Legal Framework for Repatriation
| Transaction Type | Governing GFET Chapter | Key Requirement | Approving Authority |
|---|---|---|---|
| Royalties & Technical Fees | Chapter 7, Paragraph 10 & 11 | Prior Bangladesh Bank approval for agreements exceeding certain limits or durations. | Bangladesh Bank / Authorized Dealer (AD) Bank |
| IT/ITES Export Proceeds | Chapter 11, Paragraph 28 & 29 | Declaration of export proceeds, repatriation through AD Banks. | Authorized Dealer (AD) Bank |
| General Remittances | Chapter 1, Paragraph 1 | Compliance with all foreign exchange regulations. | Bangladesh Bank / AD Bank |
| Tax Compliance | Income Tax Act, 2023; VAT Act, 2012 | Withholding tax (TDS) and VAT as applicable. | National Board of Revenue (NBR) |
Detailed Repatriation Procedures
- Execution of Agreement (Royalties/Technical Fees): For payment of royalties, technical know-how fees, technical assistance fees, or similar charges, a formal agreement must be executed between the Bangladeshi entity and the foreign service provider. This agreement should clearly specify the nature of services, payment terms, and duration.
- Bangladesh Bank Approval (if applicable): As per GFET, Chapter 7, Paragraph 10 & 11, prior approval from Bangladesh Bank is required for royalty agreements exceeding certain percentages of sales or duration (e.g., 5% of sales for 5 years). For technical assistance fees, limits are also prescribed. If the agreement falls within the general delegated authority of Authorized Dealer (AD) banks, specific Bangladesh Bank approval may not be necessary, but the AD bank will ensure compliance with GFET.
- Service Delivery and Invoicing: The foreign entity must render the services as per the agreement and issue a proper invoice to the Bangladeshi entity. For IT/ITES export proceeds, the Bangladeshi exporter must provide the services and issue an invoice to the foreign client.
- Tax Compliance: The Bangladeshi entity making the payment (for royalties/technical fees) must deduct withholding tax (TDS) at source as per the Income Tax Act, 2023, and pay VAT if applicable under the Value Added Tax and Supplementary Duty Act, 2012. For IT/ITES export proceeds, the exporter must ensure all local tax obligations are met.
- Application to Authorized Dealer (AD) Bank: The Bangladeshi entity (payer for royalties/technical fees, or exporter for IT proceeds) must submit an application to their AD bank for remittance. This application typically includes:
- Original/certified copy of the agreement (for royalties/technical fees).
- Bangladesh Bank approval letter (if required).
- Invoice from the foreign service provider/client.
- Proof of tax deduction at source (TDS certificate) and VAT payment (if applicable).
- Declaration of services rendered/received.
- For IT/ITES export proceeds, an Export Declaration (EXP) form or equivalent documentation as per GFET, Chapter 11, Paragraph 28.
- Any other documents as required by the AD bank or Bangladesh Bank.
- AD Bank Scrutiny and Remittance: The AD bank will scrutinize the documents to ensure compliance with the Foreign Exchange Regulation Act, 1947, and the GFET. Upon satisfaction, the AD bank will process the remittance of foreign currency to the foreign beneficiary's account. For IT/ITES export proceeds, the AD bank will ensure the repatriation of proceeds into Bangladesh.
- Reporting: AD banks are required to report all foreign exchange transactions to Bangladesh Bank as per the prescribed reporting mechanisms.
Consult LegalBD for Compliance
Navigating foreign exchange regulations can be complex. Our expert team can assist you with understanding the GFET guidelines and ensuring compliant repatriation of funds.
Schedule Scoping CallFrequently Asked Questions
Is Bangladesh Bank approval always required for royalty payments?
No, Bangladesh Bank approval is not always required. As per GFET, Chapter 7, Paragraph 10, AD banks are delegated authority to approve royalty payments within certain limits (e.g., 5% of sales for 5 years). Agreements exceeding these limits or durations require prior Bangladesh Bank approval.
What is the primary legal basis for repatriating IT export proceeds?
The primary legal basis for repatriating IT export proceeds is the Foreign Exchange Regulation Act, 1947, and specifically Chapter 11, Paragraph 28 and 29 of the Guidelines for Foreign Exchange Transactions (GFET) issued by Bangladesh Bank, which outlines the procedures for export of services.
Are withholding taxes applicable on technical fees remitted from Bangladesh?
Yes, withholding taxes (TDS) are generally applicable on technical fees remitted from Bangladesh. The rates are prescribed under the Income Tax Act, 2023, and may vary based on the nature of services and any applicable Double Taxation Avoidance Agreements (DTAA) between Bangladesh and the recipient's country of residence.
Can an AD bank refuse to process a repatriation request?
Yes, an Authorized Dealer (AD) bank can refuse to process a repatriation request if the submitted documents are incomplete, inconsistent, or do not comply with the provisions of the Foreign Exchange Regulation Act, 1947, and the Guidelines for Foreign Exchange Transactions (GFET). The AD bank acts as an agent of Bangladesh Bank to ensure regulatory compliance.
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