low conversion cost. In 2009-10 fiscal year the industry exported US$ 12.6 billion worth of products where in 2002 the exported amount was US$ 5 billion. Recently Bangladesh has been ranked as the 4th largest clothing exporter by the WTO (The World Trade Organization). The industry now employs more than 3 million workers, 90% of whom are women.
According to the World Bank, "Bangladesh's most significant obstacles to growth are poor governance and weak public institutions". Despite these hurdles, the country has achieved an average annual growth rate of 5% since 1990, according to the World Bank. Bangladesh has seen expansion of its middle class (world's fifty forth largest, just below of Singapore & Vietnam) and its consumer industry has also grown. In December 2005, four years after its report on the emerging "BRIC" economies (Brazil, Russia, India, and China), Goldman Sachs named Bangladesh as one of the "Next Eleven", along with Egypt, Indonesia, Vietnam and seven other countries.
2. The Legal Structure:
In Bangladesh laws are loosely based on English common laws, but family laws such as marriage and inheritance are based on religious scripts, and therefore differ between religious communities. Since 1971 Bangladesh's legal system has been updated in areas of company, banking, bankruptcy and money loan court laws.
The Supreme Court of Bangladesh comprises the Appellate Division and the High Court Division. It is the apex Court of the country and other Courts and Tribunals are subordinate to it. There are a wide variety of subordinate courts and tribunals. The civil courts are created under the Civil Courts Act of 1887. The Act provides for five tiers of civil courts in a district, which are as follows:
- Court of Assistant Judge,
- Court of Senior Assistant Judge,
- Court of Joint District Judge,
- Court of Additional District Judge and
- Court of District Judge.
The Code of Crimanal Procedure, 1898 provides for different Criminal Courts:
- Courts of Sessions
- Courts of Metropolitan Sessions
- Special courts/tribunals (Criminal)
- Courts of Metropolitan Magistrate and
- Courts of Magistrate.
Company matters in Bangladesh are dealt by the Company Bench of The High Court Division.
3. Governing Commercial/Business Laws:
- The Companies Act 1994
- The Partnership Act, 1932
- The Societies Registration Act 1860
- The Trade Organization Ordinance, 1961
- The Contract Act, 1872
- The Sale of Goods Act, 1930
- The Bank Companies Act, 1991
- The Bankruptcy Act, 1997
- The Islamic Development Bank Act, 1975
- The Money Loan Courts Act, 2003
- The Financial Institutions Act, 1993
- The Negotiable Instruments Act, 1881
- The Securities Act, 1920
- The Securities and Exchange Ordinance, 1969
- The Investment Board Act, 1989
- The Foreign Private Investment (Promotion & Protection) Act, 1980
- The Labour Code, 2006
- The Patents and Designs Act, 1911
- Trade Marks Act, 2009
- The Consumer Rights Protection Act, 2009
- The Imports and Exports (Control) Act, 1950
- The Patents And Designs Act, 1911
- Trade Marks Act, 2009
- The Insurance Act, 2010
- The insurance Development & Control Authority Act, 2010
- The Insurance Corporations Act, 1973
- Income Tax Ordinance 1984
4. Entrepreneurship in Bangladesh:
Entrepreneurship in Bangladesh may be of two sorts:
- A company formed and incorporated locally.
- A company incorporated abroad but registered in Bangladesh.The incorporation or registration is done by the Registrator of Joint Stock Companies and Firms (RJSC & F) under the provisions of the Companies Act, 1994. There are basically two types of enterprises that can be registered under the Companies Act of Bangladesh. The limited liability company (SRL) is commonly known as Private Limited Company. The other type, the stock corporation (SA) is commonly referred to as Public Limited Company. The Act applies to all classes of enterprises and companies, both public and private, including associations not trading for profit but registered under the Act, whether limited by shares or by guarantee or with or without share capital or unlimited.
The classification of establishments as provided by the Act is as follows.
4.1 Limited Companies:
(i) Company Limited by Shares:
(a) Public Limited Company:
- Issues invitation to the members of the public to subscribe the shares and debentures of the company through a prospectus which complies with the requirements of the Companies Act, 1994 and the Securities and Exchange Commission Act, 1993 as amended from time to time.
- In case of non-issuance of a prospectus, the public company cannot commence business or exercise borrowing powers unless a statement in lieu of a prospectus is filled with the Registrar and the directors have paid application and allotment money on shares taken or contracted to be taken by them.
- Has minimum 7 members, but there is no maximum limit.
- Has at least 3 Directors.
- Has the option of registering or not registering its articles. In the event of not having its own Articles of Association registered, the model regulations given in Schedule I, appended to the Act, will automatically apply.
- No allotment of share capital offered to the public can be made unless the minimum amount necessary to provide for certain specified matters has been subscribed and the sum payable in application for such shares has been received by the company.
(b) Private Limited Company:
Restricts the rights to transfer the shares.
Limits the number of its members to minimum 2 and maximum 50 excluding the persons employed in the company.
Prohibits any invitation to the public to subscribe for the shares or debentures of the company.
Must register its Articles of Association with the Registrar of Company.
Entitles to commence business from the date of its incorporation.
(ii) Company Limited by Guarantees:
4.2 Unlimited Companies:
Unlimited companies and companies limited by guarantees may or may not have share capital.
(i) Formation of a Company:
To register a company with the Registrar of Joint Stock Companies and Firms (RJSC&F), promoters have to undertake activities in following steps:
- When the Promoters will desire to form a company, at first they will have to select its name and will apply to the Registrar for the same in a plane paper with a fee of BD Tk. 10/- for each name along with the properly executed deed of settlement or the minutes of their first meeting.
- The Promoters may primarily select the name of their proposed company through searching the list of companies.
- The deed of settlement/minutes of the first meeting of the Promoters may be prepared in plane paper and to be signed by all of them and amongst others it must contain the name, address and occupation of the authorized person, with his connection with the proposed company, who will apply for the clearance of name.
- After obtaining the name clearance, the Promoters shall prepare and print the Memorandum and Articles of Association which shall be signed by them before at least two witnesses.
- The Promoters shall collect the necessary special adhesive stamp on the basis of authorized share capital of the proposed company by depositing the money through Treasury Challan in the Bangladesh Bank and will affix the same on the printed Memorandum and Articles of Association of the company.
- For the purpose of registration of a company the special adhesive stamp worth Tk. 500/- to be affixed on the Memorandum of Association irrespective of authorized capital and stamp worth Tk. 1500/-, 4,000/- and 10,000/- to be affixed on the Articles of Association for the authorized capital of Tk. 10,00,000/-, Tk. 3,00,00,000/- and above Tk. 3,00,00,000/- upto any amount respectively.
- Three copies of Memorandum and Articles of Association including the original one on which the special adhesive stamp is affixed along with duly filled in form I, VI, IX, X and XII, the clearance of name and the copy of Treasury Challan relating to the collection of adhesive stamp to be filled in the case of a private company and in the case of a public company a statement in lieu of prospectus (Schedule-4), the declaration for commencement of business (Form-XIV and (Form XI) when necessary to be filled by the Promoters in addition to the Memorandum and Articles of Association, papers and documents as mentioned above.
- At the time of filling the Memorandum and Articles of Association's papers and documents, the Promoters will pay fees based on authorized capital of the company as prescribed for the time being in Schedule-2 of the Companies Act, 1994.
4.2 Memorandum of Association:
Memorandum of Association of the company state the name of the company, whether it is public limited or private limited and the location of the registered office at the company. The memorandum should clearly spell out the main objectives, the authorized capital-division of this capital into shares of fixed amount and liability of its members. In brief it may be defined structurally to contain details as follows:
- The company's name, with the words 'Limited' or 'Private Limited' (in the case of a private company), at the end;
- The address where the registered office will be situated;
- The objects for which the company is formed;
- The nature of liability of members;
- The amount of authorized share capital divided into shares of a fixed amount; and
- The names of subscribers and the number of shares taken by each of them. The memorandum of the company is the charter or the constitution and no company can carry on any objectives not authorized by its Memorandum of Association.
4.3 Articles of Association:
The Articles of Association are the regulations governing the internal management of the affairs of the company and the conduct of its business. Articles usually contain the regulations on the following subjects:
- Share Capital
- Share Certificate
- Transfer And Transmission Of Shares
- Increase, Reduction And Alteration Of Capital
- Borrowing Powers
- Statutory And General Meeting
- Proceedings At General Meeting
- Quorum
- Votes Of Members
- Form Of Proxy
- Directors
- Disqualification Of Directors
- Power Of Directors
- Delegation Of Directors' Power
- Chairman
- Managing Director
- Operation Of Bank Account
- Notice
- The Common Seal
- Reserves And Dividend
- Accounts
- Audit
- Winding Up
- Secrecy Clause
- Arbitration
- Indemnity And Responsibility etc.
4.4 Returns to the Registrar:
The companies having share capital and incorporated under the Companies Act, 1994 shall have to file the following statutory returns to the Registrar every year:-
- The Annual List of Members and Summary [Schedule- 10]: To be filed within 21 days after the date of holding the annual general meeting. The transfer of shares if any shall be entered or reflected in this return.
- Balance Sheet and Profit & Loss Accounts: To be filed within 30 days from the date of annual general meeting (section 190). The profit and loss accounts to be filed separately in the case of a private company.
- Consent of Auditor (AC) [Section 210]: The Company shall inform the auditor or auditors in respect of his/their appointment within 7 days from the date of annual general meeting and the auditors shall inform the Registrar whether the appointment has been accepted or refused by him or them within 30 days from the date of receipt of such information [Section 210].
- Statutory Report (SR): Applicable in the case of public limited companies [Section 83].
- Particulars of Directors (Form XII): The information in respect of appointment of Directors or any change thereof and in the case of retirement of Directors by rotation and re-election in public company to be filed with the Registrar within 14 days form the date of such appointment or change [Section 115].
- The consent of the Directors to act (CD) [Form IX] [Section 92].
Returns to be filed in respect of any changes in the company:-
- Returns of Allotment (RA) [Form- XV]: To be filed within 60 days after the date of allotment [Section 151]. The capital allotted to be added and entered in the next annual list of members and summary.
- Particulars of Mortgage (PM) : To be filed within 21 days after the date of execution of the mortgage deed [Section 159].
- Particulars of Modification of Mortgages (PMM): To be filed within 21 days after the date of execution of modification deed [Section 167(3)].
- Particulars of Satisfaction of Mortgages (PSM): To be filed within 21 days from the date of satisfaction of the loans or debts [Section 172]
- Notice of Situation of Registration of Office: To be filed within 28 days after establishment or change of the registered office [Section 77] [Form VI].
- Proceeding of Special or Extra-ordinary General Meeting: To be filed within 15 days from the date of meeting [Section 88].
- Prospectus: On or before the date of issue of the prospectus [Section 138].
- Change of Name of the Company: To be filed within 15 days from the date of special resolution relating to change of name [Section 11 (6) and 88].
- Change of Memorandum of Association: To be filed within 90 days from the date of order of the court or within the extended period sanctioned by the court [Section 12 and 15].
- Notice Relating to Consolidation or Sub-division of Shares or the Conversion of Shares into Stock: To be filed within 15 days from the date of change or conversion [Section 54].
- Conversion of Private Company into Public Company: To be filed within 30 days after the date of taking decision of conversion [Section 231].
- Conversion of Public Company into Private Company: To be filed within 15 days from the date of taking decision of conversion [Section 232].
- Notice of Increase of Share Capital or the Number of Members: To be filed within 15 days from the date of taking decision of such increase [Section 56].
- Filing Fees: The yearly statutory returns or returns relating to any change in the company to be filed with the fees prescribed in Schedule- 2 of the companies Act, 1994. If any company fails to file the returns within the prescribed time limit, it may be filed on payment of late fee @ Tk. 1 (one) for every day subject to the maximum late fees of Tk. 500/-. Any liability relating to filing of return shall not be condoned by the payment of late fees.
- Late Fees: There is no provision for filing of particulars of Mortgage or charge and return of allotment with late fees.
4.5 Shareholders' Meeting:
Sections 81 to 89 of the Companies Act, 1994 deal with meetings and proceedings of the Company.
(i) General Meeting:
Section 81 of the Companies Act, 1994 provides that every company must hold general meeting called annual general meeting every year but not more than fifteen months elapse between the meetings. A Company must hold annual general meeting within 18 months of its incorporation. The Registrar has power to call general meeting. The power of court to call or direct the calling of a general meeting should be read with the power of the court given under section 85 (3) of the Act. The annual Balance Sheet and Profit & Loss accounts of the company to be placed in the annual general meeting for approval which requires to be ended on a date which is within nine months preceding the date of the meeting.
Before 60 days, from the date of the annual general meeting, a return containing prescribed particulars regarding:
- The states of the company's affair;
- Proposed amount for reserve in balance sheet;
- Recommended dividend;
- Material changes on commitment;
- Nature of business;
- Reservation qualification and adverse remarks contained in the auditors report;
- Its directors, managing directors, managers, and secretaries, past and present.
(ii) Statutory Meetings:
Section 83 of the Companies Act, 1994 provides that every company limited by shares and every company limited by guarantee and having a share capital shall, within a period of not less than one month and not more than six months from the date at which the company is entitled to commence business, hold a general meeting of the members of the company; in this Act such meeting is referred to as "the statuary meeting". The Board of Directors shall, in accordance with the other provision of this Act, prepare a report, in this Act referred to as 'statutory report" and shall at least 21 days before the day on which the statutory meeting is to be held, forward the report to every member of the company.
(iii) Extraordinary General Meeting:
Section 83 of the Companies Act, 1994 provides that ,the directors of a company, which has a share capital, shall on the requisition of the holders of not less than one tenth on the issued share capital of the company upon which all calls or other sums due have been paid, forthwith proceed to call an extraordinary general meeting of the company, and in the case of a company not having a share capital the directors thereof shall call such meeting on the requisition of such members as have, on the date of submitting the requisition, not less than one tenth of the total voting power in relation to the issues on which the meeting is called.
A meeting of its board of directors shall be held at least once or at least four such meetings in every year. There are certain powers of the company that can be exercised by the directors only at board meetings. Also, there are certain powers exercisable by the board of directors only with the consent of the company in a general meeting. The other powers of the company can be exercised by the board of directors, either at board meetings or resolution passed by circulation. Such powers will, however, be subject to the restrictions, if any, laid down by the Memorandum and Articles of Association.
4.6 Board of Directors:
The Directors of a Company are selected according to the Articles of Association of the Company and provisions of the Companies Act, 1994.They are in charge of the management of the affairs of the company. The Directors are collectively called the Board of Directors. The Board is the Company's executive authority. The Company Act 1994 contains detailed rules regarding the appointment, remuneration, powers, duties and liabilities and various other matters concerning directors.
A director is an officer of the company within the meaning of section 2 (f) as states that director includes "any person occupying the position of the director by whatever name called". The powers of a company are exercised by its board of directors. The Act provides that the board will be entitled to exercise all such powers and to do all such acts and things as the company is authorized to do, except those which are specifically required by the Act or the Memorandum or the Articles of Association, to be done by the company in general meeting. The powers exercisable by the board relate to those exercisable in pursuant to resolutions taken at Board meetings. The important powers of the board can be exercised only at Board meetings regularly convened with due notice of the subject.
Section 90 of the Act provides that every public company and a private company which is a subsidiary of a public company shall have at least three directors and every private company other than a public company shall have at least two directors.
Section 98 of the Companies Act provides that, the acts of a director shall be valid notwithstanding any defect that may afterwards be discovered in his appointment of qualification. Provided that nothing in this section shall be deemed to give validity to act done by a director after the appointment of such director has been shown to be invalid.
As per Companies Act, usual duties of boards of directors include:
- Governing the organization by establishing broad policies and objectives;
- Selecting, appointing, supporting and reviewing the performance of the chief executive;
- Ensuring the availability of adequate financial resources;
- Approving annual budgets;
- Accounting to the stakeholders for the organization's performance;
- Setting their own salaries and compensation.
The directors of a company exercise control and management over the organization, but organizations are (in theory) run for the benefit of the shareholders, the law imposes strict duties on directors in relation to the exercise of their duties. The duties imposed on directors are fiduciary duties, similar to those that the law imposes on those in similar positions of trust: agents and trustees.
The duties apply to each director separately, while the powers apply to the board jointly. Also, the duties are owed to the company itself, and not to any other entity. This does not mean that directors can never stand in a fiduciary relationship to the individual shareholders; they may well have such a duty in certain circumstances.
The exercise by the board of directors of its powers usually occurs in board meetings. Most legal systems require sufficient notice to be given to all directors of these meetings, and that a quorum must be present before any business may be conducted. Usually, a meeting which is held without notice been given is still valid if all of the directors attend, but a failure to give notice may negate resolutions passed at a meeting, because the persuasive oratory of a minority of directors might have persuaded the majority to change their minds and vote otherwise.
A meeting of its board of directors shall be held at least once or at least four such meetings shall be held in every year. There are certain powers of the company that can be exercised by the directors only at board meetings. Also, there are certain powers exercisable by the board of directors only with the consent of the company in a general meeting. The other powers of the company can be exercised by the board of directors, either at board meetings or by resolution passed by circulation. Such powers will, however, be subject to the restrictions, if any, laid down by the Memorandum and Articles of Association.
Section 107 provides following restrictions on exercise of power of directors as the directors of a company or of a subsidiary company of a public company. The director shall not, except with the consent of the company concerned in general meeting:
- Sell or dispose of the undertaking of the company; and
- Remit any debt due by a director.
The Companies Act, 1994 Section 106 provides rules regarding removal of directors:
- The company may, by extraordinary resolution, remove any share-holder director before the expiration of his period of office and may, by ordinary resolution, appoint another person instead and the person so appointed shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected director.
- A director so removed shall not be re-appointed a director by the Board of Directors.
The welfare of the shareholders and of the company depends upon who the directors are and how they carry out their duties and responsibilities. To protect the interest of the Company and the Shareholders, the directors of a company play vital role.
4.7 Mergers & Acquisitions:
The phrase mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance or help a growing company in a given industry grow rapidly without having to create another business entity. An acquisition is the purchase of one company by another company. Consolidation is when two companies combine together to form a new company altogether. An acquisition may be private or public, depending on whether the acquisition or merging company is or isn't listed in public markets.
There are many different reasons to merge with or acquire another company. Many companies turn to mergers or acquisitions as a way to answer the constant pressure from stockholders and stakeholders to show marked, continuous growth. Mergers for the sake of growth will ultimately hurt your company in the long run unless the transaction also helps to achieve one or more strategic business goals and builds on or complements the company's own core competencies. Such goals might include any of the following:
- Product extension: Identifying a target company that offers a slightly different but related product so you can extend your market presence.
- Geographic extension: Identifying a target company in the same industry that serves a geographical area that your company does not currently reach.
- Increased customer base: Finding a target company that could increase or broaden your customer base.
- Acquiring key management or other personnel: Identifying a target company with strong management talent to help your team succeed.
- New distribution channels: Finding a target company with sophisticated marketing or supply chain operations in place so you can better or more economically distribute your goods or services.
Sections 12-14 of the Companies Act, 1994 contain the main section that deals with the reconstruction and amalgamation (acquisition & merger) of the companies. However, this section requires companies to make application to the court under Section 12, which empowers the court to sanction the compromise or arrangement as proposed by the companies. Section 12(1) (g) of the Companies Act, 1994 provides that if any company wants to merge with another company it needs alteration of Memorandum by special resolution. But Section 12(2) of this Act provides that the alteration shall not take effect until it is confirmed by the Court on petition. Section 12(3) provides that before confirming the alteration, the Court must be satisfied that sufficient notice has been given to every holder of debentures of the company and to any person or class of person whose interest will, in the option of the Court, be affected by the alteration; and that, with respect to every creditor who in the opinion of the Court is entitled to object, and who signifies his objections in manner directed by the Court, either his consent to the alteration has been obtained or his debt or claim has been discharged or has been determined, or has been secured to the satisfaction of the Court.
4.7.1 Procedure of Merger:
(i) Observing Memorandum of Association of Transferee Company:
It has to be ensured that the objects of the MOA cover the objects of the transferor company or companies. If not then it will be necessary to follow the procedure for amendment of objects by passing a special resolution at an EGM convened for this purpose. It has been held by various decisions of the courts that there is no necessity to have special power in the object clause of the MOA of a company for its amalgamation with another company. It has been laid down that to amalgamate with another company is power of the company and not an object of the company.
(ii) Convening a Board Meeting:
Board Meeting is to be convened and held to consider and approve in principle amalgamation and appoint an expert for valuation of shares to determine the share exchange ratio. Consequent upon finalization of scheme of amalgamation anther Board Meeting is to be held to approve the scheme.
(iii) Preparation of Valuation Report:
Chartered Accountants are requested to prepare a Valuation Report & the swap ratio for consideration by the Boards of both the companies and if necessary it may be prudent to obtain confirmation from merchant bankers on the valuation to be made by the Chartered Accountants.
(iv) Preparation of Scheme of Amalgamation or Merger:
Auditors, legal advisors and practicing company's secretary of both the companies must interact with each other and should report the result of their interaction to their respective BOD. The boards of the involved companies should discuss and determine details of the proposed scheme of amalgamation and merger. The draft of the scheme finally prepared by the boards of both the companies should be exchanged and discussed in their respective board meetings. After such meetings a final draft scheme will emerge. The acquisition procedure is quite straightforward in Bangladesh. At first, the directors, the creditors or the liquidators in case of enterprises being wound up or the majority share holders of the enterprise do the preliminary work and draw out an outline of the proposed arrangement. Also, if possible, they enter into some kind of arrangement as a basis of further steps. A detailed petition is then to be filed before the court accompanied with all evidences. In exercising its discretion as per the Act, the court:
- Shall have regard to the rights and interests of the members of the company as well as to the rights and interests of the creditors; and
- If it thinks fit, may adjourn the proceedings in order that an arrangement may be made to the satisfaction of the court for the purchase of the interest of dissenting members; and give such directions and make such orders as it may think expedient for facilitating or carrying into effect any such arrangements.
If the court allows for the proposed acquisition, a confirmation of alteration is to be certified by the Registrar of the Joint Stock Companies and Firms of Bangladesh. The proposed Memorandum of Association may be drafted afresh or the previous one being altered and the certified copy of the order are to be filed confirming the alteration within ninety days from the date of the order or within such time as may be extended by the court in the Office of the Registrar of Joint Stock Companies and Firms in Bangladesh. The Memorandum of Association is then registered by the Registrar who shall certify the registration and provide a certificate. The certificate shall be the conclusive evidence that all the requirements of the Act, with respect to the alteration and confirmation, have been complied with. The new or altered Memorandum of Association then represents the Memorandum of the acquired enterprise.
4.8 Winding Up:
Liquidation (or "winding up") is a process by which a company's existence is brought to an end. First, a liquidator is appointed, either by the shareholders or the court. The liquidator represents the interests of all creditors. The liquidator supervises the liquidation, which involves collecting and realizing the company's assets (turning them into cash), discharging the company's liabilities, and distributing any funds left over among the shareholders in accordance with the company's constitution or the Companies Act, 1994 if there is no constitution. After these steps have been carried out, the company is formally dissolved.
The law classifies liquidations into two types:
- Voluntary (by a shareholders resolution) and
- Compulsory (by a court order).
Liquidations are also classified according to whether the company is solvent or insolvent. If the company is insolvent, this means it is unable to pay its debts as they fall due. In this situation there is potential conflict between creditors (those to whom money is owed), as there will be insufficient assets for all creditors to be paid in full. The law attempts to maintain equality between creditors, so the assets are distributed proportionately according to the size of each creditor's claim. However, the law gives priority to secured creditors (those with a charge over some of the company's property as security for the debt). In addition, a number of rules exist to prevent one or more creditors from gaining an unfair advantage.
Voluntary liquidation refers to the process whereby the shareholders appoint a liquidator, who is then answerable to the creditors or shareholders. It is not necessary to make any application to the court for this; however, the liquidator may apply to the court for directions and the court has power to remove a liquidator. A voluntary liquidation may also by commenced by the board of directors if an event specified in the company's constitution has occurred.
Voluntary liquidation may be in one of two forms, depending on whether or not the company is solvent. If the company is solvent the shareholders can supervise the liquidation. However, if the company is insolvent, the creditors may take control of the liquidation process by applying to the court. The court will require proof of solvency or insolvency to determine this matter.
Compulsory liquidation of a company requires obtaining a court order. This process starts with an application to the court alleging that one or more of the required grounds exist. The application may be brought by the company or a majority of its directors, or by the Registrar of Companies or by a creditor. Applications by creditors are by far the most important and common. Applications may be brought on a number of grounds, the most important being that the company is unable to pay its debts. There are a number of factors that the court will take into account when deciding whether or not to make a compulsory liquidation order. The court has discretion as to whether or not to make the order.
After fixation of the liquidator the company being wound up is to file the statement of all of its assets, debts and liabilities, creditor details and debts due to the company, which will be verified then. On receiving the statements the liquidator will submit to the court within 160 days of the order a report comprising amount of cash, debt due, movable and immovable properties and unpaid calls. The official liquidator will then take all the properties into his custody . Also, there will be some formalities performed by the inspection committee. The liquidator has the power to sell or transfer the movable or immovable properties of the company by public auction or contract. Transfer of property after commencement of proceeding without the knowledge of the liquidator is void. The court also has the power to order for the acquisition of any movable or immovable property by the creditors and/or contributory against their claims as it deems fit.
4.8.1 The Procedures for Winding Up a Company:
All procedures relating to winding up of a company are regulated by the Companies Act, 1994. Sections 234-321 of this Act provide how a company winds up.
Broadly speaking, the liquidation process is as follows:
- A liquidator is appointed, either by the company shareholders passing a resolution (voluntary liquidation) or by the court making an order (compulsory liquidation).
- The liquidator collects the assets of the company (including uncalled capital; that is, amounts unpaid on shares) and pays the creditors in order of priority.
- The liquidator distributes any surplus funds to the shareholders.
- The company is then formally dissolved.
The main consequences of the company being liquidated are as follows:
- The company no longer has the power to dispose of its property.
- The company may carry on business only for the limited purpose of completing the liquidation process.
- The powers of the company directors come to an end when a liquidator is appointed.
- A liquidation order operates as a notice of dismissal to all of the company's employees. Note, however, that if an employee is on a fixed-term contract and is required under this contract to be given a period of notice, then a liquidation order will breach this and the employee will be entitled to damages.
- When an application is made for a court-ordered liquidation, the court may stay or restrain any proceedings against the company as the court sees fit. When a liquidator is appointed, no person can begin or continue legal proceedings against the company or in relation to its property, unless the liquidator agrees or the court permits it.
There is a hierarchy that determines the order in which a company's assets must be distributed in liquidation. This is strictly enforced by the Courts. Any secured creditors have the first right to the assets and are usually paid out before there is a distribution. After this is paid out, any remaining debts are paid in the following orders of priority:
- The costs, charges and expenses involved in the liquidation,
- All revenue, taxes, excesses and rates payable to the Government or to a local authority,
- All wages and salaries payable to employees,
- Secured creditors,
- Unsecured creditors,
- Any interest that is attached to any debt (but only if the debt became due before the liquidation process began),
- Any debt owed to shareholders of the company, such as dividends or profits.
Among other circumstances, if the enterprise is unable to pay its debts, it may be wound up by the court. A company may be deemed unable to pay its debts if the company is unable to pay the debt to the creditor within three weeks of notice of demand or it is proved to the satisfaction of the court that the company is unable to pay its debts. A creditor or a group of creditors may apply to the court for the acquisition of the realty against their claims. An order for winding up of the company shall operate in favor of all the creditors and contributors of the company. For the purpose of winding up, the court may fix an official receiver known as liquidator. On the making of a winding up order, the petitioner will file the order in the Office of the Registrar of the Joint Stock Companies and Firms.
5. Foreign Investment:
To set up business in Bangladesh, all foreign investments must be permitted by the Board of Investment (BOI). The BOI was established by the Investment Board Act of 1989 to promote and facilitate investment in the private sector both from domestic and overseas sources. It is headed by the Prime Minister and is a part of the Prime Minister's Office. Major Functions of BOI include:
- Providing necessary facilities and assistance in the establishment of industries,
- Implementing investment related to GOB policies,
- Preparing investment schedule,
- Registering private sector industrial projects, and
- Identifying competitive investment sectors and facilitating investment by providing information and services.
Moreover, the BOI has an extra ordinary Utility Service Cell for investors that offers pre-investment counseling, facilitation of utility connections and assistance with import clearance and warehouse licenses.
5.1 Investment options for foreign entrepreneurs in Bangladesh:
(i) Joint venture/100% foreign investment proposals in the private sector:
The government of Bangladesh delineates a more liberal attitude towards foreign direct investment by offering no prior approval or no objection certificate for setting up of a joint venture / 100% foreign direct investment. It also provides facilities and the institutional support services to the entrepreneur /investors. To avail these services, entrepreneur/investors are advised to apply for registration to BOI in a simple prescribed form.
(ii) Self financed local investment proposals including industries sanctioned/financed by financial institutions or commercial banks:
The entrepreneurs of such projects are to fill up a simple prescribed application form and submit to BOI for registration. After a first-hand scrutiny of the information, BOI issues registration letter.
For both A & B incorporation options, foreign investors are advised to collect the application form from BOI Office or downloaded from BOI website. Documents to be enclosed with the application are:
- Application in prescribed form duly filled in. 2 (two) copies.
- Certificate of incorporation along with Memorandum & Articles of Association in case of Public/Private Limited Company. In case of Joint Venture Project (JVP), JVP Agreement duly signed by both the parties. 2 (two) copies
- Attested copies of deeds/documents in support of project land (in case of own land, Purchase Deed and in case of lease / rental premises, Deed of Agreement).
- If the total project cost exceeds Tk. 50 (fifty) million, submit Project Profile. 2 (two) copies
- Background of the promoters in official letterhead pad describing Name, Permanent and Mailing Address, Position and Nationality. 7 (seven) copies
- List of machinery indicating quantity and price. 7 (seven) copies
- In case the project is financed by loan, copy of relevant documents in support of loan. 2 (two) copies
Pay order / bank draft amounting required amount in favor of "Executive Chairman and Member-Secretary, Board of Investment."
After receiving the application duly filled in, signed and required documents enclosed, BOI reviews the application and, if found suitable, Registration Certificate is issued by 7 days. BOI registration makes the company eligible to avail the incentives and facilities provided by the Government. (D3)
(iii) Joint venture industrial units with the public sector corporations:
Any individual entrepreneur either local or foreign can set up an industry with Public Sector Corporation. Such joint venture is required to be registered with the BOI if the private sector's contribution is more than 50% of the project cost and in such case it is treated as private sector project. For any public sector which makes contribution out of its own fund needs approval of the concerned ministry. If the contribution of the corporation is 50% or above, it is treated as a public sector project. The public sector project is processed by the concerned ministry for approval of the Planning Commission.
5.2 Infrastructural Facilities and Utility Services in Bangladesh:
5.2.1. General:
Bangladesh has a number of positive attributes, infrastructural facilities and utility services which attract the attention of foreign investors from both developed and developing countries. Geographical location of the country is ideal for global trades with very convenient access to international sea and air route. Bangladesh is endowed with abundant supply of natural gas, water and its soil is very fertile. The government has implemented a number of policy reforms designed to create a more open and competitive climate for private investment, both foreign and domestic. The issues relating to infrastructural facilities and utility services have been given high priorities in those policy reforms and implementations.
5.2.2. Utility Services:
(i) Water:
Water is supplied by the Water and Sewerage Authority (WASA) in the metropolitan areas. Very high priority is attached regarding availability of water in industrial areas.
(ii) Gas:
Natural gas supply is available in major industrial areas.
(iii) Telecommunication:
Comprehensive telecommunication services such as fully automatic telex, fax, e-mail, internet, telephone including international direct dialing are available.
(iv) Electricity:
In Bangladesh, electric power is generated in hydro steam, gas-turbine and diesel power plants. All the generating stations are interconnected through a national grid.
5.2.3. Infrastructural Facilities:
(i) Communication:
Bangladesh's geographic location is also an advantage for foreign investment. The transport sector of Bangladesh consists of a variety of modes. The country being a flat plain, all three modes of surface transport as road, railway and water are widely used in carrying both passengers and cargo.
More than half of Bangladesh has access to an all-weather hard surface road within three miles distance. Ports and important business centers are well connected by roads and highways. Further, about 32% of the total area of Bangladesh is effectively covered by the railways. It connects all the administrative and business points of the country. Railway container services from Chittagong port to Dhaka are available. Similarly, Bangladesh Inland Water Transport Authority has been established by the government for maintenance of navigability of ports and channels.
There are two major ports in the country. Chittagong Port, the oldest port, has been an entry point for at least 1000 years. The Mongla Port in Khula region serves the western part of Bangladesh. World's reputed shipping lines are operating through these two ports. There are now 11 operational airports in Bangladesh. Of these, the airports at Dhaka, Chittagong and Sylhet serve international routes.
(ii) Industrial Land:
Industrial plots are allotted by Bangladesh Export Processing Zones Authority (BEPZA) and Bangladesh Small and Cottage Industries Corporation (BSCIC) in industrial areas developed by them. The primary objective of an EPZ is to provide special areas where potential investors would find a congenial investment climate, free from cumbersome procedures. Bangladeshi EPZs are excellent places for setting up labor-intensive high-tech industries from abroad. As part of its development of industrial infrastructure, the country has set up 8 Industrial Parks and High-tech Parks. As a result of these measures, the potential for strengthening of the pace of industrialization in the country has been brightened. Plots in other industrial estates/areas, owned by the government or owned/controlled by any local authority, are allotted on the recommendation of the Board of Investment (BOI).
(iii) EPZs in Bangladesh:
Bangladeshi EPZ's at a glance:
- EPZ-Chittagong
- EPZ-Dhaka
- EPZ-Mongla
- EPZ-Ishwardi
- EPZ-Comilla
- EPZ-Uttara
- EPZ-Adamjee
- EPZ-Karnaphuli
5.2.4. Other Facilities:
(i) Industrious low-cost workforce:
Bangladesh offers a well-educated, highly adaptive and industrious workforce with the lowest wages and salaries in the region. 57.3% of the population is under 25, providing a youthful group for recruitment. The country has consistently developed a skilled workforce catering to investors' needs. English is widely spoken, making communication easy.
(ii) Strategic location, regional connectivity and worldwide access:
Bangladesh is strategically located next to India, China and ASEAN markets. As the South Asian Free Trade Area (SAFTA) comes into force, investors in Bangladesh will enjoy duty-free access to India and other member countries.
(iii) Strong local market and growth:
Bangladesh has proved to be an attractive investment location with its 160 million population and consistent economic growth leading to strong and growing domestic demand.
(iv) Low cost of energy:
Energy prices in Bangladesh are the most competitive in the region. Transportation on green compressed natural gas is less than 20% of the diesel price.
(v) Proven export competitiveness:
Bangladesh enjoys tariff-free access to the European Union, Canada, Australia and Japan. In Europe, Bangladesh enjoys 60% of the market share and is the top manufacturing exporter amongst 50 least developed countries.
(vi) Competitive incentives:
Bangladesh offers the most liberal FDI regime in South Asia, allowing 100% foreign equity with unrestricted exit policy, easy remittance of royalty and repatriation of profits and incomes.
(vii) Export Processing Zones:
In order to stimulate rapid economic growth of the country, particularly through industrialization, the government has adopted an 'Open Door Policy' to attract foreign investment to Bangladesh. Bangladesh's Export Processing Zones Authority (BEPZA) is the official organ of the government to promote, attract and facilitate foreign investment in the Export Processing Zones.
The country is also developing its core infrastructures including roads, highways, surface transport and port facilities for a better business environment.
(viii) Positive climate:
A largely homogeneous society with people living in harmony irrespective of race and religion, Bangladesh is a democratic country enjoying broad bi-partisan political support for private investment. The legal and policy framework for business is conducive to foreign investment.
5.2.5. Incentive Details:
The democratic government is highly keen to stimulate the economy and transform a poverty-stricken economy into a developed one within short time. In accordance with that, the Government's policy on investment offers a lucrative package to attract foreign investment. These incentives are updated on a yearly basis and new incentives are also declared. These facilities are subjected to some conditions and provided by the Board of Investment. In addition, Bangladesh offers citizenship, permanent residentship and multiple entry visas for the foreign investors.
Some salient features of the package are:
- Tax Holiday Facility (THF)
- Depreciation Allowance
- Duty Exemption and Concessions on Machinery
- Avoidance of Double Taxation
- Remittance
- Repatriation
- Exit
- Ownership
- Investing in the Stock Market
- Incentives to Non Resident Bangladeshi (NRBs)
- Incentives to Export-Oriented and Export-Linkage Industries
- Additional Incentives for EPZ Industries
- Other Incentives
(i) Tax Holiday Facility (THF):
Tax holiday is allowed to industries subject to the relevant rules and procedures set by the National Board of Revenue (NBR) for the following period according to the location of the establishment. NBR issues tax holiday certificate within 90 days of submission of application.
For industries located in Dhaka and Chittagong Divisions (excluding 3 Hill Tract districts of Chittagong Division) are exempted for 5 years. For industries located in Khulna, Sylhet, Barisal, and Rajshahi, Divisions and the 3 Chittagong hill districts are exempted for 7 years. However, for power generation, exemption is allowed for 15 years. The period of tax holiday will be calculated from the month of commencement of commercial production.
(ii) Depreciation Allowance:
Only New Industrial undertakings will enjoy accelerated depreciation allowance in lieu of tax holiday as per following schedule:
- Industrial undertaking set up in the areas of Dhaka, Narayangonj, Chittagong and Khulna falls within a radius of 10 miles from the municipal limits of those cities: @ 100% on the cost of a machinery for the first year only.
- Industrial undertaking set up elsewhere in the country: @ 80% on the cost of machinery in the first year and @ 20% in the second year.
(iii) Duty Exemption and Concessions on Machinery:
For 100% export oriented industry, no import duty is charged in case of capital machinery and spares up to 10% value of such capital machinery. For other industry, import duty, 2 7.5% ad valorem, is payable on capital machinery and spares imported for initial installation or BMR/BMRE of the existing industries. The value of spare parts should not, however, exceed 10% of the total C&F value of the machinery. Value Added Tax (VAT) is not payable for imported capital machinery and spares. Import duty @ 7.5% is secured in the form of bank guarantee or an indemnity bond is returned after installation of the machinery. Investors can avail this opportunities by applying for import duty exemption certificate at BOI. BOI, then, issues certificate within 7 days from the date of application
(iv) Avoidance of Double Taxation:
For Foreign Investors, double taxation can be avoided on the basis of Bilateral Double Taxation Avoidance Treaties (DTTs). Income Tax policy section of National Board of Revenue is entrusted to negotiate the Double Taxation Agreements with foreign countries to promote foreign direct investment in Bangladesh. DTA is an agreement between two countries seeking to avoid double taxation by defining the taxing rights of each country with regard to cross-border flows of income and provide tax credits or exemptions to eliminate double taxation. It also provides exchange of information between treaty partners regarding evasion of tax. Exemption of income tax up to 3 years, from the expatriate employees in industries, is specified in the relevant schedule of Income Tax ordinance.
(v) Remittance:
Remittance of profits of branches of foreign firms/companies, dividends/capital gains, salaries and savings by expatriates, royalty and technical fees, training and consultancy fees, receivables collected by shipping companies and lines towards freight and passage can be effected through authorized dealers without prior approval of the Bangladesh bank. Foreign entrepreneurs are, therefore, entitled to the same facilities as domestic entrepreneurs with respect to tax holiday, payment of royalty, technical know-how fees etc.
(vi) Customs Duty:
Government introduces some laws to exempt customs duties on export & import of goods. Government under provision of section 19 and 20 of the Customs Act, 1969 has wide powers to grant exemption from payment of customs duties chargeable on any goods imported or exported. The government issues notifications exempting generally, either absolutely or subject to such conditions as thought fit to be imposed by notification, goods of any specified description from the whole or any part of the customs Act leviable thereon.
(v) Repatriation:
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 repatriable dividends or retained earnings, those will be treated as new investment. Foreigners employed in Bangladesh are entitled to remit up to 50 percent of their salary and will enjoy facilities for full repatriation of their savings and retirement benefits.To avail full repatriation of invested capital, profit and dividend, Foreign Investors would be needed to apply for repatriation approval from Bangladesh Bank (BB) through nominated bank.
(vi) Exit:
An investor can wind up an investment either through a decision of an annual or extraordinary general meeting. Once a foreign investor completes the formalities to leave the country, he or she can repatriate the net proceeds after securing proper authorization from the central bank (Bangladesh Bank).
(vii) Ownership:
For foreign direct investment, there is no limitation pertaining to foreign equity participation, as 100 percent foreign equity is allowed on investments anywhere in the country, not simply in export processing zones. Thus, Foreign investor can set up ventures either wholly owned or in joint collaboration with local partner. Non-resident institutional or individual investors can make portfolio investments in stock exchanges in Bangladesh. Foreign investors or companies may obtain full working loans from local banks. The terms of such loans will be determined on the basis of bank-client relationship.
(viii) Investing in the Stock Market:
Foreign investors are allowed to participate in initial primary offerings (IPOs) and right issues without any regulatory restrictions. Also, incomes from dividends are tax-exempt for investors.
(ix) Incentives to Non-Resident Bangladeshi (NRBs):
The Bangladesh government offers special incentives to Non-resident Bangladeshis (NRBs) to encourage them invest in the country. Board of Investment (BOI), the government body to accelerate private investment, is the facilitator of the incentives, which the government provides to the NRBs and to the foreign investors as well. NRBs will enjoy facilities: One-Stop Service; Special Service for export-oriented industries; Investment opportunities in the capital market; Banking, similar to those of foreign investors. Moreover, they can buy newly issued shares/ debentures of Bangladeshi companies. A quota of 10% has been fixed for NRBs in primary public shares. Furthermore, they can maintain foreign currency deposits in the Non-resident Foreign Currency Deposit (NFCD) account.
(x) Incentives to Export-Oriented and Export-Linkage Industries:
Encouraging export oriented industries is one of the major objectives of the Industrial Policy in place, and as such the government ensures all support and co-operation to the exporter as per the export policy. To make investment in 100 percent export-oriented industries attractive, the following incentives and facilities will be provided:
- Concessionary duty as per SRO (Special Revenue Order) is allowed on the import of capital machinery and spare parts for setting up export-oriented industries or BMRE of existing industries. For 100% export-oriented industries no import duty is payable.
- Facilities such as special bonded warehouse against back-to-back letters of credit or notional import duty and non payment of Value Added Tax (VAT) facilities are available as per SRO of the government.
- System for duty drawback is being simplified and concise. The exporter will be able to get back the duty draw-back directly from the concerned commercial bank.
- Bank loans of up to 90% if the value against irrevocable and confirmed letters of credit/sales agreement, are available.
- For granting export performance benefits, the list of export products and the rate of export performance benefit (XPB) are reviewed from time to time.
- With the intention of encouraging backward linkages, export-oriented industries including export-oriented readymade garment industries using indigenous raw materials instead of imported materials, are given additional facilities and benefits at prescribed rates. Similar incentives are extended to the suppliers of raw materials to export-oriented industries.
- Export-oriented industries are allocated foreign exchange for publicity campaigns and for opening offices abroad.
- Entire export earnings from handicrafts and cottage industries are exempted from income tax. In case of other industries, proportional income tax rebates on export earnings is given between 30% and 100%. Industries which export 100% of their products are given tax exemption up to 100%.
- Facilities for importing raw materials are given for manufacturing exportable commodities under banned/restricted list.
- Import of specified quantities of duty-free samples for manufacturing exportable products is allowed. The quantity and value of samples is determined jointly by the concerned sponsoring agency and the NBR.
- Local products supplied to local projects against foreign exchange under international tender are treated as indirect exports and the producer is entitled to avail of all export facilities.
- Export oriented industries like toys, luggage and fashion articles, electronic goods, leather goods, diamond cutting and polishing, jewellery, stationery goods, silk cloth, gift items, cut and artificial flowers and orchid, vegetable processing and engineering consultancy services identified by the government as thrust sectors are provided special facilities in the form of cash incentives, venture capital and other facilities.
- Export oriented industries are exempted from paying local taxes (such as municipal taxes).
- Leather industries exporting at least 80% manufactured products will be treated as 100% export oriented industries.
- Manufactures of indigenous fabrics (such as woven, knit, hosiery, grey, printed, dyed, garment check, hand loom, silk and specialized fabrics) supplying their products to 100% export oriented garment industries are entitled to avail a cash subsidy equivalent to 25% of the value of the fabrics provided the manufacturers of the fabrics do not enjoy duty draw back or duty free bonded warehouse facility.
- 100% percent export-oriented industry outside EPZ will be allowed to sell 20% percent of their products in the domestic market on payment of applicable duties and taxes.
- The Export-oriented industries which are identified by the government as "Thrust Sector" will be provided special facilities and venture capital support.
- Apart from the above mentioned facilities, other facilities as announced and provided in the export policy are also applicable for export-oriented and export-linkage industries.
- Tax exemption on dividend income of non-resident shareholders during tax exemption period of an industry set up in an export processing zone and also after the expiry of tax exemption period if the dividend is re-invested in the same project.
- Exemption of tax on income from industrial undertakings set up in an export processing zone for ten years from the date of commercial production.
- Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange.
(xi) Additional Incentives for EPZ Industries:
In order to stimulate rapid economic growth of the country, particularly through industrialization, the government has adopted an 'Open Door Policy' to attract foreign investment to Bangladesh. The Bangladesh Export Processing Zones Authority (BEPZA) is the official organ of the government to promote, attract and facilitate foreign investment in the Export Processing Zones.
The primary objective of an EPZ is to provide special areas where potential investors would find a congenial investment climate, free from cumbersome procedures. Two EPZs, one in Chittagong and the other near Dhaka are now operational.
Investment in the Export Processing Zones enjoys the following special incentives:
(a) Fiscal Incentives:
- Tax holiday for 10 years.
- Duty free import & automatic bonded warehouse facility.
- Exemption from dividend tax
- Foreign technicians are exempted from income tax for 3 years (for the projects approved before 22 March 09)
- Remittance of Royalty, Technical and Consultancy Fees allowed
- Duty & Quota Free Access to EU, Canada, Australia etc.
(b) Non-fiscal incentives:
- Investment protected under Foreign Private Investment (promotion and protection) Act, 1980.
- 100% foreign ownership permissible.
- No ceiling on foreign investment.
- Foreign currency loan from abroad under direct automatic route.
- Non-resident Foreign Currency Deposit (NFCD) Account permitted.
(xii) Other Incentives:
Numerous other incentives relating to taxation, immigration and capital transfer apply. Royalties and technical know-how fees received by any foreign collaborator, firm, company or expert are tax exempt. The interest on foreign loans is tax exempt under certain conditions. On the basis of bilateral agreements, double taxation in case of foreign supplement investors can be avoided. Foreign technicians employed in industries specified in the relevant schedule of income tax ordinance can be exempt from income tax up to three years. Private sector power generation companies may be tax exempt on income for 15 years from the date of commercial production. Capital gains from the transfer of shares of public limited companies listed with a stock exchange are tax exempt. There will be no discrimination in case of duties and taxes for the same type of industries set up by foreign and local investors and in the public and private sectors.
Tax exemption on dividend income of non-resilient shareholders during tax exemption period of an industry set up in export processing zone and also after the expiry of tax exemption period if the dividend is re-investment in the same project. Exemption of tax on income from industrial undertakings set up in export processing zone for ten years from the date of start of commercial production. Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange. Corporate tax rates for industrial companies whose shares are publicly traded is 35% and the rate of those whose shares are not publicly traded is 40%.
Citizenship can be obtained by investing a minimum of US $500,000 or by transferring US $1,000,000 to any recognized financial institution (non-repatriable). Permanent residency may be gained by investing a minimum of US $75,000 (non-repatriable).
5.3. Investment Protections / International Agreements:
(i) Legal Protection:
The policy framework for foreign investment in Bangladesh is based on 'The Foreign Private Investment (Promotion & Protection) Act, 1980', which ensures legal protection to foreign investment in Bangladesh against nationalization and expropriation. It also guarantees non-discriminatory treatment between foreign and local investment, and repatriation of proceeds from sales of shares and profit.
(ii) International Agreements:
Bangladesh is a signatory to MIGA (Multilateral Investment Guarantee Agency) & ICSID (International Centre for Settlement of Investment Disputes) and a member of OPIC (Overseas Private Investment Corporation) of USA & WIPO (World Intellectual Property Organization), permanent committee on development co-operation related to industrial property.
(iii) Bilateral Agreements:
In addition to the broad policies encouraging foreign investment, the government of Bangladesh has entered bilateral investment treaties. These treaties included such assurances as unrestricted currency transfers, avoidance of double taxation, compensation for expropriation, dispute settlement procedures, and taxation treatment. Bangladesh has signed bilateral investment with Belgium, Canada, China, Denmark, France, Germany, India, Italy, Japan, Poland, Romania, Singapore, South Korea, Sri Lanka, Sweden, Thailand, The Netherlands, United Kingdom (including Northern Ireland ). Negotiations are going on with U.S.A, Iran, Philippines, Qatar, Australia, Nepal, Turkey, Indonesia, Cyprus, Norway, Finland and Spain.
(iv) Investment Treaty:
Belgium, Canada, France, Germany, Iran, Italy, Japan, Malaysia, Pakistan, Philippines, Poland, Republic of Korea, Romania, Switzerland, Thailand, The Netherlands, Turkey, United Kingdom, USA, Indonesia. Negotiations are ongoing with India, Hungary, Oman, Maldova, DPRK, Egypt, Austria, Mauritius, Uzbekistan.
5.4. Required Permits & Procedures:
5.4.1. Registration:
In order to regulate working conditions and to ensure safety in the commercial or industrial establishment, any manufacturing company employing ten or more workers is required to be registered. The Labour Code, 2006 regulates working conditions and ensures safety in the industrial establishment. Prescribed Application Form has to be collected from the office of the Chief Inspector of Factories and Establishment, filled in and submitted with requirements. The CI&E office issues registration within the stipulated period.
5.4.2. Obtaining Utility Connections:
Entrepreneurs may apply either directly to the concerned authority for obtaining utility services or approach BOI for assistance along with copy of registration/ sanction letter. Utility Service Cell is specially responsible within BOI to help investors in obtaining necessary utility services.
5.4.3. Obtaining Work Permit:
Work permit for foreign nationals is a pre-requisite for employment in Bangladesh. Private sector industrial enterprises desiring to employ foreign nationals are required to apply in advance in the prescribed form of BOI. For expatriate employment the guidelines are as follows:
- National of the countries recognized by Bangladesh are considered for employment.
- Employment of expatriate personnel be considered only in industrial establishments which are sanctioned / registered by the appropriate authority.
- Employment of foreign nationals is normally considered for the job for which local experts / technicians are not available and persons below 18 years of age are not eligible for employment.
- Decision of the Board of Directors of the concerned company for new employment/ extension is to be furnished.
- Number of foreign employees should not exceed 5% of the total employees including top management personnel.
- Initially employment of any foreign national is considered for a term of 2 years which may be extended on the basis of merit of the case.
- Necessary security clearance has to be obtained from the Ministry of Home Affairs.
5.4.4. Registration/Approval for Foreign Loan, Suppliers' Credit, PAYE Scheme etc.:
Entrepreneurs in the private industrial sector arranging foreign credit in the form of loan, suppliers' credit, PAYE scheme etc. are required to obtain prior approval from the Scrutiny Committee headed by the Governor of Bangladesh Bank. However, falling within the following guide-lines are not required to obtain prior approval from BOI for contraction such credit:
- The effective rate of interest should not exceed LIBOR+4% (effective interest is the sum of the stated annual rate of interest and the annualized fees such as commitment fee, syndication fee, front-end fee, project appraisal fee etc.)
- The down payment, if any, in case of suppliers' credit should not exceed 10% of the credit amount.
- Repayment period should not be less than 7 years.
A copy of the foreign loan agreement signed by both parties should be submitted to BOI for registration. Period approval of BOI required for the proposals which do not fall within the aforesaid guide-lines.
5.4.5. Procedure for Import of Raw & Packing Materials and Spare Parts by Industrial Units:
No permission is required for import of free list items. For items in the restricted list, BOI, BEPZA and BSCIC are responsible for issuance of import entitlement. Import Registration Certificate (IRC) will be issued by the concerned authority in favour of the industrial enterprises within 30 days of receiving applications. Items included in the banned list cannot be imported unless otherwise specified.
In case of import of raw and packing materials of the pharmaceutical industry, the Drugs Administration Directorate under Ministry of Health & Family Welfare prepares Block Lists on half-yearly basis. BOI/BEPZA/BSCIC provides all other assistance relating to imports in the private sector in their respective jurisdictions.
5.4.6. Obtaining Industrial Plot:
Once an industrial project is registered, the entrepreneur is eligible to apply for allotment of land to the government. Price of land in most of the industrial estates/ areas is relatively lower than the market rate. These estates are developed with necessary infrastructure facilities such as electricity, gas, water, sewerage etc.
Industrial plots are allotted by Bangladesh Export Processing Zones Authority (BEPZA) and Bangladesh Small and Cottage Industries Corporation (BSCIC) in industrial areas developed by them. Plots in other industrial estates/areas, owned by the government or owned/controlled by any local authority, are allotted on the recommendation of the Board of Investment (BOI).
Most of the industrial areas/estates are owned/controlled by city development authorities in three divisional head quarters; RAJUK in Dhaka, CDA in Chittagong and DA in Khulna. Besides these, there are a few industrial estates owned and controlled by some other government agencies namely:
(a) Public Works Department and
(b) Housing and Settlement Directorate.
BOI also recommends for acquisition of land to the concerned if required by the industrial units. In such cases the entrepreneurs are required to submit relevant papers and information in connection with the land to be acquired by the Deputy Commissioners (D.C.) concerned.
5.4.7. Environmental Legislation:
Environment Conservation Act, 1995 made it mandatory to all industrial projects to obtain Environmental Clearance Certificate from the Department of Environment. The main criteria for obtaining clearance are set out in the Environment Conservation Rules, 1997 which was established under the Act. Different levels of assessment are required depending on the particular industry concerned. Investors may apply in prescribed forms for Environmental Clearance Certificate to BOI Utility Service cell (USC) enclosing required documents. The USC arranges necessary clearances from the DOE within the stipulated period.
5.4.8. Currency Regulations:
126.96.36.199. Relaxation / Liberalisation of Exchange Control Regulations:
Bangladesh Bank (BB) is the central bank of the country and responsible for issuing Bangladeshi currency and maintaining its value. BB administers the foreign exchange regulations. It has been continuing to liberalize foreign exchange regulations in conformity with the government's reform agenda in macro economic policies with a view to creating an environment conducive to investment and productivity. Individuals/firms resident in Bangladesh may conduct all current external transactions, including trade and investment related transaction, through banks in Bangladesh authorised to deal in foreign exchange (Authorised Dealers) without prior approval of the Bangladesh Bank. Non- resident's direct investment in industrial enterprise in Bangladesh and non-resident's portfolio investment through stock exchanges in Bangladesh also do not require prior approval of the Bangladesh Bank. Restrictions exist on import and export of currency, gold or silver jewellery or precious stones without prior approval. Instructions related to foreign exchange transactions by a foreign investor are available in the Guidelines for Foreign Exchange Transactions (1996), Volume-I and Volume-II and Circulars issued by Bangladesh Bank from time to time. Salient features of some of those instructions are appended below. For detailed instructions, investors should consult the relevant guidelines/circulars.
The major aspects of exchange control include:
(i) Convert Ability to Bangladeshi Taka:
Bangladeshi 'Taka' is convertible for current external transactions. All current transactions including trade, investment and investment related transactions may be conducted by individuals/firms through authorized dealers (banks) without prior permission of BB.
(ii) Opening of Bank Account by a Foreign Investor:
A non-resident may open with any Authorized Dealer (AD) branch of a bank's Foreign Currency (FC) accounts and Non-resident Foreign Currency Deposit (NFCD) accounts with foreign exchange brought in from outside. Balances of these accounts are freely transferable abroad. A foreign investor may also open a Taka account freely with any bank while he is resident. A non- resident can open a Non-Resident Investor's Taka Account (NITA) with any AD in Bangladesh with foreign exchange remitted from abroad through normal banking channel or by transfer of funds from the non-resident investor's foreign currency account for portfolio investment in Bangladesh.
(iii) Bringing in Cash from Abroad by a Foreign Investor:
A foreigner can bring in foreign exchange in any form including cash without limit. For amounts, in excess of US$ 5,000 a declaration on FMJ form is required to be made to the Customs Authorities at the time of entry. Amounts brought in may also be taken out freely, subject to production of declaration where applicable.
(iv) Transfer of Capital and Capital Gains:
Foreign capital invested in Bangladesh for industrial projects with the approval of the government is allowed to be repatriated from Bangladesh, along with capital appreciation, if any, provided approval is first obtained from the Bangladesh Bank Dividends and profits are now allowed to be remitted with much lesser controls. Prior approval of the Bangladesh Bank is required before profits from the foreign subsidiaries can be remitted to the parent company. Taxes must first be paid. Profits retained are considered re-invested. Applications for remittance of profits should be made to the Bangladesh Bank through the applicant's bank by letter.
The repatriation of sale proceeds (including capital gains) of shares of companies listed in a Stock Exchange in Bangladesh may be made through an AD if such investment takes place through NITA operation. Transfer of shares and securities from one non-resident to another non-resident requires no prior BB approval. However, remittance of sales proceeds of shares of companies not listed in a Stock Exchange requires prior BB permission, which is accorded to for amounts not exceeding the net asset value of the shares.
(v) Remittance of Proceeds from Liquidation of Industrial Undertaking:
Remittance of proceeds arising out of liquidation of industrial undertaking requires prior Bangladesh Bank approvals.
(vi) Remittance of Royalty, Technical Know:
Industrial enterprises may enter into agreements for royalty, technical know-how/technical assistance fees abroad if the total fees and other expenses connected with technology transfer do not exceed either 6% of the previous year's sales of the enterprise as declared in their tax return or 6% of the cost of the imported machinery in case of new project. However these agreements need to be registered with BOI. Agreements not in conformity with these general guidelines require prior permission of BOI. Authorized Dealers may remit royalty, technical know-how/technical assistance fees payable as per agreements subject to approval of BOI.
(vii) Transfer of Profit and Dividend Accruing to a Foreign Investor:
Branches of foreign firms/companies including foreign banks, insurance companies and financial institutions are to remit their post-tax profits to their head offices through ADs. Moreover, remittance of dividend income to non-resident in respect of their investments in Bangladesh may be made through an AD. Therefore, remittance of post-tax dividend/profit on non resident direct or portfolio investment do not require prior approval.
(viii) Repatriation of Savings, Retirement Benefits & Salary of Foreigners Employed in Bangladesh:
Foreigners employed in Bangladesh with the approval from the government may remit 50% of salary, actual savings and admissible retirement benefits through an AD. Moreover, net salary of foreign nationals' payable for the period of leave admissible to them as per their service contact duly approved by the government will be remittable.
(ix) Local Borrowing:
Bank may extend working capital loan or term loans in local currency to foreign controlled or foreign owned firms/companies (manufacturing or non-manufacturing) operating in Bangladesh on the basis of normal banker-customer relationship.
Further, banks are free to grant local currency loans to joint venture industries in EPZ up to the amount of short-term foreign currency loans obtained from abroad.
(x) Borrowing from Abroad:
Borrowing from abroad in foreign currency requires prior BOI approval. For repayment of principal and interest of approved foreign currency borrowing may be made through ADs as per agreed terms. A 100% foreign owned and joint venture unit in EPZs may, however, obtain foreign currency loans from overseas banks and financial institutions without prior BOI or BB approval. However joint ventures in EPZ cannot make changes on their assets favoring non-residents.
18.104.22.168. Investment Facilitating Measures:
Prior approval of Bangladesh Bank is no longer required for:
- Remittance of profits to the head office of foreign investors.
- Issuance of share to non-residents against investment in industrial setup in Bangladesh.
- Remittance of dividends on such shares to the non-resident investors.
- Portfolio investment by non-residents including foreign individuals/enterprises in shares and securities through stock exchanges on Bangladesh.
- Remittance of dividend on portfolio investment by non-residents through stock exchanges of Bangladesh.
- Remittance of sale proceeds including capital gains.
- Remittance of principal and interest installments on loan/supplier's credit obtained by industrial units from foreign lenders with approval of BOI.
- Remittance in repayment of principal and payment of interest on such loans.
- Remittance of royalty, technical know-how and technical assistance fees in conformity to the BOI guidelines.
- Remittance of savings of expatriate personnel, out of salary and benefits stated in BOI approved contract, at the time of their leaving from Bangladesh.
188.8.131.52. Export Encouragement Measures:
Government has re-fixed annual foreign exchange retention quota for exporter at 40% of FOB export earning. Retention quota for high import content exporters is 7.5% of FOB export earnings and exporters are allowed to keep foreign exchange retention quota in foreign currency accounts in a bank in Bangladesh dealing with foreign currency. Usage of funds of the retention quota of exporters in setting up offices abroad and bonafide business expenses such as visit abroad, participation in export fair & seminars, import of raw materials, machineries and spares etc. are allowed keeping the bank informed.
6. Customs Regulations
Customs duty has a vital role to play in the economy of Bangladesh as the duty is collected by the country on goods imported or exported out and, as such it is a very significant source of revenue.
In Bangladesh the Customs Act, 1969 governs the customs duty. Import duty covers the basic duty which is levied at the preferential rate in case of importing the commodities. The Law provides for levying of customs duties at rates prescribed and passed annually or under any law for time being in force on goods imported into or exported from Bangladesh; goods brought from any foreign country to any customs station and without payment of duty there transhipped or transported for or hence carried to and imported at any other custom station and goods brought in bond from one customs station to another.
Most of the customs duties are ad-valorem. Where duty is assessed on tariff value as stated in Bangladesh Customs Tariff, the Government has power to fix tariff values for goods. If there is any kind of deterioration or defect in the goods, the proportionate abatement in value is allowable. To determine the invoice price including ocean freight and insurance landing charges are also to be included. A certificate from an internationally reputed inspection and certification agency is necessary if any second hand machinery is imported.
There has been a lot of alteration in exchange rates, rates of duty and tariff value and they keep on changing in short span of time. Law provides that the rates as in force on the date of presentation of the bill of entry for home consumption will be applicable.
When the goods are sought to be cleared on importation of goods, the documents which are to be submitted are Bill of Entry, Invoice and Packing List, Import License where necessary, Certificate of Country of Origin where preferential rate is claimed, Insurance Memo or Policy and Bill of Lading or Delivery Order. The documents necessary to be submitted in exporting the goods are Shipping Bill, Invoice and Packing List, Export License or Quota Certificate where necessary, Export Inspection Agency's Certificate where necessary, necessary Forms of Central Excise. Where some goods are imported and the prices have gone down, the importers are advised to keep catalogue regarding composition and functions of the goods.
If the importer has paid short or excess of the custom duty, there is the provision to demand if the payment is short and to refund if the payment is in excess. Similarly the person is aggrieved by the custom authorities, he has the opportunity to file an appeal to the Commissioner of Customs (Appeals). A second appeal lies to the Appellate Tribunal. Where the imported goods are lost or destroyed at any time before clearance for home consumption, the remission on duty will be available but if there is any kind of pilferage, no remission in duty will be made. The owner of the goods for home consumption has always the opportunity to relinquish the title of the goods before getting the goods cleared.
7. Taxation:
Taxation one of the major sources of public revenue to meet a country's revenue and development expenditures with a view to accomplishing some economic and social objectives, such as redistribution of income, price stabilization and discouraging harmful consumption. It supplements other sources of public finance such as issuance of currency notes and coins, charging for public goods and services and borrowings. The term "Tax" has been derived from the French word "Taxe" and etymologically, the Latin word "Taxare" is related to the term 'tax', which means 'to charge'. Tax is 'a contribution exacted by the state'. It is a non-penal but compulsory and unrequited transfer of resources from the private to the public sector, levied based on predetermined criteria.
According to Article 152(1) of the Constitution of Bangladesh, taxation includes the imposition of any tax, rate, duty or impost, whether general, local or special, and tax shall be construed accordingly. Rate is a local tax imposed by local government on its residents or the property owners of the locality, duty is a tax levied on a commodity and an impost is a tax imposed for an entry into a country. Under the provision of article 83 of the Constitution, "No tax shall be levied or collected except by or under the authority of an Act of Parliament". Bangladesh inherited a system of taxation from its past British and Pakistani rulers.
The system, however, developed based on generally accepted canons and there had been efforts towards rationalizing the tax administration for optimizing revenue collection, reducing tax evasion and preventing revenue leakage through system loss. Taxes include narcotics duty (collected by the Department of Narcotics Control, Ministry of Home Affairs), land revenue (administered by the Ministry of Land an collected at local Tahsil offices numbered on average, one in every two Union Parishads), non-judicial stamp (collected under the Ministry of Finance), registration fee (collected by the Registration Directorate of the Ministry of Law, Justice and Parliamentary Affairs) and motor vehicle tax (collected under the Ministry of Communication).
The tax structure in the country consists of both direct (income tax, gift tax, land development tax, non-judicial stamp, registration, immovable property tax, etc) and indirect (customs duty, excise duty, motor vehicle tax, narcotics and liquor duty, VAT, SD, foreign travel tax, TT, electricity duty, advertisement tax, etc) taxes. The present land revenue system of Bangladesh has its base in the East Bengal state acquisition and Tenancy Act, 1950 which established a direct contract between the taxpayer and the government. The most important tax on the value of transferred property is the non-judicial stamp tax (levied under the Stamp Act, 1899), which has been in existence since January 1899. Current rates of non-judicial stamp duty are provided in the First Schedule of the Finance Act, 1998. The judicial stamp tax is being levied under the Court Fees Act 1870, although the levy of court fees originated in the introduction of the Bengal Regulation No. 38 of 1795.The first sales tax was introduced in the former Central Provinces of India in 1938. In Bengal, sales tax was adopted in 1941. In 1948, sales tax was transferred as a central tax under the General Sales Tax Act of 1948. The Sales Tax Act, 1951 came into force on 1 July 1951 by repealing the Pakistan General Sales Tax Act of 1948.Until 1982, sales tax was being collected under the 1951 Act, which was replaced by the Sales Tax Ordinance 1982. The VAT law was promulgated by repealing the Business.
Income tax was first introduced in the subcontinent by the British in 1860 to make up the revenue deficit caused by the Sepoy Rebellion, 1857. After independence of Bangladesh, income tax was made effective under the Income Tax Act, 1922 passed on the basis of the recommendations of the All-India Income Tax Committee appointed in 1921. Currently, income tax has been imposed under the Income Tax Ordinance 1984 (ITO) promulgated on the basis of recommendations of the Final Report of the Taxation Enquiry Commission submitted in April 1979. Income taxpayers (assessees) are classified as individuals, partnership firms, Hindu undivided families (HUF), associations of persons (AOP), companies (publicly traded and private), local authorities, and other artificial juridical persons. Tax rates and scope of taxable income differ based on residential status of assessees (resident or non- resident). From fiscal or assessment year, (AY) 2010-011, there is a filing threshold of annual total income of Tk. 165,000 applicable for individuals (including non resident Bangladeshis), partnership firms, HUF, AOP and assessees other than companies and local authorities. In case an identity of this group has a total annual income less than this level, he is not required to submit tax return but if someone's income is higher, he is to pay a minimum tax of Tk. 1,000. Bangladesh inherited a system of taxation from its past British and Pakistani rulers.
Many countries are using income tax as an incentive to allure investment; both by reducing tax rate and simplifying the taxation laws. In Bangladesh, tax rates on company profits are 45% to 42.5% for bank, insurance, mobile phone, financial companies. It is 37.7% for all other companies. The tax rate is 27.5% for publicly traded companies other than bank, insurance, mobile phone, financial companies.
Bangladesh company income is taxed twice, once tax is paid by the company on its profit, and then again it is slapped on the shareholders who receive dividends out of such profits at rates applicable on them. Companies are required to deduct income tax at 10% on dividends paid to its shareholders. Bangladesh tax rates rank among the highest in the world.
Some of the countries having low corporate income tax rates are as follows: Albania- 10%, Brazil- 15%, Cambodia- 20%, Chile- 17%, China- 25%, Egypt- 20%, Germany- 15%, India- proposed 25%, Indonesia- 28%, Iran- 25%, Ireland- 12.5%, Malaysia- 20% to 25% (20% small co.), Mexico- 28%, Pakistan- 20% for companies with turnover upto Rs. 250 million; above that 35%, the Philippines – 30%, Russian Federation- 20%, South Africa- 28%, Sri Lanka- 15% to 35%, Thailand- listed 20% – 25%, non-listed 20% – 30%, Turkey- 20%, the United Kingdom- 28%, small co. 21%, the United States- income upto $50,000 at 15%, maximum tax slab for income above $18,333,333 at 35%, Vietnam- 25%.
Most countries including India & Pakistan are no longer taxing the corporate income twice; instead they impose additional dividend distribution tax on the company and keep dividends exempted for the shareholders.
Among direct taxes, income tax is one of the main sources of revenue. It is a progressive tax system. Income tax is imposed on the basis of ability to pay. "The more a taxpayer earns the more he should pay"- is the basic principle of charging income tax. It aims at ensuring equity and social justice. Any income collected or gained by a company doing business in Bangladesh, whether resident or not is taxable. Corporate tax rates for industrial companies whose shares are publicly traded is 35% and the rate of those whose shares are not publicly traded is 40%.Tax rates on income of all other companies including banks, financial institutions, insurance companies and local authorities is 45%. Companies enjoying tax holiday are required to invest only 25% to 30% of their income in other activities as per rules of the National Board of Revenue (NBR). Income tax is levied on all companies and individuals for the previous year and payable for the year of assessment of fiscal year (July to June). If a company adopts an accounting period different from the fiscal year, the business period is a 12 month accounting period preceding the year of assessment. Taxable income is calculated after adjusting for incurred expenses in the production of income.
Returns filed received by or due to foreign technician under contract if it is accompanied by audited accounts and certified by a chartered accountant as to the correctness of the total income of the assessee. Salary income received by or due to a foreign technician under contract of service approved by the NBR is fully exempted from paying tax (subject to prescribed conditions and limitations) for a period of three years from the date of his arrival in Bangladesh. Expenditure incurred by an employer in respect of remuneration of a foreign technician is also fully exempted from income tax (subject to stipulated conditions). Expenditure incurred as a remuneration payable to a foreign technician by a Bangladeshi firm carrying on the business of consultant and engineers in Bangladesh is fully exempted from tax (subject to prescribed conditions and limitations).
Tax holiday is allowed to industries subject to the relevant rules and procedures set by the National Board of Revenue (NBR) for the following period according to the location of the establishment. In Dhaka and Chittagong Divisions (excluding 3 hill districts): 5 years. In other divisions (including 3 hill districts of Chittagong Division): 7 years. The period of such tax holiday will be calculated from the month of commencement of commercial production. The eligibility of tax holiday to be determined by the NBR and the time of the commencement of commercial production is certified by the respective sponsoring agencies. The industrial establishment should be registered under the companies Act. 1994. Tax holiday facility can be availed by industries coming into commercial production within 30 June 2000 A.D.
An accelerated depreciation instead of a tax holiday is allowed at the rate of 80% of the actual cost of the machinery or plant from the year the plant starts production and 20% for the following year provided the industry is located within a "developed area". The depreciation is 10% if the industry is set up in a location considered less than a "developed area".
Bangladesh exempts agriculture and worker remittance from income tax. And export incomes are either exempted or taxed at a lower rate. The situation is same in other developing countries including India & Pakistan.
In Bangladesh income tax process is regulated by the Income Tax Ordinance 1984. Most common tax law simplification is done through imposing a fixed percentage of income tax on sale (turnover) of goods or services and relieving the tax payers from the burden of filing of tax returns and from proving his declared profit or loss by producing books and records and involving in dispute and disagreement with tax department.
Traders, manufacturers and service providers deposit a fixed amount or a percentage of sales turnover, which is deemed final tax. It eliminates possibility of protracted legal battle between the tax department and tax payers. This is a great hardship on tax payers in terms of time & cost. It also increases government's cost of tax collection.
In Bangladesh the tax rate for first Tk 165,000/- nil, next Tk 275,000/- 10%, next Tk 325,000/- 15%, next Tk 375,000/- 20% and for rest of the amount 25%. Simple, transparent tax law and low tax rates ensure compliance while ambiguity, discretion & high tax rate promotes evasion and corruption. India has proposed & Pakistan has introduced new tax laws adopting mostly global best practices; and it is high time that Bangladesh should overhaul its tax policy, procedure and rates in line with the countries that are competing to encourage local and foreign investment. This will help create jobs, provide social security and produce more goods and services as most developing countries are in the league.
How is the period for assessment determined?
Income tax is levied on all companies and individuals for the previous year and payable for the year of assessment of fiscal year (July to June). If a company adopts an accounting period different from the fiscal year, the business period is a 12 month accounting period preceding the year of assessment. Taxable income is calculated after adjusting for incurred expenses in the production of income.
Returns filed received by or due to foreign technician under contract if it is accompanied by audited accounts and certified by a chartered accountant as to the correctness of the total income of the assessee.
Salary income received by or due to a foreign technician under contract of service approved by the NBR is fully exempted from paying tax (subject to prescribed conditions and limitations) for a period of three years from the date of his arrival in Bangladesh.
Expenditure incurred by an employer in respect of remuneration of a foreign technician is also fully exempted from income tax (subject to stipulated conditions).
Expenditure incurred as a remuneration payable to a foreign technician by a Bangladeshi firm carrying on the business of consultant and engineers in Bangladesh is fully exempted from tax (subject to prescribed conditions and limitations).
The income of the foreign collaborator shall be liable to tax if income is received or deemed to be received in Bangladesh. Any remuneration received in Bangladesh for the work done by an individual is taxable. The term 'remuneration' is very wide being inclusive of salaries and wages, pension, fees, commissions, profits in lieu of or in addition to salary, advance salary and perquisites and taxable payments include all allowances, deferred compensation and taxable equalization. The individual tax rate is as follows:
Personal Income Tax Assessment other than Company:
|Rest Amount
8. Labor Regulations:
Labour law is the body of laws, administrative rulings and precedents which address the legal rights of, and restrictions on, working people and their organizations. As such, it mediates many aspects of the relationship between trade unions, employers and employees. In Canada, employment laws related to unionized workplaces are differentiated from those relating to particular individuals. In most countries however, no such distinction is made. However, there are two broad categories of labour law. First, collective labour law relates to the tripartite relationship between employee, employer and union. Second, individual labour law concerns employees' rights at work and through the contract for work. The labour movement has been instrumental in the enacting of laws protecting labour rights in the 19th and 20th centuries. Labour rights have been integral to the social and economic development since the Industrial Revolution.
Bangladesh offers an abundant supply of disciplined, easily trainable and low-cost work force suitable for any labor-intensive industry. Of late, there is an increasing supply of professionals, technologists and other middle and low level skilled workers. They receive technical training from universities, college, technical training centers, polytechnic institutions etc. The expenditure incurred by an employer to train his employee is exempted from income tax.
8.1. Appointment and Conditions for Employment:
The Bangladesh Labour Code 2006 provides that, the minimum age for workers in Bangladesh is 18 years in factories and establishments. Contracts are made in the form of a letter of offer. Workers may also be engaged on verbal agreements. In government organizations and in some private organizations as well, a probation period exists for skilled or semi-skilled workers varying between three month's to one year and during this period either party may serve one month's notice for termination from or giving up to the job. In the private sector, the dignity of labor is ensured in accordance with the principles enunciated in the ILO convention and recommendations.
8.2. Settlement of Labor Disputes & Labour Court:
Settlement of industrial disputes is usually dealt as per the provisions of Sections 209-231 of the Bangladesh Labour Code 2006. In case of any industrial dispute, firstly the parties shall try to resolve the same through negotiations. If a bipartite negotiation fails, conciliation machinery of the government is requested by the aggrieved party to intervene and the conciliation process is undertaken. If succeeds agreement is signed between the parties. If the conciliation procedure fails, with the consent of both the parties the dispute may be referred to the arbitrator appointed by the Government or by either of the parties. Award of the Arbitrator will be final and no appeal will be allowed against such award. On the other hand, if the parties do not agree to appoint an arbitrator, the party raising the dispute, may go for strike or lockout as the case may be. The government may, however, prohibit the same after one month in the interest of the public. In case of utility services like, (a) electricity, gas, oil & water supply etc. (b) hospital & ambulance service, (c) fire brigade, (d) railway & Bangladesh Biman and (e) ports etc., strike is prohibited.
Again in case of strike or lockout, either party may refer it to the Labour Court. Interference of court can also be sought to enforce the Provisions of the Labour Code, or the award of the Arbitrator or any agreement between the parties.
8.3. Wages and Fringe Benefits:
Sections 120 to 137 of Bangladesh Labour Code 2006 provide about procedure of payment. Section 138 provides that the government shall establish a Wage Board for the purpose of fixing a minimum wage for the labour. Section 140 of this code provides that the Wage Board has power to declare minimum rates of wage. In the public sector, wages and fringe benefits of the workers are determined by the government on the recommendation of the National Wages Commission established from time to time. Such commissions were appointed in 1973, 1977, 1984, 1989 & 1992. Wages & fringe benefits declared by the government in 1977 having 20 grades of wages. The public sector employees are, however, covered by the Pay Commission declared by the government from time to time
8.4. Working Hours, Holiday and Leave:
Sections 100 to 112 of the Labour Code 2006 provide about rules regarding working hours and leave of a labour. Section 100 of this Code provides that no adult worker shall be allowed to work in an establishment for more than eight hours in a day except certain circumstances. Section 103 of Labour code provides provisions of Weekly Holidays. Section 115 to 117 of this Act provides about Casual leave and Sick leave.
8.5. Social Security:
Chapter 4, 5, 6, 7 and 8 of the Labour Code 2006 provides rules regarding Maternity Welfare, Enviroment of the Company, Safety and welfare measure for the Labour.
8.6. Labour Union:
Through the Bangladesh Labour Code 2006, freedom is also given to the laborers to form any federation of trade union. Trade unions or federation of trade unions can be formed in any premises or any commercial or industrial establishments. The Registrar appointed under this ordinance may declare any of the trade unions formed in accordance with the provisions of this ordinance, as the CBA of that very establishment. To declare a trade union as a CBA, the registrar is bound to abide by the provisions of the Ordinance. The function of the CBA is to bargain with the employers and with the government regarding labour interests and labour rights. So, it can be said that the labour organization is recognized by the state.
9. Intellectual Property in Bangladesh:
The protection of IP property at national level is ensured by different Acts and the Rules made there under. There is separate legislation for different kinds of IP. The inventions and designs are being protected under the Patents and Designs Act, 1911 and the Patents and Designs Rules, 1933. The trademark protection is ensured by the Trademark Act, 2009 and the Trademark Rules, 1963. The Copyrights Act, 2000 and the Copyrights Rules, provides protection for the subject matters of copyright.
Besides the national laws in this respect, Bangladesh is the member of several International treaties. It is a member of the Universal Copyright Convention (UCC) since 5th May, 1975; of the World Intellectual Property Organization (WIPO) since 11th May, 1985; of TRIPS Agreement since 15th April, 1994; of Berne Convention since May 1999; of Paris Convention since 3rd March, 1991. Being a member of these treaties Bangladesh is enjoying cooperation from the respected authorities at the concerned field.
Industrial Property Office of Bangladesh is the Department of Patents, Designs and Trade Marks as established by the Patents and Designs Act, 1911. The Head of this Department is the Registrar of Patents, Designs and Trade Marks. The Department acts under the supervise Ministry of Industries located at Shilpa Bhaban, Annex Building 91, Motijheel C/A, Dhaka 1000. The Department is divided into two wings i.e. Patents and Designs Wings for dealing with the functions related to patents and designs and Trademarks Wing to deal with the functions regarding trademark.
The Copyright Office of Bangladesh is 'Registry of Copyrights' which acts under the supervision of Minister for Cultural Affairs. The Copyright is situated in National Library Building (2nd flr.) Sher-e-Bangla Nagar, Agargaon, Dhaka-1207. The head of the Office is the Registrar of Copyrights who discharges the function as conferred upon him by the Copyrights Act, 2000.
9.1 Patents and Designs:
The Patent and Design Act, 1911 was enacted with the purpose of protecting invention and design. Part one deals with the details of patent. Part two deals with the details of designs0. Part 3 deals with the details of general provisions.
An application must be made in the prescribed form and must be left at the department of patents, designs and trademarks in the prescribed manner. However, an application for patent should contain the following particular namely-
(a) Name of the inventor (applicant),
(b) Address(s) and nationality of the inventors,
(c) Two sets of specification and one set of drawing on tracing paper (transparent),
(d) One set Legalized Deed of Assignment (if any),
(e) Power of Attorney [Form no.- 31],
(f) Certified copy of the foreign patent (in case of claiming priority).
The principal claim shall define the essential novel features of the invention and be in one single continued sentence. Optional features may be made the subject matter of subordinate claims. The drawings shall be filed in triplicate and the original shall be on tracing cloth or transparent or semi-transparent sheet.
Application, where accompanied by complete specifications will be examined and objections on examination are communicated to the applicant for carrying out amendments and to re-file the documents for re-examination, if necessary. After all objections are complied with, the Controller of Patent will accept the specifications and advertise such acceptance in the Official Gazette and keep it open for public inspection. If there is no opposition, or in case of opposition, the determination is in favor of the grant of patent, a patent shall, on payment of the prescribed fees, be granted, subject to such conditions (if any) as the Government think expedient, to the applicant or in case of a joint application to the applicants jointly, and the Registrar shall cause the patent to be sealed with seal of the department of Patents, Designs and Trademarks.
On the acceptance of the application the registrar shall give notice thereof to the applicant and shall advertise the acceptance; and the application, specification and the drawing (if any) shall be open to the public inspection. any person may, on payment of the prescribed fees, at any times within four months from the date of the advertisement of the acceptance of an application, give notice at the Department of patents, design and trademarks of opposition to grant the patent on certain specified ground. The term limited in every patent for duration thereof shall, save as expressly provided by this Act, be 16 years from its date. To maintain a patent in force, renewal fees are to be paid from the beginning of the fourth year from the date of patent. Infringement means the violation of the exclusive rights granted to the patentee. The statute conferred exclusive monopoly rights to make, use, exercise, sell or distribute the invention by his satisfaction and when such rights are violated by others it is called infringement. a patentee may institute a suit in a District Court having jurisdiction to try the suit against any person who makes, sells or uses the invention without his license, or counterfeits it, or imitates it. A successful plaintiff is entitled to the relief in the form of injection, damages or an account of profit.
9.2 Design:
"Design" means only the features of shape, configuration, pattern or ornament applied to any article by any industrial process or means, whether manual, mechanical or chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye; but does not include any mode or principle of construction or anything which is in substance a mere mechanical device, and does not include any trade mark as defined in section 478, or property mark as defined in section 479 of the Penal Code. It is the ornamental or aesthetic aspect of a useful article consists of shape, or pattern, or color or configuration which must appeal to the eye of the consumers. A particular attractive design may be profitable for the business for it will increase the sale.
The Registrar may, on the application of any person claiming to be the proprietor of any new or original design not previously published in Bangladesh, register the design under this Part.
The application must be left at the Department of Patents, Designs and Trade Marks in the prescribed manner and must be accompanied by the prescribed fee. An application must be made in the prescribed form and generally it should contain the following particulars:
(a) Name of the inventor (applicant),
(b) Address(s) and nationality of the inventors,
(c) Two sets of specifications of design,
(d) Four sets of 3D pictures of the products from 4 sides,
(e) Power of Attorney [From – 31].
A design when registered shall be registered as of the date of the application for registration. The Registrar shall grant a certificate of registration to the proprietor of the design when registered.
The term piracy as used in the Act has the similar meaning of infringement. There is civil remedy for the violation of copyright of design. In case of piracy of the design the owner of the design may file suit to the Court of District Judge.
9.3 Trademarks:
The Trademarks Act, 2009 was enacted by the President of Bangladesh in 2008 in exercising his power under Article 93 (1), which was confirmed in the parliament in 2009. The Act was adopted for the purpose of repealing the previous Statutes and modifying the laws relating to the trademark. The Merchandise Marks Act, 1889 (Act IV of 1889) and Trade Marks Act, 1940 (Act V of 1940) have been repealed under this Act.
Any person claiming to be the proprietor of a trademark already in use or proposed to be used in Bangladesh may apply in writing for registration of a Trademark in the prescribed manner. An applicant has to file application for the registration of a trademark to the Trademark Registry Wing of the Department of Patents, Designs and Trademarks.
An application for the registration of a trademark shall include the following:
- Full name, street address and nationality of applicants.
- Whether applicants are manufacturers/merchants/provider of services.
- Goods or services for which the mark is to be registered.
- Whether the mark is being used in Bangladesh by the proprietors, Proposed to be used in Bangladesh by the proprietors, Proposed to be used in Bangladesh by a corporate body to be constituted, Proposed to be used in Bangladesh by a registered user (in which case an application for registration of registered user must be filed simultaneously).
- Black and white bromide prints (on photographic quality paper) for a label or design.
- Signature of the applicant (if individual) or of an officer of the applicant company, whose position in the company should be stated including the corporate seal. It is not necessary to notarize or legalize the authorization.
After filing the application, the Registrar may either accept or reject or order to correct or modify the application. An application for registration of a trade mark may be accepted either absolutely or subject to conditions or limitations. Section 16 states that, the Registrar may reject an accepted application. Where an application is accepted by the Registrar, he shall advertise to the fact of its acceptance. Any person may object to the registration by following the procedure prescribed for the purpose. The procedure opposition has been enacted to test the distinctiveness and to quarry that other will not be affected by the registration of this trademark. The Registrar shall register the trademark if-
- An application for registration of a trade mark has been accepted; and
- it has not been opposed, or
- the time for notice of opposition has expired, or
- having been opposed, or
- has been decided in favour of the applicant.
On the registration of a trade mark the Registrar shall issue to the applicant a certificate in the prescribed form of the registration thereof sealed with the seal of the Trade Marks Registry.
The proprietor of a registered trademark will enjoy exclusive rights to use the trademark in relation to the goods for which it is registered and the registration of trademark enables the proprietor to file a suit for infringement of this right and obtain injunction, damages, and other relief against an infringer. Nobody can use the trademark without the authority of the owner of the trademark. Infringement is the violation of exclusive rights conferred on the proprietor. Where a person uses any trademark in the course of trade, in relation to the same goods for which the mark is registered without the authority of its proprietor it will amount an infringement of that trademark. Where the rights of a proprietor of a registered trademark has infringed, he can initiate Civil proceeding (i.e. action for infringement and action for passing off), or Criminal Proceeding for having remedy. An action for infringement is statutory remedy. Passing off means to misrepresent that of one's business or connected with another, in way likely to cause damage. Passing off is tort and its remedy is based solely on the common law of principles. It is an actionable wrong (known as passing off) for trader so to conduct his business as to lead to the belief that his goods or business are the goods or business of another.
Any suit regarding the infringement of trademark, or to establish the right or any ratified right respecting trademark shall be instituted in the Court of District Judge within whose jurisdiction the infringement occurred. A criminal proceeding has to be instituted in the Court of Metropolitan Magistrate or any other 1st class Judicial Magistrate. remedy in a suit for infringement may be availed in the form of injunction, damages, an accounts of profit, destruction or erasure of falsifying trademark, delivery up the goods marked with false trademark.
9.4 Copyright:
The Copyright Act, 2000 was adopted by replacing the Copyright Ordinance, 1962. This Act was enacted to ensure the different types of intellectual works of human mind e.g. literary works, dramatic works, musical works, artistic works, cinematographic films and sound recordings.
The enjoyment of copyright does not depend upon any formalities like registration. Although there is provisions for registration of copyright but it does not differ a work from any unregistered work. Copyright in a work automatically subsists as soon as the work comes into existence, if the work is original. The Copyright Act, 2000 confers on the owner of the Copyright exclusive right to multiply copies of his work for commercial exploitation. It also grants the negative right to refrain others from illegally multiplying the copies of his work. The Copyright protection exists in published as well as, unpublished works. The works in which copyright subsists are literary, dramatic, musical, artistic, cinematography film, records and computer programs. Copyright law also extends protection to works of art intended for quasi commercial purposes, i.e., artistic design of cartoons, catalogue lists, drawings, monograms, advertisement drawings, computer software and painting produced on cards. Computer programs are entitled to protection under the present law. Besides, the Copyright Act, 2000 grants the rights for broadcasting organization in their broadcast, rights for the performing artists in their performance and rights for the publishers in the typographical presentation. Computer software comprises of programme manuals, punched cards, magnetic tapes, discs and papers, etc., which are needed for the operation of computers. The author is recognized as the first owner of the copyright except in the case of commissioned works done for valuable consideration during the course of employment either under a contract of service or of apprenticeship.
Where the author of literary, dramatic, musical, or artistic work is a natural person, the term of copyright shall usually be the lifetime of the author plus sixty years. But where the author is a juristic person term of copyright shall be sixty years from the year of its first publication.
Where copyright in any work has been infringed, the owner of the copyright shall be entitled to all such remedies by way of injunction, damages, accounts of profit and otherwise as are or may be conferred by law for the infringement of a right. Every suit or other civil proceeding of the infringement of copyright in any work or the infringement of any other right conferred by this Act shall be instituted in the district court having jurisdiction. The owner may initiate criminal proceeding against the alleged infringer under the provision of this Act. The Act has incorporated certain acts as offence.
10. Purchasing Immovable Property:
Right to property predominantly revolves around owning landed property. One of the means by which a company owns property is purchasing of land. Given the context of our country an intending purchaser of land is put in a perplexed situation and is bewildered by the congruities of law and the provocation of the go-betweens. Precisely for this reason a buyer of land should have to be diligent in order to avoid the post-buying hazards. There are some points which can help a prospective buyer in purchasing a piece of land.
- Firstly, the purchaser has to scrutinize how the seller (owner) had owned the land. In case he is an owner by purchase the connectivity with previous ownerships should be scrutinized. In case he had become owner through inheritance the partition deed may be inquired of to see his share in the holding.
- The CS (Cadastral Survey) khatian, the SA (State Acquisition) khatian, the RS (Revisional Survey) khatian, BS khatian or the latest khatian whatever, should be examined through the office of Record Room & Collectorate Bhaban. In an area where a land survey is going on the field porcha may be inquired into. In case if it is discovered that there is a dispute on this land, the purchaser is to be sure about the settlement of the dispute from the settlement office.
- The documents shown by the seller should be verified by the purchaser through the Balam Book Volumes kept in the sub-registry office. If the papers do not resemble with the records kept in the relevant Register it should be presumed that the papers are forged.
- The mutation porcha, D.C.R and Rent receipt should also have to be examined by the purchaser through the concerned Tahsil Office and the Office of Assistant Commissioner of land. Failure of this may render a purchaser liable to pay the land revenues due by himself. The duty of the buyer is to examine the consistency between the latest document and the earlier one (popularly known as baya deed) in terms of the amount of land, holding number, khatian number etc
- The purchaser also needs to be sure that the land which he is going to buy is free from all encumbrances. Free from encumbrances means that the land is not a mortgaged one or is not a subject matter of a legal dispute, or is not a government khas land or not a declared vested property land or land decided for acquisition. This information can be found from union tahshil office, upazilla land office or district DC office. If there is a certificate case or there is a litigation pending, the land is not worth buying. Sale of a land during the pendency of a proceeding is prohibited and hence void.
- The purchaser also should be aware that the intended land is also not subject to prohibitory land area. The Government at times forbids selling of land in particular locality for development or environmental purposes.
- There is a cardinal principle of land transfer, 'no person can hand over a better title than he himself has'. If the seller's title to the land is faulty, he has no authority to sell the land. His transfer would be void. So, an intending buyer should be aware of this aspect. If he buys the land from the authorized person of the owner the power-of-attorney should be verified in order to see his extent of authority to sell the land.
- A co-sharer by inheritance has a right of pre-emption i.e. priority right of purchase in case of land transferred by other original co-sharer. The purchaser may face legal challenge if such pre-emption right is overlooked by the seller. So, in case of valuable property it is better to bring notice to all that he (the buyer) is going to buy such and such property.
These all seem to be a big order. But to avoid further complexities such precautions are important. Great loss can be avoided by a reasonable due diligence in purchasing of land. In transfer of property law there is a well recognized principle known as caveat emptor. The doctrine of caveat emptor implies that 'let a purchaser exercise proper caution who ought not to be ignorant of the amount and nature of the interest which he is about to buy.' It is true that the seller also owes a major legal responsibility to ensure all the formalities of transfer of land and convincingly proof that he has the legal authority to sell the land. But prevention is better than cure. It is equally important that the buyer should make the seller disclosing all the material facts affecting his property.
10.1 Procedure of Purchase:
Step 1: Verify the record of rights from the Land Office (also known as Land Revenue Office)
Completion Time Frame: 15 – 60 days (simultaneous with procedures 2 and 3)
Points to Note:
Parties check that land tax payments are up to date.
The land administration system in Bangladesh separates records of ownership and those on revenue as such:
a. Land Records Office for land records, surveys, publication and maintenance of records under the directorate of land records and survey (Ministry of Land).
b. Land Office or Land Revenue Office under Ministry of Land. There are 11 administrative offices in each upajela.
c. There are 64 districts in Bangladesh but 61 registration districts. 3 hill districts do not have registration centers. In Dhaka, the district land registration office has 11 sub registrar offices under the Ministry of Law.
Step 2: Conduct RS Mutation on property
Completion Time Frame: 60 days (simultaneous with procedures 1 and 3)
Points to Note:
Since the last survey on Dhaka was done, transfers of property titles created before then must be converted (mutated) to the new survey. This is requested at the Assistant Commissioner of Lands (Tahsil). In order to obtain this, an application is required to be made to the concerned Assistant Commissioner of Land with particulars of the property. The Assistant Commissioner forwards the same to the Tahsil Office, who are responsible for conducting the relevant survey and providing a report to AC Land. Upon receiving the report, AC Land renders the mutation certificate. The inspection is noted in procedure 3. In the future, properties will have to be converted to the Mahanagar survey, which is currently underway.
Step 3: Obtain inspection for RS Mutation
Completion Time Frame: 60 days (simultaneous with procedures 1 and 2)
Points to Note:
The permission is only mandatory when the property is under the control of either the Ministry of Works (National Housing Authority) or RAJUK (Dhaka Improvement Trust since 1952 until it was renamed Rajdhani Unnayan Kartripakkh –RAJUK in 1982). paid in order to expedite the process and guarantee approval, which amount to BDT 10,000 to 15,000.
The buyer also checks that the property is up to date with payments to the Municipality, gas utility service, electricity utility service, and the water utility service to make sure that there is no outstanding dues payable so that the those liabilities do not transfer to him. Each of these checks will cost around BDT 625. These are standard steps customary in Bangladesh and not mandatory for registration.
Step 4: Obtain the non-encumbrance certificate from the relevant Sub-registry Office
Completion Time Frame: 2-3 days
Points to Note:
The buyer checks the legal status of the land (mortgaged or leased or ownership) at the relevant Sub-registry.
Step 5: Prepare deed of transfer and pay stamp duty
Completion Time Frame: 1 day
Points to Note:
A lawyer may prepare the transfer deed, but it can be prepared by the parties themselves. The deed must be prepared in stamped paper that will cost 5% of the property value to get it. This represents the stamp duty.
Step 6: Pay capital gains tax, registration fee, VAT and other taxes at a designated bank
Completion Time Frame: 1 day
Completion Costs: Capital Gains Tax (5%)+ VAT (1.5%) + local government tax (2%) + registration fee (2.5%)
Points to Note:
Stamp Duty = 5%
(Applicable only for municipal corporation area payable by private housing and flat developers and commercial businesses)
Registration fee = 2.5%
Local Government Tax = 2%
Capital Gains Tax = 5%
(Not applicable in rural areas for agriculture. Applicable to land above 100 000 Takas, irrespective of when the transfer was made)
The 2.5% registration fee is payable to the Bank in favor of the sub-registry office and the receipt is to be presented at the moment of applying for registration.
Step 7: Apply for registration at the relevant Sub-registry
Completion Time Frame: 1 year (simultaneous with procedure 8)
Points to Note:
The buyer applies for registration at the Municipal Deed Registry Office, presenting the receipts of payment for the registration fees obtained in Step 6.
A certified registration document is obtained within a week for the buyer's record. The original sale deed/certificate require about 1 year to be obtained.
Step 8: Register the change in ownership at the Land Revenue Office
Completion Time Frame: 45 – 60 days (simultaneous with procedure 7)
Points to Note:
The change of ownership must be registered in the Land Revenue Office. The property is recorded under the name of the new owner, who is responsible for paying the land taxes from the day it is transferred.
11. Epilogue:
Bangladesh is positioned as a link between the emerging markets of South Asia and fastest growing markets of South East Asia and ASEAN countries. With the proposed concept of a "Bay of Bengal Growth Triangle" with its apex Chittagong port extending south-west to Calcutta, Madras and Colombo and the south-eastern arm extends through Yangon, to Thailand, to Penang with the third arm to Colombo, this region has got growing attention of the investment world.
The stable macroeconomic situation reflects the continued high growth of exports, increased flows of remittances, moderate growth in money supply as well as that of imports. The country has a policy of private sector led, liberal economic approach; export oriented, gradually transforming into assembling & manufacturing; seeking for rapid expansion of the service sector. Also looking for substantial joint venture and Direct Foreign Investment (DFI) from abroad in medium and large-scale industries and enterprises, including infrastructure building. Economist-risk factors for FDI in Bangladesh are minimum compared to many other countries of this region.
We have opened up our economy with rapid liberalization of import policies helping globalization of our economy. We are one of the top exporters of readymade garments to USA and Europe. We have removed all barriers to investment and business. Government is offering unparalleled facilities to investors. 100% foreign investment is allowed. Expatriates' work permits are easily obtained and unhindered remittance of dividends, capitals, gains on capital etc. are allowed. We have eliminated licensing system and simplified government approval procedure for investment in Bangladesh. Cost of production especially cost of labor both skilled and semi-skilled is comparatively lower. Cost of living is also quite low and reasonable and there is no communal or ethnic problem. That's why Bangladesh has become an attractive investment destination in South Asia.