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Comparison of Company, Liaison Office, Branch Office and Project Office

The table below provides a comparison of business structures applicable for foreign investors in Bangladesh. This comparison is not intended for local entrepreneurs. Local entrepreneurs should refer to this comparison.

FeatureCompany (Private/Public Ltd Subsidiary)Liaison Office (LO) / Representative OfficeBranch Office (BO)Project Office (PO)
Governing Law / AuthorityGoverned by The Companies Act, 1994. Incorporation is handled by the Registrar of Joint Stock Companies and Firms (RJSC). Investment registration and incentives may involve the Bangladesh Investment Development Authority (BIDA). Foreign exchange matters fall under Bangladesh Bank (BB), and taxation under the National Board of Revenue (NBR).Permission is granted by BIDA. Foreign exchange and reporting are regulated by BB. Tax compliance on expenses and payroll is overseen by the NBR. Registration with RJSC is also required after obtaining BIDA approval.Permission is granted by BIDA. Foreign exchange and reporting are regulated by BB. Tax compliance on expenses and payroll is overseen by the NBR. Registration with RJSC is also required after obtaining BIDA approval.Permission is granted by BIDA. Foreign exchange and reporting are regulated by BB. Tax compliance on expenses and payroll is overseen by the NBR. Registration with RJSC is also required after obtaining BIDA approval. The terms of relevant project contracts are also applicable.
Legal StatusIt is established as a Separate Legal Entity incorporated under the laws of Bangladesh and is considered a domestic company distinct from its parent.It functions as an Extension of the foreign parent company and does not possess a separate legal personality in Bangladesh.It functions as an Extension of the foreign parent company and does not possess a separate legal personality in Bangladesh.It functions as an Extension of the foreign parent company, lacks separate legal personality, and its existence is tied specifically to an approved project.
Permitted ActivitiesA Company can conduct any legally permissible business activity, including manufacturing, trading, and services, subject only to specific sectoral regulations (such as reserved sectors where foreign investment might be restricted). This structure offers the greatest operational flexibility.Permitted activities are strictly limited to liaison functions, such as conducting market research, promoting the parent company’s products or services, coordinating with local parties, and acting as a communication channel. An LO cannot engage in any commercial activities, revenue generation, trading, or sign contracts on behalf of its parent company, as per BIDA Guidelines.A BO can conduct commercial activities specifically mentioned in its BIDA approval letter. It is permitted to issue local invoices and earn revenue from these approved operations. However, it generally cannot engage in manufacturing or unrestricted retail trade without special permission from BIDA.The permitted activities are strictly limited to the execution of the specific project or contract for which BIDA granted permission. A PO cannot undertake any activities that fall outside the defined scope of the approval letter.
Formation & RegistrationRequires formal incorporation with RJSC, involving name clearance, drafting and filing the Memorandum and Articles of Association, and providing director/shareholder details. Proof of foreign capital encashment must be submitted. Post-incorporation steps include obtaining a Trade License, Taxpayer Identification Number (TIN), VAT registration, and potentially registering with BIDA for incentives.The process begins with obtaining permission from BIDA. This requires submitting parent company documents (like Certificate of Incorporation, MoA/AoA, Board Resolution), a detailed plan of proposed activities, and an organization chart for the LO. After BIDA approval, the entity must open a bank account, report the initial remittance to BB, register with RJSC, and obtain a Trade License, TIN, and VAT registration (BIN) (for managing local expenses).The process begins with obtaining permission from BIDA. This requires submitting parent company documents (like Certificate of Incorporation, MoA/AoA, Board Resolution), a detailed plan of proposed activities, and an organization chart for the BO. After BIDA approval, the entity must open a bank account, report the initial remittance to BB, register with RJSC, and obtain a Trade License, TIN, and VAT registration (BIN) (for managing local expenses).The process is quite similar to LO/BO. The application process involves submitting parent company documentation and detailed project information to BIDA. After BIDA approval, the entity must open a bank account, report the initial remittance to BB, register with RJSC, and obtain a Trade License, TIN, and VAT registration (BIN) (for managing local expenses).
LiabilityThe Company operates with Limited Liability, meaning the company’s own assets are liable for its debts, and the parent company’s assets are generally protected.The foreign parent company bears full liability for all debts, obligations, and actions of the LO within Bangladesh.The foreign parent company bears full liability for all debts, obligations, and actions of the BO within Bangladesh.The foreign parent company bears full liability for all debts, obligations, and actions of the PO within Bangladesh related to the project execution.
Capital RequirementsThere is no specific minimum share capital mandated by law for incorporation itself, unless required for specific incentives or regulated sectors. Investment capital must be remitted into Bangladesh through official banking channels. A minimum inward remittance of USD 50,000 is mandatory if the company wants to hire expat.An LO does not have share capital. However, a minimum inward remittance of USD 50,000 is mandatory. These funds must arrive within two months of BIDA’s approval date and are intended to cover initial establishment costs and operational expenses.A BO does not have share capital. However, a minimum inward remittance of USD 50,000 is mandatory. These funds must arrive within two months of BIDA’s approval date and are intended to cover initial establishment costs and operational expenses.A PO does not have share capital. However, a minimum inward remittance of USD 50,000 is mandatory. These funds must arrive within two months of BIDA’s approval date and are intended to cover initial establishment costs and operational expenses.
FundingThe operations of the Company can be funded by equity injection or loan. For equity injection, return must be filed with RJSC.The foreign parent company can remit the office cost without any tax or additional cost.The foreign parent company can remit the office cost without any tax or additional cost.The foreign parent company can remit the office cost without any tax or additional cost.
Management & ControlThe Company is managed by a Board of Directors, who are appointed by and accountable to the shareholders. The foreign parent company exercises control through its shareholding and representation on the board.The LO is directly controlled and managed by the foreign parent company according to its directives.The BO is directly controlled and managed by the foreign parent company according to its directives.The PO is directly controlled and managed by the foreign parent company, often implementing a project-specific management structure agreed upon with the client or dictated by the project’s needs.
TaxationThe Company is taxed as a domestic entity in Bangladesh on its worldwide income (though Double Taxation Avoidance Agreements may apply) at the prevailing corporate income tax rates. It is also subject to Value Added Tax (VAT), Tax Deducted at Source (TDS) on payments, and other applicable taxes.An LO is generally not subject to income tax because it is prohibited from earning revenue in Bangladesh. However, it is liable for VAT on its local purchases and expenses, and for TDS obligations related to employee salaries and payments to local vendors.A BO is taxed on the income it earns within Bangladesh from its BIDA-approved activities. The applicable corporate income tax rates are often similar to those for domestic companies, subject to relevant DTAA provisions. It is also subject to VAT, TDS, and other applicable taxes.A PO is taxed on the income attributed to its project activities conducted within Bangladesh. The applicable corporate income tax rates and assessment methods are subject to relevant DTAA provisions and local tax laws. It is also liable for VAT, TDS, and other applicable taxes.
Repatriation of FundsProfits, distributed as dividends, are repatriable to foreign shareholders after payment of applicable taxes, Sale proceeds from shares and winding-up distributions are also repatriable under BB rules.Since no profits are earned, none can be repatriated. However, unspent funds originally remitted by the parent company can be repatriated upon closure of the office.Profits earned from BIDA-approved activities are repatriable after payment of applicable taxes. Unspent or residual funds can be repatriated upon closure.Profits or surplus funds generated from the project are repatriable according to the terms of the project agreement and prevailing regulations, subject to payment of taxes. Residual funds remaining upon project completion and office closure can be repatriated.
Employment (Expatriates)Employment of expatriates requires obtaining appropriate E-visas and Work Permits, with recommendations or processing handled by BIDA or other regulators. A stipulated ratio of foreign to local employees generally applies (e.g., 1:5 for commercial, 1:20 for industrial setups, per BIDA Guidelines). Full compliance with the Bangladesh Labour Act, 2006 is mandatory.Employment of expatriates requires obtaining appropriate E-visas and Work Permits, processed via BIDA. The applicable foreign to local employee ratio must be maintained (generally 1:5 for commercial offices, per BIDA Guidelines). Full compliance with the Bangladesh Labour Act, 2006 regarding employment conditions is required.Employment of expatriates requires obtaining appropriate E-visas and Work Permits, processed via BIDA. The applicable foreign to local employee ratio must be maintained (generally 1:5 for commercial, 1:20 for industrial setups, per BIDA Guidelines). Full compliance with the Bangladesh Labour Act, 2006 is mandatory.Employment of expatriates requires obtaining appropriate E-visas and Work Permits, processed via BIDA. The applicable foreign to local employee ratio is determined based on the nature of the project (commercial or industrial). Full compliance with the Bangladesh Labour Act, 2006 is mandatory.
Duration / TermA Company enjoys perpetual existence according to law and continues indefinitely unless it is formally wound up and dissolved.BIDA permission for an LO is typically granted for an initial limited period (for example, three years) and requires periodic renewal to continue operations legally.BIDA permission for a BO is typically granted for an initial limited period (for example, three years) and requires periodic renewal to continue operations legally.BIDA permission for a PO is typically linked directly to the timeline of the specific project and is granted for an initial limited period (for example, three years) and requires periodic renewal to continue operations legally.
Compliance BurdenThe Company faces the Highest compliance burden. It includes regular filings with RJSC (like Annual Returns, financial statements), filings with the NBR (Corporate Tax returns, VAT, TDS), reporting to BB for foreign transactions, potential BIDA reporting, holding statutory meetings (Board, AGM), and strict adherence to the Companies Act and Labor laws.LO faces a moderate compliance burden. It includes BIDA compliance (renewals, activity reports), filings with RJSC, reporting to BB (remittances), NBR filings (VAT, TDS), and adherence to Labor laws. It is generally less complex than managing a Company.BO faces a moderate compliance burden. It includes BIDA compliance (renewals, activity reports), filings with RJSC, reporting to BB (remittances, profit repatriation), NBR filings (Corporate Tax, VAT, TDS), and adherence to Labor laws. It is generally less complex than managing a Company.PO faces a moderate compliance burden. It includes BIDA compliance (permission renewals, project progress reports), BB reporting (remittances, fund repatriation), NBR filings (Corporate Tax, VAT, TDS), adherence to Labor laws, and ensuring compliance with all terms of the specific project contract.
Dissolution / ClosureClosure involves a formal Winding Up process under the Companies Act, 1994, which can be Voluntary or Court-Ordered. It requires appointing a liquidator, settling all debts and liabilities, obtaining final tax clearance from the NBR, and final de-registration from RJSC.Closure requires obtaining prior approval from BIDA. The process involves publishing a public notice, settling all outstanding liabilities, obtaining tax clearance certification from the NBR, completing de-registration formalities with RJSC, final reporting to BB, and obtaining permission from BB for repatriating any residual funds.Closure requires obtaining prior approval from BIDA. The process involves publishing a public notice, settling all liabilities, obtaining tax clearance certification from the NBR (as per Sec 89, Income Tax Act 2023), final reporting to BB, obtaining BB’s permission for repatriation of residual funds, and completing de-registration formalities with RJSC.Closure, typically upon project completion, requires approval from BIDA. The process involves publishing a public notice, settling all liabilities, obtaining tax clearance certification from the NBR (as per Sec 89, Income Tax Act 2023), final reporting to BB, obtaining BB’s permission for repatriation of residual funds, and completing de-registration formalities with RJSC.

Special Note:

  • One Person Company (OPC): An OPC is typically only permitted for a local natural person.

  • Private and Public Limited Company: Foreign investors can set up both Private and Public Limited Companies in Bangladesh. However, unless intending to list on a stock exchange, foreign investors typically do not set up Public Limited Companies.

Key Considerations for Foreign Investors:

  • Nature of Business: If the strategic objective involves full-scale commercial operations within Bangladesh, such as manufacturing, trading, or providing a wide range of services locally, establishing a Company provides the necessary legal framework and maximum operational flexibility.
  • Market Exploration/Coordination: If the immediate goal is limited to exploring the market, establishing contacts, conducting research, or coordinating with local agents without engaging in direct sales or revenue generation, an LO offers a simpler structure with lower compliance compared to a BO or Company.
  • Limited Commercial Activity/Service Delivery: If the foreign entity needs a presence in Bangladesh to perform specific commercial tasks, generate local revenue from clearly defined and approved activities, or deliver certain services directly (but stopping short of full manufacturing or unrestricted trading), a BO could be a suitable option.
  • Project Execution: If the entity’s presence in Bangladesh is solely required to execute a specific, typically time-bound, contract that has been awarded to the foreign parent company, establishing a PO is the appropriate and designated structure for this purpose.
  • Liability Exposure: A critical distinction lies in liability. Operating as an LO, BO, or PO exposes the foreign parent company to unlimited liability concerning the activities and obligations of its presence in Bangladesh. In contrast, structuring as a Company (a subsidiary) effectively shields the parent company through the principle of limited liability.
  • Long-Term Presence: A Company structure signifies a permanent establishment and commitment to the market, with perpetual legal existence. LOs, BOs, and POs operate under permissions granted for fixed terms by BIDA, necessitating periodic renewals for continued operation.
Key Contact

For professional assistance with your business setup or advice on the optimal business structure in Bangladesh, please reach out to our corporate advisory team: