Doing Business in Bangladesh

Doing Business in Bangladesh

Doing Business in

Bangladesh

Howladar Yunus & Co. Chartered Accountants

February 2012


Doing Business in Bangladesh 2012 P a g e | 2

Page Chapter Contents

1.0

Tabl

e of

Con

tent

s

3 2.0 Disclaimer

3 3.0 Introduction

4 4.0 The Country

7 5.0 Forms and Business Enterprises

18 6.0 Direct Taxation

21 7.0 Exchange Control

27 8.0 Other Forms of Taxation

30 9.0 Labour Relations and Social Security

32 10.0 Grants and Incentives

33 11.0 Quality of Life

37 - Appendix – A : Rates of Taxes

38 - Appendix – B : Rates of Taxes - Companies

39 - Appendix – C : RJSC Fees



2. DISCLAIMER

The content of this book is based on the legislation in operation and information available at the time of publication, which may subsequently have changed. Whilst every care has been taken in its production, no responsibility can be accepted for any action undertaken or refrained from as a consequence of this material. Translation of laws, in the appropriate cases, from Bengali to English in this book has not been authenticated by any competent authority. A great effort was made to ensure literal translation of the lawswhich have been published in Bengali only. However, sometimes the free translation became required to make the issue understandable. Specific professional advice should always be obtained based on personal circumstances or specific case. If there is any contradiction on any issue of this book with that of the official publications or decision of the competent authority of the Bangladesh Government, the later shall prevail. Author accepts no responsibility whatsoever for any action undertaken or refrained from as a result of the information contained herein.

3. INTRODUCTION

Bangladesh is a combination of competitive market, business-friendly environment and cost structure that can give the best returns. Bangladesh offers a well-educated, highly adaptive and industrious workforce with the lowest wages and salaries in the region. 57.30% 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. Bangladesh is strategically located next to India, China and ASEAN markets. Bangladesh has proved to be an attractive investment location with its 146.6 million population and consistent economic growth leading to strong and growing domestic demand. Energy prices in Bangladesh are the most competitive in the region.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. Bangladesh offers export-oriented industrial enclaves with infrastructural facilities and logistical support for foreign investors.



4. THE COUNTRY

4.1. GEOGRAPHY/STATISTICS

Bangladesh is located in the Southern Asia, bordering the Bay of Bengal with the coastline covering 580 km between Burma & India with the land boundaries 4,246 km where Burma covered 193 km and India covered 4,053 km. The time difference is GMT+6. The Total area is 147,570sq km and the total population is 164,425,491.The climate of the country is focused as tropical; mild winter (October to March); hot, humid summer (March to June); humid, warm rainy monsoon (June to October). Official language is Bangla (Bengali). English is widely used in Government, Business and Universities. Out of total population, Muslim 89.6 %, Hindu 9.3 %, Buddhist 0.5%, Christian 0.3% and Other 0.3%.

4.2. ECONOMY

The economic position of the country is GDP/PPP (2011 est.): $100 billion; per capita $664, Real growth rate: 6%, Inflation: 11.3%. The Industries are Textiles, Jute, Garments, Tea Processing, Paper Newsprint, Cement, Chemical Fertilizer, Light Engineering, Sugar, Ceramics and Pharmacy. Natural resources are Gas, Timber and Coal. Arable land covered 55.39% and permanent crops covered 3.08% of total land area. Bangladesh exports mainly Ready Made Garments including Knit Wear (75% of exports revenue). Others include: Shrimps, Jute Goods (including Carpet), Leather Goods and Tea. Bangladesh imports mostly Petroleum Product and Oil, Machinery and Parts, Soybean and Palm Oil, Raw Cotton, Iron, Steel and Wheat.

4.3. CURRENCY AND BANKING

Currency of the country is Bangladeshi Taka (Tk). The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, 4 State Owned Commercial Banks (SCB), 5 government owned specialized banks, 30 domestic private banks, 9 foreign banks and 29 non-banking financial institutions. The financial system also embraces insurance companies, stock exchanges and co-operative banks. Bangladesh Bank is both the Government’s banker and the banker’s bank, a “Lender of the Last Resort”. Bangladesh Bank, like most of the central banks of different countries, exercises monopoly over the issue of currency and the banknotes.

4.4. GOVERNMENT/POLITICS

The conventional long form is “People's Republic of Bangladesh” and the conventional short form is “Bangladesh”. The government type is parliamentary democracy. Capital is Dhaka and the administrative 7 divisions are Barisal, Chittagong, Dhaka, Khulna, Rajshahi, Rangpur and Sylhet. 26 March 1971 is the date of independence and 16 December 1971 is known as Victory Day and commemorates the official creation of the state of Bangladesh.



4.5. LEGAL SYSTEM

Bangladesh seceded from Pakistan in December 1971. The British-era legislation applied in Pakistan after 1947 and post-partition legislation enacted in Pakistan continued to form the basis of Bangladeshi personal status laws, but legal developments since 1972 have been distinct.

Constitution adopted 4 November 1972. Amended in 1977 to remove principle of secularism included in Part II entitled Fundamental Principles of State Policy. After the emergence of Bangladesh in 1971, a rigid constitution has been adopted which came into force on 16 December 1972. The basic law of Bangladesh is the constitution of the People's Republic of Bangladesh, 1972 as amended from time to time. Till 2010, fifteen amendments to the constitution have been made. All laws of the country are subordinate laws made by the elected Sangsad (the legislature consists of 350 members) conforming to the tenets of the Constitution. The laws enacted by the legislature and now in operation regulate almost all spheres of life. Ordinarily executive authorities and statutory corporations cannot make any law, but can make by-laws to the extent authorized by the legislature. Such subordinate legislation is known as rules or regulations. Unless found ultra vires of the parent law, such rules or regulations are also enforceable by the court like the laws made by the legislature. Important laws of the country may be classified under some broad heads such as land and property laws, personal laws, commercial laws, labour and industrial laws, election laws, law of crimes, service laws, fiscal laws, press laws and laws relating to the remedies.

All laws, rules or regulations made by the competent authority are applied in the Courts and Tribunals. The Courts can be classified into two classes viz. the Supreme Court and; Subordinate Courts and Tribunals. The Supreme Court of Bangladesh is the apex court with its two divisions, the High Court Division and the Appellate Division. As the apex court the high court division has been vested with the power to hear appeals and revisions from subordinate courts, and also to issue orders and directives in the nature of writs to enforce fundamental rights and to grant other reliefs available under the writ jurisdiction. There are civil courts presided by Assistant Judge to try the suits of civil nature and criminal courts presided by judicial magistrate to try the criminal cases.

In addition, there are various other laws on different subjects regulating different fields and spheres of activities of national life. To seek remedy a person has to file a case before the appropriate court or authority. Claims regarding money, property, compensation etc is to be filed before the civil court presided over by the assistant judge or subordinate judge according to value of the claim, and complaint against commission of crime is to be filed either with the local police station or in the criminal court of the magistrate of the first class of the locality. The police investigates the cases lodged with the police station and produces witnesses before the court during trial. On the other hand, it is the responsibility of the complainant to produce witnesses before the court in the cases in which magistrates take cognizance on the basis of a written complaint. There are other authorities before which remedies may



be sought by an aggrieved party. Those authorities are administrative authorities or tribunals. Except in respect of enforcement of fundamental rights, admiralty, company matters and writ petitions, relief cannot be sought directly from the high court division which mainly deals with appeals and revisions from the decisions of the subordinate courts.

One of the notable features of the legal system of Bangladesh is that the legislature can enact any special law for any particular purpose and thereby can form special courts or tribunals. For example, there are labour courts and labour appellate tribunals to decide labour disputes, administrative tribunals and administrative appellate tribunal to decide service disputes of public servants, income tax appellate tribunal to decide income tax disputes, custom, excise and VAT Appellate tribunal to decide disputes regarding custom and excise duties and VAT, court of settlement to decide disputes about abandoned properties, special judges to try corruption cases against public servants, special tribunals to try criminal cases under the Special Power Act 1974 and Nari-o-ShishuNirjatan Daman Adalats to decide cases of crimes committed against children and women. To decide election disputes the election tribunals are constituted with judicial officers. Family courts have been constituted with assistant judges to decide family disputes. To decide money claims of the banks and other financial institutions ArthaRinAdalats have been set up presided over by judges, and insolvency courts have been set up presided over by district or additional district Judges to declare defaulting borrowers as insolvent. To try offences committed by children below the age of 16 years, juvenile courts have been formed with the magistrates and sessions judges, and juvenile courts follow the special procedure laid down in the children's Act.



5. FORMS OF BUSINESS ENTERPRISE

5.1. SOLE PROPRIETORSHIP

DefinitionIn the sole proprietorship, known alternatively as sole tradership, the proprietor is to take all risks. Some of the favourable characteristics of a sole proprietorship business are the ease of initiation, low cost of commencement, freedom in keeping liability to certain limits, right to control, ease of winding up, minimum legal restrictions, liberty in making quick decisions and the like. The sole trader bears unlimited liability.

A sole trader-ship business has no legal identity other than that of its owner. Most sole proprietors conduct small businesses such as retail shops that sell stationary, groceries, cloth, medicines, handicrafts, books, confectioneries, spare parts, and tyre/tube, wholesale stores. Many operate amusement business, and service marketing such as hotels, restaurants, guesthouses or tailoring, hair dressing, road, and water transportation. Sole trader-ships in Bangladesh are usually classified as small, medium and large depending on the size of capital employed.

Principle LegislationAll the laws related to an individual are applicable to a sole proprietorship.

General Requirements to Start a Sole Proprietorship Business: Trade License from City Corporation/Municipality/Union Council (Local Government Bodies);

Taxpayer’s Identification Number (TIN)

VAT Registration (in the cases where applicable)

IRC (in the case of business related to import)

ERC (in the case of business related to export)

License/Permission from the authorities according to the nature of business/profession

Bank Account

Membership of Trade Body

As per publication of Board of Investment (BOI), local investor you may setup a business under several organizational structures such as single proprietorship, partnership and limited company. In the case of a foreign investor, one may establish its business only under limited company.



5.2. PARTNERSHIP FIRM

DescriptionPartnership Business a form of business organization created through voluntary agreements of minimum two and maximum 20 persons (the maximum is 10 in the case of banking business), with the intention of making and sharing profits among themselves. A partnership can arise only as a result of an agreement or contract, expressed or implied, between the partners. In Bangladesh, a partnership firm is to be formed under the provisions of the Partnership Act 1932. By definition, a partnership is illegal if it consists of more than 20 persons in case of a general business and more than 10 persons in case of business in banking. A non-profit making association is not a partnership in law of Bangladesh. In general, institutions or associations cannot be a member of a partnership.

The Partnership Act 1932 does not require a partnership deed or agreement to be registered. The registration of such firm is optional. But if registered, a partnership firm can enjoy some legal rights and facilities. A partnership deed includes the name of the firm, nature of business, the capital and property of the firm, the capital of individual partners, term of partnership, provision for salaries, and drawings on account of profit, rate of interest (if any) on partners' capital, advances and drawings, rights and duties of individual partners, provision for accounts and audit, division of profits and losses (capital and revenue), powers of admission and expulsion of a partner, termination of agreement by insolvency, death, etc., valuation of goodwill and share of assets on sale or death, and an arbitration clause.

If a partnership business is not registered, a partner of the firm can not bring a suit to enforce a right arising from a contract or conferred by the Partnership Act against the firm or his co-partners. Also, an unregistered firm can not file a suit, or take other legal proceedings, to enforce a right from a contract, or to claim a set-off in any suit filed against it. However, the non-registration of a firm does not affect the right of an unregistered firm to bring a suit to enforce a right arising otherwise than out of a contract and the power of an official assignee or receiver to realise the property of an insolvent partner.

Principle Legislation The Partnership Act, 1932;

General Requirements to Start a Partnership Business: The Partnership Deed; Minutes of Partners’ Meeting; Trade License from City Corporation/Municipality/Union Council (Local Government Bodies); Taxpayer’s Identification Number (TIN) VAT Registration (in the cases where applicable) IRC (in the case of business related to import) ERC (in the case of business related to export) License/Permission from the authorities according to the nature of business/profession Bank Account



Membership of Trade Body

As per publication of Board of Investment (BOI), local investor you may setup a business under several organizational structures such as single proprietorship, partnership and limited company. In the case of a foreign investor, one may establish its business only under limited company.

5.3. LIMITED PARTNERSHIP FIRM

In Bangladesh, Limited Partnership Firm in Bangladesh is not realistically available.

5.4. BRANCHE/LIASION/REPRESENTATIVE OF FOREIGN COMPANIES

Description

A company expands its business by opening up its branch offices in various parts of the domestic country as well as in other countries. A branch office refers to an establishment which carries on substantially the same business and activity as is carried out by its Head Office. Branch offices help in expanding the size of the market for a company's product by attracting more customers; widening the scope of its trading and manufacturing activities as well as bringing more opportunities and opening unexplored avenues for it. Thus, these offices help to fuel the growth of the company and enhance its profitability on a sustained basis.

The activities of Branch/Liaison/Representative office of a foreign entity shall remain confined to those as set forth in the permission of BOI. The said offices shall strictly follow the foreign exchange regulations of the government of Bangladesh. Generally, no outward remittance of any kind from Bangladesh sources by the said offices is allowed except the cases permitted by the foreign exchange regulations. The Branch/Liaison/Representative office of a foreign entity shall have to be submitted income tax return to the competent income tax authority of Bangladesh. Security clearance is required to be obtained from Ministry of Home, government of Bangladesh. Such offices shall have to bring inward remittance at least USD 50,000 within 2 (tow) months from the date of the issue permission letter as establishment cost and 6 months operational expenses.

Principal Legislation

The Investment Board Act, 1989; Rues & Regulations of Board of Investment (BOI); The Companies Act, 1994; The Foreign Exchange Regulation Act, 1947



General Requirements to Open Branch/Liaison/Representative Office of Foreign Companies:

Foreign companies not registered in Bangladesh can set up a place of business in Bangladesh in the form of a Branch Office or a Liaison Office. An investor can close a Branch Office/Liaison Office/Representative Office in Bangladesh by an application with audit report, updated tax payment certificate, NOC from Bangladesh Bank etc. and required formalities with RJSC shall have to be performed. An investor can change the address of a Branch Office/Liaison Office/Representative Office in Bangladesh by an application with certified copy of rent deed and board resolution supported by a treasury chalan of specific amount. For to waiver the condition of BOI Branch Office/Liaison Office/Representative Office the company have to apply for the specific condition to waive in BOI.

Board of Investment (BOI)Permission will be required from the BOI in order to open up a Branch Office and shall submitapplication in the prescribed form along with the following documents:

Prescribed Application From, duly filled in, signed and stamped;

Memorandum of Association (MOA) and Articles of Association (AOA) of the Principal Company;

Certificate of Incorporation;

Name and Nationalities of the Directors/Promoters of the Principal Company;

Board Resolution to open a Branch/Liaison/Representative Office in Bangladesh;

Audited Accounts of the last financial year;

Proposed organogram of the office;

List of activities of the proposed office

All papers/documents must be attested by the Bangladesh Embassy/High Commission of the country oforigin. Embassy/High Commission of the applicant's country of origin or Apex Chamber of Commerce of the country of origin.

Bangladesh Bank (BB)Afterwards, permission is sought from Bangladesh Bank for opening branch/liaison Office in Bangladesh by foreign entities including airlines, companies, firms under Section 18B of the Foreign Exchange Regulation Act, 1947.

Registrar of Joint Stock Companies (RJSC)Foreign Combines which establishes a place of business in Bangladesh shall, within one month of the establishment of the place of business, deliver to the Registrar of RJSC for registration--(a) a certified copy of the charter or statues or memorandum and articles of the company or other instrument constitution or defining the constitution of the company; and if the instrument is not written in Beguile or English Language, a certified Penally or English translation thereof; (b) the full address of the registered or principal office of the company;



(c) a list of the directors and secretary, if any, of the company; (d) the name and address or the names and addresses of one or more persons resident in Bangladesh, authorized to accept on behalf of the company service of p[process and any notice or other document required to be served on the company; (e) the full address of the office of the company in Bangladesh which to be deemed its principal place of business in Bangladesh.

5.5. LIMITED COMPANIES

Description

Limited company is a company in which the liability of the members or subscribers of the company is limited to what they have invested or guaranteed to the company. Limited companies may be limited by shares or by guarantee. And the former of these, a limited company limited by shares, may be further divided into public companies and private companies.

Business in Bangladesh may be carried on by a company formed and incorporated locally or by a company incorporated abroad but registered in Bangladesh. The incorporation or registration is done by the Registrar of Joint Stock Companies and Firms under the provisions of the Company's Act 1994. Companies could be classified in following categories:

a. Company Limited by Sharesi. Public Limited Company andii. Private Limited Company

b. Company Limited by Guarantees;c. Unlimited Company

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 and

Entitles to commence business from the date of its incorporation.

Public Limited Company: May issue 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, the Securities and Exchange Ordinance, 1969 and the Securities and Exchange Commission Act, 1993 as amended from time to time.



Has minimum 7 members but there is no maximum limit.

Has at least 3 Directors.

May a private company converted into a public company.

Unlimited Company:An unlimited company refers to a company having no limit on the liability of its members.

Principal Legislation The Companies Act, 994;

The Securities and Exchange Ordinance, 1969;

The Foreign Exchange Regulation Act, 1947;

General Requirements to Set Up a Company:

Registrar of Joint Stock of Companies and Firms (RJSC)To register a company with the Register of Joint Stock Companies and Firms, promoters have to undertake activities in following steps:

Selection of the Company Name:The name should not be identical with or closely resemble to the name of an existing company. An application in plain paper along with nominal required fees is be submitted to the RJSRF for verification and clearance of the proposed name.

Memorandum of Association (MOA):MOA states the name of the company, whether it is public or private limited and the location of

the registered office at the company. The MOA should clearly spell out the main objectives, the authorized capital, the divisions of this capital into shares of fixed amount and liability of its members.

Articles of Association (AOA):The AOA are the regulations governing the internal management of the affairs of the company and the conduct of its business. These articles are subordinate to and controlled by MOA.

Registration Application:Prescribed Application Form for registration has to be filled in, signed and submitted to the Registrar of the Joint Stock Companies and Firms.

Chief Inspector of Factories and EstablishmentAny manufacturing company employing 10 (ten) or more workers is required to be registered under the Labour Act, 2006 with the office of the Chief Inspector of Factories and Establishment. The act is primarily to regulate working conditions and to ensure safety in the factory.



Registration with Board of Investment Application Form Trade License Limited Company : Certificate of Incorporation Memorandum and Articles of Association Name and address of other shareholder/director(s) of the project Additional documents for projects in certain sectors Copy of rental agreement or lease deed for premises or land purchase document TIN Certificate Registration Fee (Bank Draft)

5.6. TRUSTS

DescriptionA “Trust” is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner The person who reposes or declares the confidence is called the “Author of the Trust”. The person who accepts the confidence is called the “Trustee”. The person for whose benefit the confidence is accepted is called the “Beneficiary”. The subject-matter of the trust is called “Trust-property” or “Trust-money”. The “Beneficial interest” or “Interest” of the beneficiary is his right against the trustee as owner of the trust-property; and the instrument, if any, by which the trust is declared is called the “instrument of trust”.

A breach of any duty imposed on a trustee, as such, by any law for the time being in force, is called a “Breach of trust”

And in the Trust Act, 1882, unless there be something repugnant in the subject or context, “Registered” means registered under the law for the registration of documents for the time being in force. The main instrument of any public charitable trust is the trust deed, wherein the aims and objects and mode of management (of the trust) should be enshrined. The salient features of Trust are as follows:

In every trust deed, the minimum and maximum number of trustees has to be specified.

The trust deed should clearly spell out the aims and objects of the trust, how the trust should be managed, how other trustees may be appointed or removed, etc.

The trust deed should be signed by both the settlor/s and trustee/s in the presence of two witnesses.

The trust deed should be executed on non-judicial stamp paper, the value of which would depend on the valuation of the trust property.




The Trust Act, 1882;

The Societies Registration Act, 1860;

The Companies Act, 1994;

The Registration Act, 1908;

General Requirements to Set Up a Trust:

The application for registration should be made to the official having jurisdiction over the region in which the trust is sought to be registered.

After providing details (in the form) regarding designation by which the public trust shall be known, names of trustees, mode of succession, etc., the applicant has to affix a court fee stamp of specified amount, depending on the value of the trust property.

The application form should be signed by the applicant before the regional officer or superintendent of the regional office of the charity commissioner or a notary. The application form should be submitted, together with a copy of the trust deed.

Two other documents which should be submitted at the time of making an application for registration are affidavit and consent letter.

5.7. JOINT VENTURES

DescriptionJoint venture (JV) is a business agreement in which parties agrees to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares.


The Companies Act, 1994;

The Investment Board Act, 1989;

The Foreign Investment Promotion and Protection Act, 1980

General Requirements to Set Up a Joint Venture: Joint venture agreement Application Form Trade License Limited Company :



Certificate of Incorporation Memorandum and Articles of Association Name and address of other shareholder/director(s) of the project Additional documents for projects in certain sectors Copy of rental agreement or lease deed for premises or land purchase document TIN Certificate Registration Fee (Bank Draft)

POST-INVESTMENT SERVICES BY BOIOnce the investor decides to invest and forms a company, BOI provides following Specific facilities and comprehensive services: Industrial Registration Recommend for Industrial Plot (if available)/ in any designated industrial area other than BSCIC

& BEPZA Recommend for utility connections Recommendation for Foreign Loan, Suppliers' Credit, deferred payment, PAYE Scheme, etc. Recommendation for import of machinery and raw materials. Issue of work permit. Remittance of Royalty, Technical Know-How and Technical Assistance Fees

Protection of Foreign Investment

The Foreign Private Investment (Promotion and Protection Act 1980) and bilateral investment treaties ensures the protection of investment form expropriation in Bangladesh. The equity that is brought in is allowed to repatriate from the country with the dividend earned.

Remittance of the equity, dividend and royalty technical assistance The equity can be remitted while the company decided to exit the country. The dividend

earned each year can be remitted based on the necessary documentation and approval. The royalty and technical assistance can also be remitted based on the documents and criteria fixed by the government.

Availability of land for the industrial usesThe land use for the industries can be as under:a) Export processing zones (EPZ): The land in the EPZ enclaves is allotted by the EPZ authority.b) Private lands: The private lands can be scouted by the investors itself. A foreign company can own land in its name.c) Govt. owned land: The investor can seek for Govt. owned land (khas land). He can mention for certain land in a district (regional centre) and can sought support of BOI. BOI can request the



respective Deputy Commissioner (DC), who is the administrative head of the district, for providing that land.

100% Foreign Investment in a Business100% foreign equity may be allowed in all areas of investment under Companies Act 1994. However, Private investment (local as well as foreign) is restricted in four sectors on strategic grounds as mentioned in the Industrial Policy-2010.

BOI approval/registration for commercial enterprisesFor commercial enterprises BOI approval/registration is not needed. They must register under concern law and proper authority.

STEPS TO START A JOINT VENTURE IN BANGLADESH

Joint Venture Agreement between the parties

Company Formation or Establishing Place of Business Opening Liaison/Branch/Representative Office;

Securing Trade License;

Plant Setup;

Registering with BOI;

Joint Venture and 100% Foreign Investment proposal in the Private Sector;

Self-financed local investment proposals including industries sanctioned/financed by financial institutions or commercial banks;

Permission for setting up joint venture industrial units with public sector corporations;

Obtaining Industrial Plot;

Registration/Approval for Foreign Loan, Suppliers’ Credit, PAYE Scheme etc.;

Obtaining Utility Connection Import of Spare Parts and Raw & Packaging Materials;

Obtaining Work Permit;

Registration with Factories Act;

Registration with Environmental Legislation;

Remittance of Royalty, Technical Know-How and Technical Assistance Fees;

Commercial Operation



5.8. CO-OPERATIVES

DescriptionCo-operative is a business organization owned and operated by a group of individuals for their mutual benefit. A cooperative can also be defined as "an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through jointly owned and democratically controlled enterprise". A cooperative may also be defined as a business owned and controlled equally by the people who use its services or by the people who work there. Various aspects regarding cooperative enterprise are the focus of study in the field of cooperative economics.

To uplift the status of the poor people living in the rural areas, the government of Bangladesh set up the Rural Development and Cooperative Division ( RDCD ) under the Ministry of Local Government, Rural Development and Cooperatives. This Division is responsible for policy formulation, planning, monitoring and administration of rural development and cooperative initiatives of the country. RDCD is also assigned to coordinate the activities pertaining to rural development undertaken by other Ministries and provide policy guidelines to the RDA and BARD are serving the policy guidelines and formulating recommendations related to poverty reduction strategies through their symbiotic research and action-research programs.


The Cooperative Societies Act, 2001;

The Cooperative Societies Rules, 2004

General Requirements to Set Up a Society:

Bye-laws and Deed of Cooperative Society

Application in the prescribed form to the Registrar of Co-operative Societies

The registration of a cooperative society is subject to satisfaction of the Registrar of the Cooperative Societies (RCS);

For banking and unlimited liability cooperatives some financial conditions have been imposed;



6. DIRECT TAXATION

6.1. INCOME TAX – INDIVIDUALS/SOLE PROPRIETORSHIP/PARTNERSHIP FIRMIncome 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. Tax is levied on income but taxability of a person is determined on the basis of his residential status. Anyone stays in the taxable territory for 182 days or more in the income year or 365 days at a time or consecutively within 04 years immediately before the income year just preceding the assessment year plus a minimum of 90 days in the income year, shall be deemed to be resident, Otherwise, a non-resident. Non-resident except a Bangladeshi non-resident has to pay tax at the maximum rate of 25% irrespective of total income. Moreover, a Non-Resident shall not be entitled to any sort of tax rebate like investment tax rebates etc. The last date for submission of income tax return, unless extended by competent tax authority, by the thirtieth day of September next following the income year.

6.2. INCOME TAX – COMPANIESNo distinction is made for the purposes of corporate income tax between foreign owned companies and Bangladeshi-owned companies, although some firms may qualify for a tax holiday in the initial years after entering Bangladesh. A Company is obliged to submit income tax return by fifteenth day of July next following the income year or, where the fifteenth day of July falls before the expiry of six months from the end of the income year, before the expiry of such six months.

Consequences of Non-Submission of Return

Imposition of penalty amounting to 10% of tax on last assessed income subject to a minimum of Tk. 1,000/-

In case of a continuing default a further penalty of Tk. 50/- for every day of delay.

Assessment Procedures:

For a return submitted under normal scheme, assessment is made after hearing.

For returns submitted under Universal Self-Assessment Scheme, the acknowledgement slip is determined to be an assessment order. Return filed under Universal Self -Assessment is of course subject to audit.



6.3. TAX ON CAPITAL GAINS

Capital Gain from the Transfer of Listed Shares

Capital gains arising on the sale or transfer of non-government securities, including stock and shares of public companies listed on the Bangladesh stock exchanges are exempted from income tax in the case of individual.

Capital gainshall be taxed @ 10% in the case of capital gain earned by a Company;

Tax shall be imposed on Capital gain@ 5% if the transferor is a sponsor, shareholder or director of a bank, financial institution, merchant bank, insurance company, leasing company, portfolio management company, stock dealer or stock broker company;

Capital gain earned by a shareholder who holds shares more than 10% in the listed company at any time during the income year shall be taxed @ 5%;

Capital Gain from the Transfer of Other Capital Assets

In the case of a company, tax at the rate of fifteen per cent on the Capital Gain;

In the case of a person other than a company,if the capital assets disposed after not more than five years,capital gain shall be included in the total income and will be taxed accordingly;

In the case of a person other than a company,if the capital assets disposed after five years, tax payable on the capital gains at the rate applicable to his total income including the said capital gains, or tax at the rate of fifteen per cent on the amount of the capital gains whichever is the lower;

6.4. WITHHOLDING TAXESIn Bangladesh withholding taxes are usually termed as Tax deduction and collection at source. This system is considered as an important mechanism of tax collection. Under this system both private and public limited companies are legally authorized and bound to withhold taxes at some point of making payment and deposit the same to the Government Exchequer. The taxpayer receives a certificate from the withholding agent and gets credits of tax against assessed tax demand on production of the certificate.

Salient Features of Withholding Tax:

Chapter VII (Payment of Tax Before Assessment Section), particularly Sections from 48 to 56, provides for the income from which tax shall be deducted or collected at source.

Every company is required to file a returnof withholding tax so collected or deducted in each quarter;



In the event of failure to deduct, collect or pay, or failure fails to pay the tax so deducted or collected, the person shall be deemed to be an assessee in default and pay an amount at the rate of 2% per month;

An assessee is in default or is deemed to be in default in making payment of tax, may be exposed to a penalty of a sum not exceeding the amount in arrear;

No deduction on account of allowance from income from business or profession shall be admissible in respect of any payment made by an assessee to any person if tax and VAT;

All sums deducted or collected shall be paid to the credit of the Government within 3 (three) weeks from the date of such deduction or collection;

6.5. GIFTS TAX In Bangladesh, there are no specified tax regulations on Gifts tax.

6.6. DEATH DUTIESCurrently, the Bangladesh authorities have not imposed death duties or estate duties.

6.7. TAXATION OF FOREIGN ENTERPRISES AND OPERATIONSThere are no specific tax benefits for foreign companies and operations on Bangladesh. Tax rates will be applicable as local company’s tax rate.



7. EXCHANGE CONTROLS

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.

The declaration symbolized a turning point in the country’s exchange management and exchange rate systems. The period preceding this declaration saw an intensification of reforms undertaken by Bangladesh Bank to ease controls on foreign payments and exchange rate arrangements. These reforms and the subsequent further changes have been summarized in the following paragraphs.

Investment in Bangladesh:With the exception of a few reserved sectors, foreign investors are free to make investments in Bangladesh in industrial enterprise. An industrial entity may be set up in collaboration with local investors or may even be wholly owned by the foreign investors. No permission is needed to set up such enterprises if the entrepreneurs use their own funds. However, to avail of facilities and institutional suport provided by the government, entrepreneurs/sponsors are advised to apply for registration with the Board of Investment (BOI). For items in the control list, the office of the Chief Controller of Imports & Exports (CCI & E) prescribes the basis and conditions of import entitlement.

Shares may be issued in favour of foreign investors against capital machinery brought into Bangladesh. For issuance of shares against foreign investment in the form of capital machinery, the exchange control copy of bill of entry evidencing clearance of the capital machinery from the Custom Authorities, copies of the relative import permit, invoice and bill of lading are required.

Investment in shares/securities by non-residents:

Non-residents are free to invest in shares / securities quoted in the stock exchanges, with foreign exchange sent or brought into Bangladesh.

They may also invest in new, yet-to-be-listed public issues of Bangladeshi shares/securities. In such cases investors are not required to transact through any registered broker/member of stock exchange. 5% shares of Initial Public Offering (IPO) of a company is reserved for Non-Resident Bangladeshi (NRB). Non-Resident Bangladeshi (NRB) can purchase/subscribe securities in foreign currency through "Foreign Currency Account for IPO" opened for the purpose only by the issuing company. Over subscription can be repatriated after completion of formalities.

Permission of Bangladesh Bank is not required for issue and transfer of shares in favour of non-residents against their investments in joint ventures in Bangladesh.

Non-resident share holders can freely transfer their shares to other non-residents.



Remittance of profits:Branches of foreign firms/companies including foreign banks, insurance companies and financial institutions are free to remit their post-tax profits to their head offices through banks authorized to deal in foreign exchange (Authorized Dealers) without prior approval of Bangladesh Bank.

Remittance of dividend/capital gain:Prior permission of Bangladesh Bank is not required for:

remittance of dividend income to non-residents in respect to their investments in Bangladesh;

remittance of dividend declared out of previous year's accumulated reserves; and

dividend and sale proceeds (including capital gains) of shares of companies listed in a Stock Exchange in Bangladesh. Such remittance may be effected prior to actual payment of taxes provided that the amount payable to the tax authorities at the applicable tax rate is withheld by the company. Remittance of sale proceeds of shares of companies not listed in Stock Exchange requires prior Bangladesh Bank permission, which is accorded for amounts not exceeding the net asset values of the shares.

Remittance of royalty/technical fees:Industrial enterprises may enter into agreements for payment of royalties, technical know-how/technical assistance fees abroad without prior permission if the total fees and other expenses connected with technology transfer do not exceed (a) 6% of the previous year’s sales of the enterprises as declared in their tax returns, or (b) 6% of the cost of imported machinery in the case of new projects. These agreements, however, need to be registered with the Board of Investment (BOI). Agreements not in conformity with these general guidelines require prior permission of the BOI. ADs may remit the royalties, technical know-how/technical assistance fees payable as per agreements registered with/approved by BOI, without prior approval of Bangladesh Bank.

Remittance on account of training and consultancy:Industrial enterprises producing for the local market may remit through ADs up to 1% of their sales as declared in their previous year's tax returns for the purpose of training and consultancy services without prior approval of Bangladesh Bank.

Remittance by shipping lines, airlines, courier service companies:Foreign shipping lines, airlines and courier service companies may send abroad, through an AD, funds collected in Bangladesh towards freight and passage, after adjustment of local costs and taxes, if any.



Foreign and Local Borrowings

Foreign loans:Industrial enterprises in Bangladesh (local, foreign or joint venture) may borrow abroad with prior Board of Investment (BOI) approval. Remittances towards payment of interest and repayment of principal as per terms of BOI approved borrowing may be made through ADs without prior Bangladesh Bank approval.

Local borrowings:Banks in Bangladesh may extend working capital loans 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, without reference to Bangladesh Bank

Banks in Bangladesh 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.

Convertibility on Trade AccountBangladesh Taka is fully convertible for settlements of trade related transactions. Import licence is not required for import of items not in the control list. An importer has automatic access to foreign exchange for import of all items outside the control list, and also for import of control list items as per general or specific authorization of the office of the Chief Controller of Imports and Exports.

Exchange Facilities for Exporters

New Exporters:Annual foreign exchange quota for business travel abroad for new exporters has been set at US $ 6000. Bonafide requirement beyond US $ 6000 is accommodated by Bangladesh Bank upon written request submitted with supporting documentation.

Retention Quota for merchandise exporters:Merchandise exporters may retain up to 50% of realised FOB value of their exports in foreign currency accounts in US$, Euro, Japanese Yen. For export items with high import contents (such as naptha, furnace oil, bitumen, readymade garments etc.), the retention quota is 10%. The computer software and data entry/processing service exporters may also retain up to 50% of realised export proceeds in foreign currency accounts. Funds from these accounts may be used to meet bonafide business expenses, such as business visits abroad, participation in export fairs and seminars, import of raw materials, machineries and spares etc. Funds from these accounts may also be used to set up offices abroad without prior permission of Bangladesh Bank. Exporters may, at their option, retain the foreign currency in interest bearing renewable term



deposit accounts in Bangladesh with a minimum amount of USD 2,000 or Pound Sterling 1,500 equivalent.

Retention quota for service exporters: Service exporters may retain 5% of their repatriated income in foreign currency accounts. Funds may be drawn from these accounts to meet expenses for bonafide business expenses abroad. This quota may also be kept in interest bearing renewable term deposit accounts. However, foreign exchange earnings on account of indenting commission or agency commission for export from Bangladesh may not be credited to such accounts since these incomes originate from Bangladesh sources.

Commercial RemittancesPrior permission of Bangladesh Bank is not required by the ADs for:

opening back-to-back import LCs on account of manufacture-exporters for their input imports as per prescribed input-output coefficients;

issue of bank guarantee/performance bond on account of the merchandise exporters of Bangladesh in favour of foreign buyers;

remittance on account of short weight, quality claim, partial shipment etc. upto 10% of realised export proceeds.

payment of discount not exceeding 10% of the invoice value at the request of the exporter where foreign importers refuse to clear goods due to discrepant documents etc.,

remittance of premia on foreign currency policies taken by Bangladesh nationals while residing abroad,

remittance of premia on account of re-insurance,

remittance of “General Average” collected from consignees in Bangladesh,

remittance of pre-shipment inspection fees,

remittance of bonafide expenses incurred by Bangladesh Biman and Bangladesh Shipping Corporation in foreign ports/stations,

remittance on account of charter hire of foreign ships,

remittance of purchase price of ships acquired by private firms/companies,

remittance of royalty/honoraria/fees to non-residents including foreign news agencies for features, articles etc. subscribed by local newspapers/magazines,

advertising of Bangladeshi commodities in mass media abroad.



7.1. REPATRIATION OF EARNINGS AND ROYALTY PAYMENTS

7.2. RESTRICTIONS ON AMOUNTS THAT CAN BE TAKEN OUT OF THE COUNTRY

7.3. LOCAL BORROWINGBank may extend working capital loan or term loan in local currency to foreign controlled or foreign owned firm/ companies (manufacturing or non-manufacturing) operating in Bangladesh. However, term loan can not exceeds 50% of the paid up capital, in case of 100% foreign owned companies.

7.4. IMMIGRANTSBangladesh has sent more than 6.7 million workers to over 140 countries during a period of more than three decades since the mid-1970s. Most of these workers temporarily migrate to work in Middle East and Southeast Asia. This mass movement of temporary migrant workers has, to some extent, eased unemployment pressures on the over-burdened labor market in this highly populated country. More importantly, the remittance transfers received from thesemigrant have reached a phenomenal level of over 10 billion US dollar in 2009, approximately 12 percent of GDP in Bangladesh. Remittance inflows hit a decade high of $12.17 billion in the year 2011, offering the government a much-needed cushion against dwindling foreign exchange reserves and exchange rate volatility. Remittances grew 10 percent in 2011 from the previous year.

The latest growth in remittances comes as more workers are joining the bandwagon of more than 7.6 million Bangladeshi migrants, 80 percent of whom working in the oil-rich Middle East. During 2011, the outflow of migrant workers surged 45 percent to a two-year high at 568,000 due to opening of new jobs. Key Middle East countries need more foreign workers now as they are taking more development projects, inspired by high oil prices at around $100 a barrel.

7.5. CONTRACT WORKERS/TEMPORARY RESIDENTS

Work PermitWork permit for foreign nationals is required for employment in Bangladesh. Private sector industrial enterprises (outside EPZ), branch/liaison/representative office of foreign origin and also local commercial enterprises desiring to employ foreign nationals are required to apply in the prescribed form obtainable from BOI. For expatriate employment the guidelines are as follows:

Nationals of the countries recognized by Bangladesh are considered for employment.



Employment of expatriate personnel is considered only in industrial establishments and commercial enterprises duty 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 has to be furnished.

Initially employment of any foreign national is considered for a term of one year 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 after issuance of work Permit and the duration of visa should be extended upto the period of Work Permit.

For obtaining new Work Permit, the expatriate investors and employee must arrive in Bangladesh with ‘PI’ and ‘E’ types’ visa respectively obtainable from concerned Bangladesh Mission in abroad.

Application for Expatriate Work Permit must be submitted to BOI within 15 (fifteen) days from the date of arrival.

Number of the expatriate employees in an industrial enterprise should not exceed 1:20 (foreign: local) ratio at any time during regular production and the ratio for commercial enterprises be 1:5 (foreign: local);

Furthermore, BOI imposes a ceiling of USD 50,000 for investment in joint venture by the Foreign Shareholders, if that joint venture asks for work permit in favor of its expatriate employees.

Prescribed application form has to be collected from BOI or may be be downloaded from BOI website www.boibd.org.

Remittance of salaries and savings by expatriates: Expatriates working in Bangladesh with the approval of the Government may remit through an Authorized Dealer (AD) 50% of salary and 100% of leave salary as also actual savings and admissible pension benefits. No prior Bangladesh Bank approval is necessary for such remittances.



8. OTHER FORMS OF TAXATION

8.1. SALES TAX/VAT VAT is imposed on goods and services at stages of import stage, manufacturing, supply, and

trading;

VAT is imposed on services provided in Bangladesh and also on the services rendered from the outside Bangladesh;

A uniform VAT rate of 15% is applicable for both goods and services;

A registered person is entitled to claim back the VAT paid on purchase of inputs subject to compliance with the provisions of VAT laws;

15% VAT is applicable for all business or industrial units with an annual turnover of Tk. 60 million and above, except in the cases specified;

Turnover tax at the rate of 3% is leviable where annual turnover is less than Tk. 60 million;

Truncated rate also applied in the cases specified by VAT laws which has been determined on the basis of assumed percentage of value addition;

Supplementary Duty (SD) is applicable as per 3rd Schedule of the VAT Act, 1991;

Exemption of VAT or imposition of VAT @0% is regulated by Section 3 (Export or Deemed Export), Section 14 (goods/service declared by the government), 1st and 2nd Schedule of the VAT Act, 1991.

8.2. STAMP DUTYStamp duty is one of the main source of Government revenue collection. All matters relating to stamps are regulated through The Stamp Act. 1899 and Stamp Manual, 1931.

Stamp duties are applicable on the following: Agreements & contracts Notes Certified copies Documents Land registration, etc.

8.3. PROPERTY TAXESA property tax is somewhat similar to a wealth tax. Only a certain portion of an individual’s tangible wealth is taxed at a certain rate, which is often a flat rate, but may vary under different circumstances or jurisdictions. The tax base may include, but is not limited to, a variety of assets such as real estate, land, family home, investment property, and private firms and forests lands.



8.4. PAYROLL TAXIn general, salary means monthly amount paid to a person for doing an ongoing long term job and typically in a permanent capacity. However, according to section 2 (58), "salary" includes:

(a) any wages; (b) any annuity, pension or gratuity; (c) any fees, commissions, allowances, perquisites or profits in lieu of, or in addition to, salary or

wages; (d) any advance of salary; (e) any leave encashment;

According to Section 21(1) of the Income Tax Ordinance (ITO), the following income of an assessee shall be classified and computed under the head "Salaries", namely:-

(a) any salary due from an employer to the assessee in the income year, whether paid or not; (b) any salary paid or allowed to him in the income year, by or on behalf of an employer though not

due or before it became due to him; and (c) any arrears of salary paid or allowed to him in the income year by or on behalf of an employer, if

not charged to income-tax for any earlier income year.

For the purpose of computing the income chargeable under the head "salary", the value if perquisites, allowances and benefits includable in the said income shall be determined in accordance with the provision of the rule 33A to rule 33J, whichever is applicable. The significant components of salary which are excluded therefrom for the purpose of tax are as follows:

Where the house rent allowance is receivable by the employee in cash, the amount, if any by which the house rent allowance so receivable exceeds fifty percent of the basic salary or taka 15,000 per month, whichever is less, shall be included in his income.

Where the employee is provided with rent free accommodation, the rental value of the accommodation or twenty five percent of the basic salary of the employee, whichever is less, shall be included in his income.

Where no conveyance is provided by the employer and the conveyance allowance is receivable by the employee on cash, the allowance so receivable in excess of Tk. 24,000/= shall be included in his income.

Where the conveyance is provided by the employer for the use of the employee partly or exclusively for personal or private purposes, there shall be included in the employee's income, an amount equal to seven and half percent of the employee's basic salary.

Where any amount is payable to the employee by way of hospitalisation or medical expenses, the amount, if any, by which the sum receivable by him exceeds the actual expenditure incurred by him shall be included in his income.



8.5. FRINGE BENEFIT TAXWhen an employee receives benefits from an employer, the taxable benefits are subject to Individual Income Tax in Bangladesh.

8.6. TARIFFSA tariff may be either tax on imports or exportsor a list or schedule of prices. The import of a number of products is the sole reserve of nominated government trading organizations. The import regime consists of:

A banned list A restricted list Freely importable items (imports falling outside the above lists could be imported either freely

or by fulfilling specified conditions)

All other permitted imports require a LCA form to be completed: These allow registered commercial importers to import under letter of credit without the need

of an import license. Importers must lodge a 10 per cent -100 per cent (depending on the business relationship with

banker) cash margin against covering letters of credit. Import transactions are governed by regulations specified on the Bangladesh Import Policy

Order (IPO) issued by the Chief Controller of Imports and Exports, Ministry of Commerce. Foreign exchange is controlled by the Bangladeshi. Bank in accordance with Foreign Exchange Control policy: Allocation is administered through authorised financial institutions. All imports must be supported by a letter of credit, except for the import of capital machinery

and raw materials for industrial use.

There is a short list of prohibited goods – most second-hand goods are included. Penalties for the smuggling of illegal narcotics are severe. Some engineering products must comply with established technical standards and require an inspection certificate issued by a recognized organization.



9. LABOR RELATIONS AND SOCIAL SECURITY

The Employment Conditions are regulated by the Labour Act, 2006. The minimum age and conditions are described in Sections 34 to 44 of the Labour Act, 2006). Child labour is prohibited under Section 34 of the said Act. No child can be employed or allowed to work in any trade or in any establishment. Achild means a person who is yet to complete fourteen years of age." 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 moth'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.

Any manufacturing company employing ten or more workers is required to be registered under the Labour Act, 2006 with the office of the Chief Inspector of Factories and Establishment. The act is primarily to regulate working conditions and to ensure safety in the factory.

9.1 LABOR MARKET

The wage in Bangladesh is probably the lowest in south Asia. The productivity of the employees is satisfactory and apt to change is frequent. The wage in Bangladesh is controlled by the relevant statutes. The minimum wage in ensured by the constitution. Wages vary from sector to sector as well as well through profession. A basic characteristic of the Labor market of Bangladesh is a high rate of labor force growth and low rates of employment. Agriculture is still the major sector providing employment followed by the service sector. The labor market shows the existence of high underemployment, dominant rural share and smaller share of women employment.

Bangladesh experienced a modern annual growth rate in labor force (2.7%) until the end of the 1970s. But over the period of 1981 to 1996, total labor force increased from 25.9 million to 56.0 million recording an annual average growth rate of 8%. The increase is mostly attributed to adoption of definitional change in female economic activities in 1989 in Labor Force Survey (LFS).

The garments manufacturing, leather and leather goods, tea, jute and jute goods, fish and frozen food, NetWare are the important industrial sectors which earn substantial amount of foreign currency each year from export. Millions of male and female workers are involved with these industries by occupation. Occupational health and safety is an important worker’s right. The legal framework of Bangladesh provides some basic protection to workers in industrial sectors in this issue.



9.2 THE RIGHT TO WORK – NATIONALS

Bangladesh has always attached importance to the protection of the right of citizens to work and the rights and interests of workers, regarding this as an important aspect of its efforts to safeguard human rights.

In order to implement the labour regulations in Bangladesh, a minimum-wage system has basically been established in the whole country.

9.3 THE RIGHT TO WORK - NON NATIONALS

Expatriates working in Bangladesh should have a current work Visa, working permit from the relevant authority.

9.4 LABOUR LAWS / REGULATIONS

Bangladesh offers an abundant supply of disciplined, easily trainable and low-cost work force suitable for any labour- intensive industry. Furthermore, there is an increasing supply of professionals, technologists and other middle and low level skilled workers who have received technical training from universities, colleges, technical training centers and polytechnic institutions. Bangladesh is a member to ILO and both the private and public sectors are encouraged to observe the principles so enunciated in the ILO Convention and Recommendations.

The Labour Act, 2006 consolidated and amended previous laws relating to employment of workers, relationship between workers and employers, determination of minimum wages, payment of wages, compensation for injuries arising out of and in the course of employment, formation of trade unions, raising and resolving industrial dispute, health, safety, welfare and environment of employment of workers and apprentice and related issues.

9.5 THE SOCIAL PARTNERSHIP – WORKER PARTICIPATION

The Labour Act, 2006 contains provisions on compensation for workers injured in the course of employment, maternity benefit and provident funds for workers of non-Government establishments. The Act also requires certain industrial undertakings to establish a Workers’ Participation Fund and a Worker’s Welfare Fund.



10. GRANTS AND INCENTIVES

10.1. SOURCES OF ASSISTANCE

The government provides cash assistance / incentive for doing business in Bangladesh in some particular export oriented industries.

10.2. GRANTS AVAILABLE

Cash Incentives are available in the following sectors, with different cash incentive rates:

Textile

Agro products

By cycle

Crashed Bone

Poultry

Light Engineering Products

Liquid Glucose used in agro product

100% Halal Meat

Frozen Shrimp & other Fish

Leather

Ship Export

Finished Leather

Crushed Leather

Plastic Pet Bottle

Jute products



11. QUALITY OF LIFE

11.1. HOUSING

Expatriates living in Dhaka have found it to be an affordable, safe and comfortable place to live in, with a good range of expatriate housing readily available in centrally located apartments. Popular places to live in include Gulshan, Baridhara and Banani. Most expatriates live in these areas. A quality apartment rents for $700-$1,000/month. Luxury houses rent from $1,000-$1,500 (luxury units).

In several suburban areas, quiet and secluded housing are also available for rent. For those visiting Bangladesh, Dhaka offers several international standard hotels including the Dhaka Sheraton and the Sonargaon (a Pan-Pacific Hotel). These hotels provide deluxe accommodation, restaurants, health clubs and entertainment facilities. In addition there are a number of medium standard hotels and guest houses in Dhaka and Chittagong to accommodate the expatriates.

Rental AccommodationExpatriates in Bangladesh have found it to be an affordable, safe and comfortable place, with acceptable expatriate housing readily available in centrally located apartments. Many expatriates live in the Dhaka areas of Gulshan, Baridhara, and Banani. A typical apartment will rent for $800-$1,200/month, houses for $1,200-$1,500 (luxury units).

HotelsDhaka offers several 5 star hotels. They include the following: Pan Pacific Sonargaon Hotel Radisson Water Garden Hotel The Westin Hotel Seagull Hotel Ruposhi Bangla Hotel Regency Hotel and Resort Hotel Sarina

11.2. EDUCATIONThe three main educational systems in Bangladesh: * General Education System * Madrasah Education System * Technical - Vocational Education System



Primary Stage:Five-year compulsory primary education for the 6-10 age group is imparted mainly in government and non-government primary schools. In metropolitan cities, however, government and non-government primary schools cater to the educational needs mainly of the poorer sections of the people, as the better-off families usually send their children to Private English Medium schools/ secondary schools that run primary sections as well. There, however, exist some NGO-run non-formal schools catering mainly for the dropouts of the government and non-government primary schools.

Secondary Stage:On completion of primary education, students (11+) enroll for junior secondary education that spans over 3 years. At the end of this phase, some students switch over to join the vocational stream, offered at Vocational Training Institutes (VTI) and Technical Training Centres (TTC) run by the Ministry of Education, and the Ministry of Labor and Employment respectively, while students in the mainstream continue in government and non-government secondary schools for a 2 year secondary education in their respective areas of specialization i.e. humanities, science, commerce, etc. At the end of 10th class, the students sit for their first public examination called Secondary School Certificate (S.S.C.) examination under the supervision of seven education boards.

The students of religious education and English medium streams also sit for their respective public examinations, Dakhil and O’ level, conducted by the Madrasha Education Board and London/Cambridge University respectively.

Higher Secondary Stage:After 10 years of schooling (primary and secondary), students (16+) who succeed in passing the Secondary School Certificate (S.S.C.)/Dakhil/O’ Level examination have the option of joining a college for a 2 year higher secondary education in their respective areas of specialization, or enroll in technical/ poly technical institutes for technical education. After 2-year higher secondary education, one has to sit for another public examination called Higher Secondary Certificate (H.S.C.) examination conducted by the education boards.

Students of Religious and English Medium streams also sit for their respective public examinations, Alim and A' level, conducted by the Madrasha Education Board and London/Cambridge University respectively.

Higher Education:Under-graduate education of various duration (2 to 5 years) are offered to 18+ students at a number of public and private universities / degree colleges/technical colleges/ specialized institutions. Successful completion of a degree course is a pre-requisite for appointment to a white-collar civilian job.



Post-graduate education normally of 1-2 year duration is provided at the universities and selected degree colleges and institutions.

11.3. COMMUNICATION AND TRANSPORT

The transport sector of Bangladesh consists of a variety of modes. As the country is essentially a flat plain all three modes of surface transport, i.e. road, railway and water, are widely used in carrying both passengers and cargo. The airline network is also extensive and effective.

RoadIn Bangladesh, among the various modes of transport, road transport system has been playing a significant role in transporting passengers and goods.The Roads and Highways Department (RHD) manage several categories of road. RHD has total length of 20,948 Km road unders its control. RHD also control a total number of 4,659 bridges and 6,122 culverts. RHD are currently operating about 161 ferry boats in 81 crossings (13 on national highways, 11 on regional highways and 57 on feeder roads) on its road network throughout the country. As of January 2010, Local Government Engineering Department (LGED) has so far constructed a total of 133,514 km (64,691 km dirt road and 68,823 km paved roads) upazila and union roads and 971,498 bridges/culverts.

The 4.8 km long Bangabandhu Bridge, which was opened to traffic in 1998, is the eleventh longest in the world. It has established a strategic link between the East and the West of Bangladesh. It is generating multifaceted benefits to the people and promoting inter-regional trade. Apart from quick movement of goods and passenger traffic, it is facilitating transmission of electricity and natural gas and has integrated the telecommunication links.

AirThe Civil Aviation Authority is a public sector entity entrusted to construct, maintain and supervise airports and regulate air traffic. The national flag carrier Biman flies to 26 international and eight domestic destinations.

There are now 13 operational airports and Short Take-off and Landing (STOL) ports in Bangladesh. These are Dhaka, Barisal, Chittagong, Comilla, Cox's Bazar, Ishurdi, Jessore, Rajshahi, Syedpur, Sylhet and Thakurgaon. Of these, the airports at Dhaka, Chittagong and Sylhet serve international routes. Air cargo and STOL services have been handed over to the private sector by the government.



RailAbout 32% of the total area of Bangladesh is effectively covered by railways. Bangladesh Railway had a total network of 2,835.04 km (Broad Gauge 659.33 km, Dual Gauge 374.83 km and Meter Gauge-1,800.88 km) and a total of 440 stations at the end of the year 2008-2009. Train services between Dhaka-Kolkata have been commenced on 14 April 2008 in order to establish communication between Bangladesh and India. After inclusion of railway track over the Jamuna Bridge, railway link between east and west zone has been established.

WaterwaysCountry made crafts are the most widely used carriers on the rivers. These carry passengers and merchandise on a large scale. The landscape of Bangladesh is dominated by about 250 major rivers which flow essentially north-south. The alluvial flood plain formed by these rivers covers most of the country. Wherever there is a river and a village, a launch or steamer will play for trade.

Bangladesh Inland Water Transport Authority (BIWTA) has been established by the Government for maintenance of navigability of ports and channels while the state-owned BIWTC provides passenger and cargo services in inland waterways and coastal areas of the country.

The entire coast along the Bay of Bengal is 710 km long. There are two major ports in the country. Chittagong, the oldest port, has been an entry-port for at least 1,000 years. The Mongla port in Khulna region serves the western part of Bangladesh.



APPENDICES

A. RATES OF TAX – INDIVIDUAL/SOLE PROPRIETORSHIP/FIRM

Rates of Income Tax for the Assessment Year 2011-2012

For I

ndiv

idua

ls/S

ole

Prop

rieto

rshi

p/Pa

rtne

rshi

p

Total Income RateFirst Tk. 180,000–For Male; First Tk. 200,000–For Female;First Tk. 200,000–For Individuals aged 65+ years;First Tk. 250,000–For Disabled Individuals.

Nil

Next Tk. 300,000 10%Next Tk. 400,000 15%Next Tk. 300,000 20%Balance Income 25%Minimum Tax Liability Tk. 2,000Non-resident Individuals 25%Surcharge 10% of Applicable

TaxIf Total Net Worth exceeds Tk. 2 crore



B. RATES OF TAX – COMPANIES

Rates of Income Tax for the Assessment Year 2011-2012Type of Companies RateMobile Phone Operators 45% (35% if it is listed by issuing

minimum 10% shares through IPO, out of which maximum 5% could be Pre IPO Placement)

Private Limited Companies including Non-publicly traded companies (except Bank, Insurance & Financial Institutions)

37.50%

Publicly Traded Companies (except Bank, Insurance & Financial Institutions)

If Dividend <20% but >10%, Tax Rate 27.50%

If Dividend > 20%, Tax Rebate 10%

If Dividend < 10%, Tax Rate 37.5%

If declared Dividend not paid within the time specified by SEC, Tax Rate 37.5%

Bank, Insurance & Financial Institutions 42.50%Cigarette Manufacturing Company 42.50%Dividend Income 20%



C. Registrar of Joint Stock of Companies and Firms (RJSC) FEES

To apply for Name Clearance, Registration, Certified Copies and to submit returns, fees and stamps are to be provided as under:

Fees of Name Clearance i. For NC clearance: @ BDT 600.00 for each of the proposed names.ii. For time extension: @ BDT 100.00 for each time extension application.

Stamps and Fees of Registration

PRIVATE COMPANY (Companies Act, 1994)Stamps i. For affixing on the Memorandum of Association: BDT 500.00ii. for affixing on the Articles of Association:

For Authorized Capital Stamp (BDT)Up to 10,00,000.00 2,000.00> 10,00,000.00 up to 3,00,00,000.00 4,000.00> 3,00,00,000.00 10,000.00

Registration feei. For filing 6 documents (5 filled in forms plus 1 memorandum & articles of association, @ BDT

200.00 per document): BDT 1,200.00ii. For the authorized share capital:

Authorized Capital (BDT) Fee (BDT)Up to 20,000.00 360.00Additional for every 10,000.00 or part after first 20,000.00 up to 50,000.00

180.00

Additional for every 10,000.00 or part after first 50,000.00 up to 10,00,000.00

45.00

Additional for every 10,000.00 or part after first 10,00,000.00 up to 50,00,000.00

24.00

Additional for every 1,00,000.00 or part after first 50,00,000.00 45.00

PUBLIC COMPANY (Companies Act, 1994)Stamps i. For affixing on the Memorandum of Association: BDT 500.00ii. For affixing on the Articles of Association:

For Authorized Capital (BDT) Stamp (BDT)Up to 10,00,000.00 2,000.00> 10,00,000.00 up to 3,00,00,000.00 4,000.00> 3,00,00,000.00 10,000.00



Registration feei. For filing 8 or 9 documents (7 or 8 filled in forms plus 1 memorandum & articles of association,

@ BDT 200.00 per document): BDT 1,600.00 or 1,800.00ii. For the authorized share capital:

Authorized Capital (BDT) Fee (BDT)Up to 20,000.00 360.00Additional for every 10,000.00 or part after first 20,000.00 up to 50,000.00

180.00

Additional for every 10,000.00 or part after first 50,000.00 up to 10,00,000.00

45.00

Additional for every 10,000.00 or part after first 10,00,000.00 up to 50,00,000.00

24.00

Additional for every 1,00,000.00 or part after first 50,00,000.00 45.00

FOREIGN COMPANY (Companies Act, 1994)i. For filing 6 document (1 memorandum and articles of association @ BDT 200.00 and 5 other

documents @ BDT 200.00 per document): BDT 1,200.00

TRADE ORGANIZATION (Companies Act, 1994)Stampsi. For affixing on the Articles of Association: BDT 1,500.00

Registration feei. for filing 6 documents (5 filled in forms @ BDT 200.00 per document plus 1 memorandum &

articles of association, @ BDT 200.00): BDT 1,200.00ii. For the number of members of association:

For up to 20: BDT 600.00For >20 up to 100: BDT 1,500.00For every 100 or part above the first 100 (limited member) BDT 150.00For unlimited members BDT 4,500.00

SOCIETY (Societies Registration Act, 1860i. Registration Fee: BDT. 250.00ii. Registration Filing Fee: BDT. 0.00

PARTNERSHIP FIRM (Partnership Act, 1932)i. Registration fee: BDT. 110.00



Fees of Returns Filing

COMPANIES (Private & Public)a. Returns Filing

i. For filing any document within the schedule time: @ BDT 200.00 per documentii. Late fee for filing any document beyond the schedule time: @ BDT 2.00 per day not

exceeding BDT 1,000.00 per document.b. Registration of Mortgage, Debentures and Charges

Secured Amount (BDT) Fee (BDT)upto 5,00,000.00 150.00Additional for every 5,00,000.00 or part after the first 5,00,000.00 upto 50,00,000.00

120.00

Additional for every 5,00,000.00 or part after the first 50,00,000.00 60.00

FOREIGN COMPANYa. Returns Filing


exceeding BDT 1,000.00 per document.b. Registration of Mortgage, Debentures and Charges


120.00


TRADE ORGANIZATIONa. Returns Filing


exceeding BDT 1,000.00 per documentb. Registration of Mortgage, Debentures and Charges


120.00


SOCIETIESi. For filing any document: @ BDT 200.00 per document



PARTNERSHIP FIRMi. For filing Form -2, 5 or 6: BDT 4.00 each.

Stamps and Fees of Issuance of Certified Copies

Private Company, Public Company, Trade Organization and Foreign Companya. Non-judicial stamp

i. For Memorandum of Association or part thereof: BDT 20.00ii. For Articles of Association or part thereof: BDT 20.00iii. For each of other document : BDT 20.00

b. Court fee (stamp) - per application per company: BDT 20.00c. Fees

i. For inspection of records: BDT 100.00ii. For copy of certificate of incorporation: BDT 100.00iii. For copy of certificate of commencement of business: BDT 100.00iv. Copying of documents for each 100 words or part: @ BDT 5.00 subject to a minimum of

BDT 100.00v. Comparison of document each 100 words or part: @ BDT 5.00 subject to a minimum of BDT

100.00 of each document

Societya. Identified by the applicable year

For Inspection of documents: BDT 1.50For copy of Annual list of Managing Body: BDT 20.00

b. Identified by the effective dateFor copy of Address : BDT 20.00For copy of Alteration of Name: BDT 20.00For copy: BDT 0.50 for each 100 words or part thereof

Partnership firma. Identified by the effective date

i. For Inspection of documents: BDT 1.50ii. For copy: BDT 0.50 for each 100 words or part thereof

Fees of Winding Up i. For Private and Public Company: BDT 20.00ii. For Trade Organization and Foreign Company: BDT 10.00

Doing Business in Bangladesh

Documents

bangladesh government

business enterprises

bangladeshdoing business

businessfriendly environment

chartered accountantsfebruary

bangladeshhowladar yunus

rjsc fees howladar yunus

appendix b