Six Most Important Things to Keep In Mind for Foreign Direct Investment in Bangladesh

 

Foreign direct investment (FDI) in Bangladesh does not require any prior approval from the central bank or other regulatory authority. However, there are some guiding rules from the central bank of Bangladesh for Foreign Direct Investors.

Unfortunately, most often, complexity arises due to misunderstanding and misinterpretation of those rules. You can find these rules detailed in the 2(c), Section-I, Chapter 9 of Guidelines for Foreign Exchange Transactions (GFET-2018), Vol. - 1.

Sometimes Foreign Investors want to use their money in the FDI account or NRTA (Non-Resident Taka Account) account. Authorized Dealer (AD) does not allow them to Debit the primary investment account.

The new Company with Foreign Investment is already registered with the RJSC, but documents not submitted by Foreign Investors to the related AD within 14 days of registration/ share issue favoring non-residents. Central Bank issues the “Show Cause Letter” to the AD when they intimate in late.

The Company has started its operation but not submitting Quarterly Returns to the AD. Again the AD receives another “Show Cause Letter” from the Central Bank for this. So, the Banker – Customer relationship deteriorates.

Six Most Important Things for FDI:

Did you know that you could avoid all these problems if we knew the following few facts?

1. Blocked Account: 

The account opened with the inward remittance received for Foreign Investment in Bangladesh is a non-transaction account, often called a Blocked Account. The AD will open a new account after registration with the RJSCF (Registrar of Joint Stock Companies and Firms) or BSEC (Bangladesh Securities and Exchange Commission). At the same time, the earlier account will be closed. This new account will be a transaction account.

2. Intimation to Bangladesh Bank: 

Related AD has to intimate Bangladesh Bank (the Central Bank) within 14 days of the issue of shares to non-residents. So, if you have registered your Company with RJSCF or BSEC, submit documents to the AD immediately.

3. Time for Document Submission: 

Should a Foreign Investor wait to complete all official documentation like TIN, VAT, etc., for intimation to Bangladesh Bank? The answer is “NO”. Please submit documents immediately.

4. Required Documents to Submit: 

Documents that Foreign Investors should submit to AD for intimation to Bangladesh Bank are –

I. Attested copy of the permission for the capital or share issue from the RJSCF/BSEC. (Certificate of Incorporation, MOA, AOA, Form XII)

II. Attested copy of the registration from the BIDA/BEPZA/BEZA (if any)

III. The authenticated copy of bill of entry evidencing clearance of the capital machinery from the Customs Authorities, copies of the related import permit, invoice, bill of lading/air waybill, etc. for issue of shares against foreign investment in the form of capital machinery.

5. NOC from Sender: 

If the Shareholder is not the sender of funds, submit a straight forward No Objection Certificate (NOC) from the sender of the fund. It must state that –

I. The sender does not have any objection if the shares are issued favoring the shareholder

II. The profit and sale proceed of shares will be taken to the shareholders country or at the shareholder's wish.

For example, Mr X, USA sent the fund and the Shares are issued favoring Mr Y, China. In this case, Mr X will give a NOC stating that Mr. X does not object to the shares favoring Mr Y, China. Mr Y can take the profit or sale proceeds of shares to China or at his wish.

6. Quarterly FDI Return: 

Every Foreign Direct Investor must submit FDI Return quarterly to its AD for onward submission to BB. This return should accompany a Quarterly Financial Statement, which need not be the Audited statements.

This return is straightforward in form. Download the Microsoft Excel format for Quarterly Foreign Direct Investment Return from website of Bangladesh Bank. 

 

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