How to Set Up a Subsidiary Company in Bangladesh?

Expanding your business internationally is a bold step, and setting up a subsidiary company in Bangladesh positions you in one of South Asia’s fastest-growing economies. With a population of over 160 million, low operational costs, and strategic trade advantages, Bangladesh is a compelling destination for growth.

The country’s strategic location, proximity to India and China, and government-backed incentives make it a prime spot for setting up a subsidiary company in Bangladesh.

Key Takeaways:

• Multiple Subsidiary Structures: Bangladesh offers several subsidiary options, including wholly-owned subsidiaries, joint ventures, and public or private limited companies, each suited to different business goals.
• Streamlined Registration Process: The process of setting up a subsidiary involves key steps such as selecting a company name, preparing necessary documents, registering with the RJSC, obtaining a TIN, and securing a business bank account.
• Tax Incentives and Compliance: Bangladesh provides substantial tax incentives, including tax holidays for specific sectors, while also requiring annual financial reporting, tax filings, and labor law compliance to maintain good standing.
• Strategic Location and Low Operational Costs: Bangladesh’s strategic position in South Asia, combined with its low labor and operational costs, makes it an attractive destination for international businesses looking to expand into the region.

This blog provides an exhaustive roadmap for how to form a subsidiary in Bangladesh, covering legal, tax, and operational aspects. Whether you’re a startup or a multinational, you’ll easily understand how to create a subsidiary in Bangladesh.

What Are the Types of Subsidiaries in Bangladesh?

Choosing the right subsidiary type is a foundational decision when setting up a subsidiary company in Bangladesh. A subsidiary is a separate legal entity controlled by your parent company, typically through majority ownership, and Bangladesh’s Companies Act 1994 offers several structures to align with your business objectives. Here’s an explanation of each type in depth, detailing their features, advantages, and potential challenges to guide you on how to establish a subsidiary company in Bangladesh:

Wholly-owned subsidiary

This structure grants you 100% ownership, allowing complete control over strategy, operations, and profits. It’s ideal for businesses prioritizing autonomy, such as a U.S. apparel firm launching a manufacturing unit in Dhaka to oversee its supply chain end-to-end. You bear all financial risks, requiring capital planning.

Joint venture subsidiary

You share ownership with a local or foreign partner, splitting capital, risks, and rewards based on an agreed ratio, such as 60-40. This is advantageous for utilizing local expertise or reducing investment costs. Joint ventures, often structured as private limited companies, require a clear Memorandum and Articles of Association to define governance.

Private limited company (PLC)

A flexible option, the PLC requires at least two shareholders and limits liability to your contribution, protecting your parent company’s assets. It’s popular for small to medium enterprises (SMEs), whether wholly-owned or joint ventures. Minimum paid-up capital for registration of a Bangladeshi company is Taka 1 (local) and USD 50000 for a foreign-owned company.

Public limited company (PLC)

Designed for larger operations, this requires seven shareholders and three directors. You can raise funds publicly via the Dhaka Stock Exchange. The public nature increases transparency but demands stricter compliance, such as audited financials and Securities and Exchange Commission (SEC) reporting.

Branch or Liason Office

Not a subsidiary but an extension of your foreign parent company, like a German engineering firm opening a Dhaka office for project coordination. It’s not a separate legal entity, so the parent company bears all liabilities. A branch office must register with the RJSC and comply with Securities and Exchange Commission (SEC) regulations.

Step-by-Step Guide to Setting Up a Subsidiary in Bangladesh

Understanding how to create a subsidiary in Bangladesh involves a structured process overseen by the Registrar of Joint Stock Companies and Firms (RJSC) and other authorities.

By following the steps below, you’ll establish a legal foundation for setting up a subsidiary company in Bangladesh, aligning with local requirements and best practices for business incorporation:

Step 1: Select a Unique Company Name

Your subsidiary’s name must be distinct to avoid legal conflicts. Use the RJSC’s online portal to check name availability, which is free. A unique name strengthens your brand identity and prevents delays in registration. If the name is rejected, resubmission is free but may take an extra day.

Step 2: Prepare Key Documents

Draft the Memorandum and Articles of Association, outlining your subsidiary’s business objectives, share structure, and governance. These documents must be notarized by a local notary. If you have foreign shareholders, translated and attested versions are required. Be sure to include your registered address, director information, and capital structure.

Step 3: Appoint Leadership

To form a private limited company, appoint at least two shareholders and two directors, one of whom must be a Bangladeshi resident. Public limited companies require seven shareholders and three directors. Gather necessary identification, including passports and proof of address. Foreign documents must be notarized and attested. The resident director will handle regulatory interactions, but does not need to hold shares.

Step 4: Register with the RJSC

Submit your notarized documents, director IDs, and address proof to the RJSC either online or in person. Upon approval, you’ll receive a Certificate of Incorporation and a unique company identification number. Avoid delays by ensuring your documents are error-free.

Step 5: Obtain a Tax Identification Number (TIN)

Apply for a TIN through the National Board of Revenue (NBR) using your RJSC certificate and director information. This free process takes 1–2 weeks and is essential for corporate tax compliance. You’ll also receive an e-TIN, enabling digital tax submissions and helping you avoid penalties for non-compliance.

Step 6: Register for VAT

Submit your TIN, RJSC certificate, and company details to the NBR’s VAT Commissionerate to obtain your Business Identification Number (BIN). This step, completed in 1–2 weeks, allows you to file VAT at the standard rate of 15%. Voluntary VAT registration lets you claim input tax credits, helping lower your operating costs.

Step 7: Open a Bank Account

Open a corporate bank account with a bank such as HSBC, Standard Chartered, or Dutch-Bangla and deposit the minimum capital. Provide your RJSC certificate, TIN, and identification documents. Account activation and issuance of the capital deposit certificate take 3–5 business days.

Step 8: Secure Industry-Specific Licenses

Obtain required licenses based on your business sector. For example, manufacturing firms need an industrial license from BIDA, while telecom and pharmaceutical businesses must apply for specialized regulatory approvals. These permits ensure you operate legally within your chosen industry.

Key Benefits of Establishing a Subsidiary in Bangladesh

Why pursue how to set up a parent company with subsidiaries in Bangladesh? The advantages are compelling, positioning your incorporation for growth in a thriving market. Here are the main benefits:

• Massive consumer market: With over 160 million people, Bangladesh offers a vast customer base, particularly for consumer goods, textiles, and tech services. Urban centers like Dhaka and Chattogram drive demand, with a growing middle class (20 million+) boosting purchasing power.
• Low operational costs: One of the biggest advantages of forming a subsidiary in Bangladesh is the significantly lower cost of operations. Skilled labor is affordable, and office rentals, especially in areas like Dhaka and Savar, are considerably less expensive than in regional hubs like Singapore or Dubai.
• Strategic trade position: Proximity to India, China, and ASEAN markets, coupled with the Chattogram and Mongla ports, streamlines exports. Bangladesh’s trade agreements, like those of SAFTA, reduce tariffs and cut logistics costs significantly.
• Generous tax incentives: The government offers substantial tax breaks to incentivize foreign investment. Subsidiaries operating in sectors like IT, textiles, or renewable energy can enjoy tax holidays. Companies located in Special Economic Zones (SEZs) receive further benefits, including exemptions on customs duties and corporate tax reductions.

Essential Documents for Registering a Subsidiary

Understanding how to establish a subsidiary company in Bangladesh starts with gathering the right documentation. Here’s everything you need to get started:

• Memorandum and Articles of Association
• Identification proofs 
• Proof of registered address
• Bank certificate

Legal Structures Available for Subsidiaries in Bangladesh

Choosing the right legal structure is fundamental when forming a subsidiary in Bangladesh. Each option offers varying degrees of flexibility, liability, and scalability depending on your business model. Here are your choices:

• Private limited company (PLC): With two shareholders, it’s liability-limited and private, which is ideal for SMEs. One resident director simplifies management, while restricted share transfers maintain control. Compliance costs are manageable.
• Public limited company (PLC): Requiring seven shareholders and three directors, it supports public fundraising. Stricter SEC oversight and audits suit large firms aiming for scale, like manufacturers or conglomerates.
• Liaison office: Limited to non-commercial activities like market research, it’s not a true subsidiary. BIDA approval takes 2-3 months, offering a low-risk entry but no revenue generation.

Taxation Rules and Incentives for Subsidiaries

Understanding corporate tax rates, VAT obligations, and available exemptions is vital whether you’re wondering how to start a parent company in Bangladesh or a subsidiary.  Tax holidays, double taxation treaties, and sector-specific incentives can significantly reduce operational costs and improve long-term profitability. Here’s a detailed overview.

• Corporate Income Tax (CIT): All subsidiaries must file annual tax returns with the National Board of Revenue (NBR). Non-listed companies are subject to a 27.5% corporate income tax, while listed firms benefit from a lower rate of 22.5%. Bangladesh’s tax system allows for deductions related to research and development, charitable donations, and other approved expenses.
• Value Added Tax (VAT): VAT in Bangladesh is set at 15% and is mandatory for businesses with an annual turnover exceeding BDT 8 million. Returns must be submitted monthly. Some industries, such as agriculture and education, qualify for full or partial exemptions, which can significantly lower operating costs.
• Tax holidays: Tax holidays are a major incentive for companies interested in forming a subsidiary in Bangladesh. Businesses in targeted sectors like information technology, textiles, and renewable energy may enjoy full tax exemptions.
• Double taxation treaties: Bangladesh has signed double taxation agreements with over 40 countries, including the UK, India, Japan, and Germany. These treaties limit withholding tax rates on dividends, interest, and royalties.

Regulatory and Compliance Requirements

To legally run a subsidiary or start a parent company in Bangladesh, you must meet annual compliance obligations such as financial audits, tax filings, labor law adherence, and environmental clearances. Here’s how you can stay compliant to avoid penalties and support sustainable growth:

• Annual financial reporting: Submit audited financial statements to the Registrar of Joint Stock Companies and Firms (RJSC) within six months of the fiscal year’s end. Audits must follow IFRS standards to ensure accuracy and transparency. Late submissions incur monetary fines.
• Tax filings: Corporate income tax (CIT) must be filed annually, while Value Added Tax (VAT) is filed monthly. Use the National Board of Revenue’s (NBR) e-TIN portal for electronic submission. Mistakes or delays can result in penalties, so many companies engage accountants to ensure accuracy.
• Labor compliance: Provide written employment contracts, comply with minimum wage regulations, and make mandatory social security contributions. Inspections by the Department of Inspection for Factories and Establishments can result in fines for non-compliance.
• Environmental and data regulations: Companies in manufacturing and other regulated industries must obtain environmental clearance from the Department of Environment. While data protection laws are still developing, maintaining secure data storage is crucial to avoid reputational risk.

Do You Need a Physical Address for a Subsidiary in Bangladesh?

Yes, a commercial physical address is mandatory when opening a subsidiary in Bangladesh. This address serves as the official registered office of the company and is required for both legal and regulatory purposes under the Companies Act 1994. The Registrar of Joint Stock Companies and Firms (RJSC) will not process an incorporation application without a valid address that complies with local regulations.

Operational Setup for a Subsidiary in Bangladesh

Setting up operations for a subsidiary in Bangladesh requires attention to several practical aspects to ensure the business runs smoothly from day one.

Hiring local staff is typically the first step. The country offers a cost-effective and skilled workforce for roles in IT, marketing, and administration. If you plan to bring in expatriate employees, they must obtain work visas through the Bangladesh Investment Development Authority (BIDA), which can take several months.

Next, you’ll need to establish a physical presence. Office space in premium areas such as Dhaka’s Gulshan district tends to be more expensive, while locations like Savar offer more affordable alternatives. Reliable access to utilities is critical. High-speed internet is readily available through local providers, and basic utilities such as electricity and water are generally stable in urban centers.

How to Open a Business Bank Account for a Subsidiary?

A business bank account is required to deposit share capital and handle transactions when setting up a subsidiary company in Bangladesh. Banks typically request your RJSC registration, tax IDs, and identity documents.

This step finalizes the formation process and enables financial operations for your subsidiary. Here’s a detailed guide:

1. Choose a bank: HSBC, Standard Chartered, or Dutch-Bangla Bank offer low fees and multi-currency accounts. HSBC suits multinationals, while Dutch-Bangla excels locally.
2. Gather documents: Submit your RJSC certificate, TIN, BIN, IDs, and address proof. Foreign documents need attestation.
3. Deposit capital: Transfer the required capital depending on your subsidiary type. Verification takes 3-5 days, with banks issuing a certificate for RJSC finalization.
4. Activate services: Online banking via secure apps supports payroll and tax payments.

Is an Operating Agreement Necessary for a Subsidiary?

An operating agreement, though not legally required for setting up a subsidiary company in Bangladesh, is crucial in ensuring clarity and structure within the organization. Especially when dealing with multiple shareholders, foreign investors, or joint ventures.

The primary value of an operating agreement lies in how it defines internal roles, ownership stakes, and procedures for handling profit distribution and conflict resolution. For companies forming a subsidiary or setting up a parent company structure in Bangladesh, this document creates transparency among stakeholders and reduces the risk of future disputes.

Opening a Branch vs. a Subsidiary: What’s the Difference?

A subsidiary is a separate legal entity with limited liability and tax independence, ideal for long-term investment. A branch, on the other hand, is simpler to open but directly tied to the parent company’s liabilities and taxes, making it better for short-term or low-risk market entry. Here’s a detailed comparison:

How Commenda Can Help You Expand in Bangladesh

Setting up a subsidiary company in Bangladesh can be challenging, especially when dealing with complex regulatory requirements and local procedures. Commenda takes the stress out of setting up your parent company by offering streamlined solutions every step of the way. Here’s how:

• Expert network: Connects you with RJSC agents, notaries, and accountants for seamless setup. 
• Streamlined registration: Manages name checks, document filing, and licenses via a user-friendly platform.
• Compliance tools: Tracks RJSC, NBR, and BIDA deadlines, avoiding fines.
• Market insights: Provides strategies for sectors like textiles or IT, ensuring competitive entry.

Book a demo today to see how Commenda can help you with your expansion into Bangladesh.

FAQs

Q. How much does it cost to set up a subsidiary in Bangladesh?
Setting up a subsidiary in Bangladesh typically costs between BDT 70,000 and BDT 150,000 (around €560 to €1,200). These expenses include government registration fees, notarization, legal documentation, and consultant services.

Q. How long does it take to register a subsidiary in Bangladesh?
The entire registration process generally takes around 30-60 days, including name approval, document preparation, company registration, and obtaining tax identification numbers. Delays due to incomplete paperwork can add extra time, so professional guidance is recommended.

Q. Can a foreigner fully own a subsidiary in Bangladesh?
Yes, full foreign ownership is permitted in most sectors except restricted industries like banking and defense. However, appointing at least one resident director is mandatory, which can be done through nominee services.

Q. What are the common challenges when opening a subsidiary in Bangladesh? Newcomers often face bureaucratic delays, language barriers due to local document requirements in Bangla, and complex compliance procedures. Engaging consultants and translators helps overcome these obstacles.

Q. Do subsidiaries in Bangladesh need a local director or representative?
Yes, having at least one Bangladeshi resident director is required for company registration and tax administration. Nominee directors can fulfill this role without holding ownership.

Q. What are the annual compliance requirements for subsidiaries in Bangladesh?
Subsidiaries must file audited financial statements, corporate income tax returns, monthly VAT reports, and update company records annually. Compliance with labor and environmental regulations also applies. Professional accountants assist in maintaining adherence.

Q. Can a subsidiary hire employees directly in Bangladesh?
Yes, subsidiaries can directly employ local staff by registering with the labor authorities. Employment contracts, minimum wage standards, social security contributions, and leave entitlements must be provided. Penalties exist for non-compliance.

Q. What happens if a subsidiary fails to meet compliance rules in Bangladesh?
Penalties for late filings and violations range from monetary fines to potential company dissolution in serious cases like tax evasion. Regular audits and professional accounting services help prevent such issues.