Foreign Exchange Implications
Bangladesh has restrictive foreign exchange policies and it it important for an entity to set up their business operations in compliance with the regulations set out in Foreign Exchange Regulations Act, 1947 and subsequent guidelines issued by Bangladesh Bank
FOREX Overview
- On March 24, 1994 the Bangladesh Taka was declared convertible for current account transactions in terms of Article VIII of the IMF Articles of Agreement.
- Other than a few reserved sectors foreign investors are free to make investments in Bangladesh in industrial enterprises either wholly owned or in collaboration with local investors.
- Non-residents (individual & institutions) are free to invest in shares listed on local stock exchanges with foreign exchange brought into Bangladesh.
- Shares in private limited companies may also be allotted to foreign investors.
- Non-resident shareholders can freely transfer shares to other non-residents.
- There are strict controls on outward remittance from Bangladesh and most outward remittance is restricted other than a few routes as listed below.
Dividends/Profits
- Companies can freely remit post-tax dividends to non-resident (foreign) shareholders subject to application to be made to local bank with all documents/information as stipulated by Bangladesh Bank.
- Branches of foreign firms and companies can also freely remit profits to the parent company subject to application to be made to local bank with all documents/information as stipulated by Bangladesh Bank and the BIDA.
- Dividend income and capital gains on shares listed on a stock exchange can be freely remitted if such investment was made through a Non-Resident Investors Taka Account.
- Remittance of sale proceeds of private limited companies require prior central bank approval. Dividend remittance to foreign shareholder does not require prior approval.
Royalty/Technical Knowledge/Technical Assistance/Franchise Fees
- Such fees can be remitted abroad by applying to BIDA.
- Companies wishing to affect such remittances will need to first be registered with BIDA.
- Local banks will allow payment upon furnishing BIDA approval on specific terms.
Training & Consultancy Costs
- Such fees may be remitted without prior approval of Bangladesh Bank
- The amount of remittance is restricted to 1% of annual sales as declared in the income tax return of the previous year.
Remittance Facilities for IT/Software Firms
- IT/software firms can remit upto USD 40,000 in any calendar year for international alliance/software registration fee, domain registration/hosting fee, server maintenance fee, account verification/remittance test fee, etc. without prior approval.
Shipping Lines/Airlines/Courier Companies
- Such entities may remit funds collected in Bangladesh towards freight and passage after adjustment of local costs.
Expatriate Employees
- Foreigners employed in Bangladesh may freely remit on a monthly basis, 75% of their salary and actual savings and admissible retirement benefits without prior approval to their country of domicile. Salary on which remittance entitlement is calculated would exclude monetary value of various facilities, such as free house, transport, servants, boarding, cash payments towards conveyance, entertainment, house rent etc. The term ‘net income’ would in this context signify gross income of the applicant less all compulsory deductions such as income tax, provident fund and pension fund, house rent and other deductions which are of a fixed nature.
- Foreigners employed in Bangladesh can remit up to 75% of their bonus after deduction of applicable taxes and payment thereof at one-go without spreading over the subsequent 12 months.
