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Understanding the Requirements of Business Compliance in Bangladesh

Understanding the Requirements of Business Compliance in Bangladesh

Everyone wishing to carry out business operations in Bangladesh must be clear that doing business in Bangladesh requires the fulfilment of complex legal and other requirements. Business compliance in Bangladesh is mandatory for all legal entities registered and carrying out business activities in the corporate or business sector of Bangladesh. The exciting opportunities in Bangladesh are mostly targeted by the growing economy and strategic location of Bangladesh. Every business unit is required to comply with certain laws, regulations, and other regulatory compliances during the incorporation of a legal entity in Bangladesh.

Key Considerations of Business Compliance in Bangladesh

Business Compliance in Bangladesh requires that every business entity incorporated in Bangladesh adhere to the set standards, i.e., laws and regulations established to govern the formation, marketing, financial, safety, and other respective operations of the business. Business compliance in Bangladesh is important for several reasons, as provided below:

  1. Provides transparency in business operations;
  2. Improves the integrity of the business;
  3. Reduces the business risks;
  4. Startups can avoid legal disputes (avoid legal penalties and fines);
  5. Secures the interest of the business;
  6. Improves the goodwill of the business (secures from any reputational damage);
  7. Ensures professional access to the funding and investment of the business;
  8. Ensures the longevity of the business.

Types of Business Compliance in Bangladesh

The different business structures of Bangladesh (sole proprietorship, partnership firm, Limited Liability Company, a foreign company, branch office, liaison office, etc.) all require the fulfilment of certain legal and regulatory requirements to enjoy several benefits during the smooth lifetime of the business. Bangladesh’s Companies Act of 1994 provides adherence to the regulatory steps and other obligations required to ensure the foundation of the law of business entities in Bangladesh. Some of the business compliance that must be adhered to are discussed below:

General Regulatory Compliance

General regulatory compliance is an important factor for all legal business entities to ensure the requirements and obligations for conducting business operations in Bangladesh. It also secures the startups from any legal penalty and hence it is considered to be cost-effective. The MNCs in Bangladesh ensure to follow and comply with all the regulatory requirements or standards for conducting a hassle-free business environment and avoid any penalties or damages caused due to non-compliance with the business standards in Bangladesh.

Draft business documents

The businesses that are willing to register their business in Bangladesh with the Registrar of the Joint Stock Companies and Firms (RJSC) are mandated to draft the legal documents for the business including the Memorandum of Association (MOA), encashment certificate, Articles of Association (AOA), and Partnership Agreement if needed. The AOA and MOA act as the backbone or the constitution of the business.

Obtain a name clearance Certificate.

Registering and obtaining a name clearance certificate for the business entities is a mandatory regulatory requirement that must be ensured before the incorporation of a business in Bangladesh. The procedure for registering the name of the Bangladeshi business unit attracts the filing of the application along with the fees with the Registrar of the Joint Stock Companies and Firms (RJSC) for getting the name clearance certificate, which is valid only for 30 business days.

Other Requirements

There also exist certain other requirements ensuring the regulatory framework for doing business in Bangladesh. Some of the regulatory requirements that must be fulfilled to ensure business compliance in Bangladesh require the registration of the office address and, the appointment of a registered agent and a business secretary.

Payroll Compliance

The government of Bangladesh holds the responsibility of the business to legally comply with the monthly, daily, bi-weekly, or weekly payroll aspects for the skilled and unskilled labourers working in different industries of Bangladesh. It is mandatory to ensure Labour Law Compliance through the stringent laws of Bangladesh i.e., the Fair Labor Standard Act by adhering to the provision providing for the hiring and relocating of an employee, payment of minimum wages, and overtime, record keeping, etc.

Employment key consideration

It is crucial to observe the employment considerations before hiring employees, including skilled and unskilled labourers. Some of the essential considerations include:

  1. Consider employing personnel with a valid work visa;
  2. The working hours in a week must not exceed 48 hours;
  3. The FTE employees must be allowed to take at least 1 hour of break;
  4. Overtime can be extended up to 60 hours in a week;
  5. The payment of any overtime must be ensured by the business unit.
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Payroll options for business compliance in Bangladesh

There are various options for attracting the payroll for the industries or legal entities setting up their business operations in Bangladesh. Certain payroll requirements that need to be fulfilled for business compliance in Bangladesh include:

  1. Invite applications for appointing the employees on the payroll of the parent company;
  2. The next requirement allows the appointment of highly paid HR staff with a good understanding and knowledge of the employment laws and other tax codes for the business;
  3. The next requirement that a business entity can fulfil is through the appointing of a Bangladeshi (local) payroll processing firm or company with immense practical knowledge regarding the payroll of the business unit;
  4. The last option that a business entity can choose to comply with the payroll options includes outsourcing the payroll of the entity to a registered foreign company or business entity.

Compensation, holidays, and leaves

It is the most important aspect of payroll compliance, wherein it is mandatory to have a wide range of minimum wages paid to the employees of the diverse industries enrolled in Bangladesh. The minimum wages in Bangladesh include basic allowances for food, rent, healthcare, transport, and festive bonuses (if any). Not only this, but the employees are also entitled to enjoy the benefits of paid leave, maternity leave, paternity leave, and business (national) holidays, depending upon the provisions of the different industries.

Comply with the rules of Payroll Taxation.

Business Compliance in Bangladesh requires every entrepreneur to hold proper updates on corporate rates for taxation of business units in Bangladesh. Ensuring payroll taxes requires adherence to the diverse taxation rules for different industries in Bangladesh. The companies enlisted in Bangladesh are also required to contribute an amount of profit to the Worker’s Profit Participation Fund.

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Health and Safety Compliance

It is crucial to maintain the health and safety checklist at the workplace and other business entities registered to regulate business compliance in Bangladesh. The Bangladesh Labour Act of 2013 and the Bangladesh Labour Rules of 2015 mandate the establishment of the Safety Committee and the adoption of the Health and Safety Policies at every legal entity registered and doing business in Bangladesh, like factories, companies, etc., to protect the health of the skilled and unskilled labourers, reputational and financial damage of the business management.

Certain other security compliance, in consonance with the cyber-security laws of Bangladesh, must be maintained by the industries and legal entities registered and doing business in Bangladesh. The main target of establishing cyber-security laws is to protect businesses (es) from cyber threats and attacks that damage databases and disrupt the ease of doing business in Bangladesh. A list containing the security mandates for securing business compliance in Bangladesh is provided below:

Virtual Security updates

The management of the business is required to manage and update the security questions of the company with its employees. The security questions must include security information and security notifications like bugs and attacks of the company.

Password protection

The next requirement to ensure business compliance in Bangladesh asks the company to discuss essential factors like character specifications, frequency of changing passwords, and blocks after unsuccessful login attempts with the employees.

Workplace safety

The next safety requirement that must be fulfilled to ensure business compliance in Bangladesh includes conducting timely safety checks, fire drills, and proper inspection under the vigilance of appropriate governing agencies established at the workplace.

Data security

The next requirement on the list ensures the regular conduct of data compliance to maintain security and protect the data from any breach.

Taxation Regulatory Compliance

Tax compliance in Bangladesh is mandatory for ensuring the procedure for registration and filing income tax returns on time in the prescribed format to avoid tax burdens and any penalty for non-compliance with business requirements.

Register for VAT Certificate

After the completion of the process of business registration in Bangladesh, every business unit is mandatory required to apply for VAT (Value Added Tax) registration to receive a BIN, i.e., Business Identification Number. The business entities are eligible to receive the BIN registration certificate only after proper compliance with the requirement of annual turnover for the tax year. The VAT registration is free of cost, and we at Enterslice offer to ensure a smooth procedure for getting the VAT certificate for the entities doing business in Bangladesh, which ultimately assists the business units in opening a corporate bank account and applying for corporate tax return of the business for reporting the business income generated in the tax year.

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Secure TIN registration

TIN, also known as Tax Identification Number, acts as the Social Security Number for the business, which is mandatory to secure by every entrepreneur willing to register a business following business compliance in Bangladesh. The Private Limited Companies holding domestic or foreign ownership are legally bound to apply for the TIN registration Certificate to the authorities of the National Board of Revenue (NBR). The value of applying for a TIN certificate assists and secures the following business activities, as provided below:

  1. Aids in tracing the tax payments;
  2. Helps to identify the business;
  3. Mandatory for opening a bank account;
  4. Aids in getting finances for the business, etc.

Other Tax Requirements

It is important that businesses incorporated and registered for legally carrying out business operations in Bangladesh also look after the other tax requirements for securing business compliance in Bangladesh, such,

  1. Maintaining and filing the franchise tax return;
  2. Submitting the annual tax returns under section 65 of the Income Tax Ordinance of 1984;
  3. The salary TDS statement must be annually filed under section 108 of the Income Tax Ordinance of 1984;
  4. Timely renewal of the Tax Exemption Certificate;
  5. The TDS or withholding tax return must be filed half-yearly under section 75A of the Income Tax Ordinance of 1984;
  6. Monthly filing of the supplier’s TDS statement under rule 18 of the Ordinance of 1984
  7. Issuance of VAT or tax invoice under the VAT and SD Act of 2012;
  8. Calculate any advance income tax for the tax year (if any), etc.

Internal Legal Compliance

Business compliance in Bangladesh requires the diverse industries of Bangladesh to ensure the support of the legal department and the chief compliance officer to maintain the smooth flow of the business. Legal compliance, also known as internal compliance in Bangladesh, ensures reducing legal problems, handling of all business laws, and litigation hassle in compliance with the set business standards of Bangladesh.

Conducting and Filing minutes of the meetings

Conducting and holding the annual general meeting is a statutory requirement under the provisions of the Companies Act of 1994.

Annual report filing

It is mandatory for most of the industries enrolled in Bangladesh to maintain an updated record of filing annual reports for business units. It also requires maintenance and submission of all the necessary documents to the Registrar of the Joint Stock Companies and Firms (RJSC).

Get work Permits for Foreigners.   

It is a mandatory requirement for all foreign entities carrying business in Bangladesh to get an annual, valid, and legal work permit from the Bangladesh Investment Development Authority. The work permits or work visas offered to foreigners willing to establish their business or start working in Bangladesh include business visas- the most common long-stay visa; employment permits- for enrolling in employment services; investment visas- long-term visas for investors, etc. Getting a foreign work visa or permit requires a lengthy procedure to be followed from the completed and signed application form till the proof of payment of the visa processing fees is made to the Bangladesh High Commission or Embassy.

IPR registration

In the next step, the business owners must mandatorily require the protection and security of Intellectual Property Rights, including patents, trademarks, and copyrights, for smooth business compliance in Bangladesh.

Other Internal Compliance

There exist certain other internal requirements of the companies for securing the environment of business compliance in Bangladesh, as provided below:

  1. To maintain transparency in the business;
  2. To maintain and secure all licenses and contracts of the business;
  3. To comply with the physical entrance policies of the business;
  4. Maintain proper company records, such as the register for issuing the number of shares, directors, etc.
  5. To report all stock transfers;
  6. To maintain a professional team of board of directors;
  7. To renew the permission of the Branch office before 2 months of the expiry of the existing permissions through BIDA and inform the Central Bank of Bangladesh regarding the same.

External Compliance

Business compliance in Bangladesh also requires the fulfillment of certain external legal requirements to remove any trade barrier and ensure the ease of doing business in Bangladesh.

Obtain and renew Trade licenses.

Gathering trade licenses for business setups in Bangladesh is a crucial external legal requirement wherein a legitimate presence in the market of Bangladesh is ensured. It is legally mandatory for all international and national business entities to issue a trade license under the purview of local authorities like RJSC to avoid violation of any law, penalties, fines, business closure, and monitoring of other trade activities associated with the business setup. Different types of trade licenses, including commercial trade licenses, must be obtained and categorized based on the diverse business activities or industries. The trade licenses that are important for ensuring business compliance in Bangladesh must fulfil the following business conditions: business registration, duly signed application form, compliance with the local regulations, determination of the type of business licenses, etc. It is also mandatorily required by all the legal entities registered in Bangladesh to annually, monthly, or quarterly renew the relevant trade licenses, trade body membership, and industry-related licenses (if any).

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Explore trade and investment opportunities.

All international business entities must comply with the registration and renewal of the Export Registration Certificate (ERC) and the Import Registration Certificate (IRC) with the Bangladesh Investment Development Authority (BIDA) to smoothly facilitate the trading activities of the business registered in Bangladesh.

Other relevant certificates

The legal entities are required to have some relevant certificates apart from the trade licenses to ensure business compliance in Bangladesh. The list of certificates required for every business unit registered in Bangladesh is provided below:

  1. Certificate for the electrical system;
  2. Certificate for clean drinking water;
  3. Environmental clearance certificate (ECC) from the Department of Environment;
  4. Certificate of good standing;
  5. Fire license or Certificate under sections 4 and 8 of the Fire Prevention Act.

Open a bank account.

Every type of legal entity registered and doing business in Bangladesh holds the legal requirement of opening a corporate bank account in the name and benefit of the business setup in Bangladesh. Opening a bank account is important for ensuring business compliance in Bangladesh, wherein the requirement allows the payment of VAT, registration of TIN, and getting business credits.

Get Insurance for your company.

Business compliance in Bangladesh also requires gathering all relevant insurance for the business setup, including fire insurance, medical insurance, liability insurance, and business interpretation insurance (if required).

Social Accountability

The working environment in Bangladesh is secured according to the changes observed in the global market. Compliance with the working environment of Bangladesh builds the confidence of the customers and a reliable image of the business entities. The companies are socially accountable in the manner provided below:

  1. No child or forced labour;
  2. No discrimination at the workplace;
  3. Avoid harassment or abuse at the workplace;
  4. Ensure health and safety in the business entities;
  5. Maintain discipline of the business entities;
  6. Ensure basic training in the internal management system of the organization;
  7. Introduce the rights of forming free association;
  8. The employees must follow the practice of collective bargaining for their rights.

Conclusion

Doing business in Bangladesh mandates ensuring business compliance in Bangladesh according to the codes containing the rules and regulations for managing the businesses established in Bangladesh. Smooth business in Bangladesh is ensured through the fulfillment of the legal, taxation, payroll, health, and safety requirements allowing the registration of the legal business in compliance with the business standards of Bangladesh.

FAQ’s

  1. What does business compliance in Bangladesh mean?

    Business compliance in Bangladesh allows international and national legal business setups to adhere to the set procedures, establishing rules and regulations that are important for carrying out business operations in Bangladesh.

  2. What is annual compliance for business setups in Bangladesh?

    The provision for annual compliance mandates that business entities fulfill the post-registration legal requirements annually for smooth compliance with the business standards set up in Bangladesh.

  3. What are the types of business compliance in Bangladesh?

    The types of business compliance observed in Bangladesh include health and safety compliance, payroll compliance, HR and onboarding compliance, data safety compliance, and internal and external regulatory compliance.

  4. What are the benefits of business compliance in Bangladesh?

    Proper legal business compliance in Bangladesh ensures and supports the sustained and profitable form of business organizations in Bangladesh's market. It also builds a strong customer background along with diverse investment opportunities for both investors and the government.

  5. What are the risks of non-compliant behavior of the business entities registered in Bangladesh?

    The non-compliant behaviour of the business entities registered in Bangladesh may cause the following:
    a)      Claim damages from customers;
    b)      Exclusion from tenders or other business proposals;
    c)      Face competitive consequences;
    d)      Attract government penalties;
    e)      Attract additional charges for lawyers and professionals;
    f)       Prevented from government participation;
    g)      Tarnish the reputation of the business.

  6. What is a compliance checklist for business?

    A compliance checklist for businesses in Bangladesh includes registration of the business, filing the annual report of the entity, maintaining the cost of the business unit, opening a corporate bank account, getting necessary licenses, etc.

  7. How many types of compliance are there?

    In general, there exist two types of compliance, namely, Corporate Compliance and General Regulatory Compliance.

  8. Why do businesses need compliance?

    The need for business compliance in Bangladesh is required to promote the level of transparency, accountability, and fairness, and lastly, to ensure the credibility of the business operations of the legal entities registered in Bangladesh.

  9. What is corporate compliance in business ethics?

    In terms of business ethics, corporate compliance means obeying the set standards of rules and regulations established by the authorities of the nation.

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