Starting a new business or running existing businesses can be complicated, especially navigating foreign investment in Bangladesh. Our guide offers insights into foriegn investment policy and regulations, helping investors make informed decisions. Learn about key foreign investment policies and sectors where foreign investment may face limitations.

If you are considering setting up other business structures, explore these guides below for more details:

• Bangladesh Subsidiary or Limited Company 
• Bangladesh Branch or Liaison Office
• one person company
• joint venture
• All Foreign business options
• NGO and non profit company options 

Key Benefits of Registering a Company in Bangladesh

• Investor-Friendly Policies: Bangladesh offers various incentives, especially for export-driven industries and foreign investments.
• Growing Market: With one of the fastest-growing economies in Asia, the country presents vast opportunities for both domestic and international businesses.
• Tax Treaties: Bangladesh has agreements with many countries to avoid double taxation, making it an attractive destination for foreign businesses.

By understanding these benefits and following the proper procedures, you can seamlessly navigate the process of registering your company in Bangladesh. Let us know if you need additional insights or information tailored to your industry!

Foreign Investment Policies and Laws in Bangladesh

Legal Framework for Foreign Investment

The Foreign Private Investment (Promotion and Protection) Act, 1980 serves as the primary policy framework for foreign investment in Bangladesh. Key aspects of the Act include:

• Legal Protection: Safeguards foreign investments against nationalization and expropriation.
• Non-Discrimination: Guarantees equal treatment for both foreign and domestic investors.
• Profit Repatriation: Ensures that foreign investors can repatriate profits and share proceeds.

Additionally, investors must comply with regulations set by Bangladesh Bank and the National Board of Revenue (NBR) regarding taxation and customs duties.

Investment Opportunities and Business Ownership

Foreign investors have flexibility in the following areas:

• Establishing fully owned businesses.
• Forming joint ventures with local partners.

Personal Fund Investment does not require prior approval from Bangladesh Bank, but registration with BIDA offers access to government facilities and support. Foreign companies, whether incorporated in Bangladesh or registered to operate, can legally do business in Bangladesh.

Company Registration and Governance

The Registrar of Joint Stock Companies and Firms (RJSC) oversees company registration under the Companies Act of 1994, ensuring:

• Protection of investors’ interests.
• Authority for directors to manage and operate the company.

Remittance Guidelines for Foreign Investments

Foreign investments must adhere to Bangladesh Bank’s Guidelines for Foreign Exchange Transactions. Key steps include:

1. Fund Transfer: Funds must be transferred to Bangladesh through authorized banking channels.
2. Non-Resident Taka Account (NRTA): A temporary account must be opened in the name of the proposed company at a reputable commercial bank, to accept international remittances.
3. Encashment Certificate: The certificate from the bank validates the transfer, representing 100% of the equity in the newly incorporated company.

If the investment does not proceed, the NRTA balance can be repatriated without prior approval, provided all dues are cleared.

Prohibited, Restricted, and Regulated Sectors for Foreign Investment in Bangladesh

Prohibited Sectors

Foreign investments are prohibited in the following sectors:

• Arms & Ammunition Manufacturing
• Reserved Forest Activities
• Nuclear Energy
• Gambling & Casinos
• Tobacco Processing (large-scale export)

Restricted Sectors

Foreign investment in the following sectors requires prior approval from relevant authorities:

• Defense Equipment (requires Ministry of Defense approval)
• Banking (approval from Bangladesh Bank)
• Telecommunications (BTRC licenses)
• Deep-Sea Fishing (permits required)
• Energy Resources (Gas & Coal, government approval needed)
• Media (to safeguard national interests)

Regulated Sectors

Investments are allowed under specific regulations in these sectors:

• Mining (with environmental compliance)
• Pharmaceuticals (regulated under strict laws)
• Agriculture (must benefit local communities)

Seventeen sectors require clearance or permission from designated authorities, including:

1. Deep sea fishing
2. Private sector banks/financial institutions
3. Private sector insurance companies
4. Private sector power generation, supply & distribution
5. Exploration, extraction & supply of natural gas/oil
6. Exploration, extraction and supply of coal
7. Exploration, extraction and supply of other minerals
8. Large infrastructure projects (example: flyovers, expressways)
9. Crude oil refineries
10. Industries using natural gas as raw material
11. Telecommunication services (both mobile/cellular and landline)
12. Satellite channels
13. Cargo/passenger aviation
14. Sea-bound ship transport
15. Sea-port/deep sea-port
16. VOIP/IP telephone services
17. Industries using heavy minerals from sea beaches

Guidelines for Foreign Investors in Restricted Sectors

Foreign entities wishing to invest in restricted sectors must:

1. Obtain the necessary approvals and licenses from relevant authorities.
2. Follow the Foreign Private Investment Act, 1980 for protection and promotion.
3. Adhere to Bangladesh Bank regulations and local environmental & labor laws.
4. Ensure operations align with national strategies and policies.

Key Regulations for Foreign Investments in Bangladesh

• Foreign Private Investment (Promotion and Protection) Act, 1980: Guarantees fair treatment of foreign investments and facilitates capital and profit repatriation.
• Bangladesh Export Processing Zones Authority Act, 1980: Regulates businesses in Export Processing Zones (EPZs) with various incentives.
• Bangladesh Economic Zones Act, 2010: Governs the establishment of economic zones to attract foreign investment.
• Companies Act, 1994: Regulates company formation, operation, and dissolution.
• Bangladesh Investment Development Authority (BIDA) Act, 2016: Promotes and facilitates investments, including foreign investments.
• Income Tax Ordinance, 1984: Governs tax liabilities for local and foreign businesses.
• VAT and Supplementary Duty Act, 2012: Regulates VAT and other duties on businesses.
• Bangladesh Labour Act, 2006: Ensures employment rights, including wages and work conditions.
• Foreign Exchange Regulation Act, 1947: Controls foreign exchange transactions related to investments.
• Arbitration Act, 2001: Provides mechanisms for resolving disputes, including those involving foreign investors.
• Environment Conservation Act, 1995: Ensures compliance with environmental standards.
• Securities and Exchange Ordinance, 1969: Regulates the securities market for foreign entities.
• Public-Private Partnership (PPP) Act, 2015: Facilitates investments in infrastructure through public-private partnerships.
• Investment Promotion and Financing Facility (IPFF) Project: Supports infrastructure investment in Bangladesh.
• Bangladesh Bank Circulars: Includes circulars that guide foreign exchange, financing investments, and banking operations related to foreign ventures.

Foreign investment in Bangladesh offers significant opportunities for growth and development. By understanding the legal frameworks, benefits, and restrictions, foreign investors can navigate the processes efficiently and effectively. LegalBD provides expert assistance to foreign investors, ensuring that all regulatory and compliance requirements are met throughout the investment process.

FAQs: Foreign Investment in Bangladesh

1. Why Invest in Bangladesh? Key Advantages of Investing in Bangladesh

• Foreign Investment: Bangladesh has several policies designed to attract foreign investment, especially in export-oriented sectors.
• Expanding Market: The country represents one of Asia’s fastest-growing economies, creating wide-ranging business opportunities at home and abroad.
• Tax Treaties: There are many double tax treaties (DTA) signed by Bangladesh with various countries making Bangladesh a favourable destination for foreign companies.

2. What are the foreign investment restrictions in Bangladesh?

There are specific prohibited, restricted, and regulated sectors where foreign investment is either completely banned, subject to government approval, or controlled by regulations. Some prohibited sectors include arms manufacturing, tobacco processing, and nuclear energy. Restricted sectors include defense equipment, telecommunications, and banking, which require prior approval from relevant authorities like Bangladesh Bank and BTRC.

3. What is the Foreign Private Investment (Promotion and Protection) Act, 1980?

The Foreign Private Investment Act of 1980 is the primary legal framework for foreign investment in Bangladesh. It guarantees the protection of foreign investments against nationalization, ensures equal treatment for foreign and domestic investors, and allows foreign investors to repatriate profits and proceeds from share sales.

4. Can foreign investors own 100% of a company in Bangladesh?

Yes, 100% foreign ownership is allowed in most sectors in Bangladesh subject to local laws. However, some areas have limitations for joint ventures with domestic partners or permission from the government operator.

5. Do foreign investors need approval to transfer funds into Bangladesh?

Yes, foreign investors are required to remit fund through authorized banking permissible channels and possibly open Non Resident Taka Account (NRTA) in the name of the proposed company. Transfer the funds from the NRTA into a normal account upon commencement of business. Transfer will also need to be validated by an Encashment Certificate from the central bank.

6. What is the process for registering a company in Bangladesh?

To register a company in Bangladesh, you must:

1. Apply for name clearance from the Registrar of Joint Stock Companies and Firms (RJSC).
2. Submit the Memorandum and Articles of Association, along with other documents.
3. Register with BIDA for foreign-owned companies, if applicable.
4. Obtain a Trade License and a Tax Identification Number (TIN).

7. How long does it take to complete the company registration process?

The company registration process can take anywhere from 4 to 45 days, depending on the completeness of the documentation and the specific requirements for foreign investors. The process may take longer if additional approvals are required for restricted sectors.

8. What are the tax benefits for foreign investors in Bangladesh?

Foreign investors may benefit from lower tax rates in certain sectors, particularly in export-oriented industries. Bangladesh also offers tax exemptions for investments in Export Processing Zones (EPZs) and Economic Zones (EZs). Additionally, double taxation avoidance agreements with various countries can further benefit foreign investors.

9. Are there any restrictions on profit repatriation for foreign investors?

No, No, profit repatriation is permissible under the Foreign Private Investment Act, 1980. Foreign investors can freely repatriate their profits, dividends, and proceeds from the sale of shares, subject to adhering to the relevant formalities and obtaining requisite documentation like the Issuance of an Encashment Certificate.

10. What happens if a foreign investment is made in a prohibited or restricted sector?

Investments in restricted sectors are strictly prohibited. In Restricted sectors, prior approval must be obtained by foreign investors from relevant authorities (i.e., Bangladesh Bank, BTRC, or the Ministry of Defense, and/or any other relevant authorities) in order to make the investment. Non-compliance with these regulations could lead to cancellation of the investment and legal actions.

11. What are the rules for foreign investments in Bangladesh’s export-processing zones?

Export Processing Zone (EPZs) offer various incentives for foreign investors, including tax exemptions, customs duty benefits, and access to modern infrastructure. Bangladesh Export Processing Zones Authority Act, 1980 Regulation on doing business in such zones requires all businesses to comply with defined approvals.

12. Can foreign investors participate in joint ventures with Bangladeshi companies?

Yes, foreign investors can joint ventures with local companies. In this case, the foreign benefactor can hold a controlling or minority interest, based on the industry and laws in force. Joint ventures in restricted areas usually need to be approved by the proper authorities, and the conditions of the joint venture agreement should comply with national guidelines and regulations.

Read this for more> Options for foreign business registration in Bangladesh.

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