Repatriating profits from Bangladesh as a foreign investor requires adherence to the forex regulations set forth by the Bangladesh Bank (i.e. the central bank of Bangladesh). These regulations provide a framework for the repatriation of profits and aim to ensure transparency and compliance with local laws. The following discussion will shed light on the practical aspects of the repatriation of dividends and profits, salary income, royalty & technical know-how as well as the repatriation of capital by foreign investors in Bangladesh.
Legal basis for repatriation
The legal framework governing the repatriation for foreign investors consists of a number of laws, rules, and regulations, which include the Foreign Private Investment Act of 1980, which inclusively assures the repatriation of capital and dividend for foreign investors. Furthermore, the procedural aspects of the repatriation are governed by the Guidelines For Foreign Exchange Transactions, 2018 (Chapter 9 in particular) issued by Bangladesh Bank as well as various other regulations, circulars, and notifications issued by the Bangladesh Bank and the Bangladesh Investment Development Authority (BIDA).
1. Repatriation of dividends and profits from Bangladesh
Bangladeshi laws permit full repatriation of investments and dividends, subject to relevant taxes, Reinvestment of profit is considered as new investment.
Dividend income (both final and interim) can be remitted through an authorized dealer (“AD”, which is the commercial bank) of the non-resident shareholders. In this regard, an application has to be made in the prescribed form certified by an auditor. In addition to that, remittable dividends can also be credited to foreign currency accounts (“FC Accounts”) maintained by non-resident shareholders (FE Circular No. 29 (Jul. 2020) of Bangladesh Bank). The investors can invest balances in their FC accounts for purchasing securities or can remit them. Within one month of executing the remittance of the dividend, ADs are required to forward details of the remittances to the Foreign Exchange Investment Department at the Head Office of Bangladesh Bank for post facto checking.
Branch offices of foreign companies, banking, and insurance institutions incorporated in Bangladesh can remit post-tax profits to their head offices through AD. However, branch offices other than banks and insurance companies will need permission from BIDA and Bangladesh Bank for remitting profits.
2. Repatriation of salary from Bangladesh
Foreign citizens legally employed in Bangladesh can remit up to 75% of their monthly salary after deducting all admissible expenses, saving, and admissible retirement benefits through an AD. Furthermore, the net salary of a foreign national payable for the period of leave admissible as per the service contract duly approved by the government will be remittable.
3. Repatriation of Royalty and Technical Service Fees from Bangladesh
Industrial enterprises are not required to obtain prior permission from the BIDA for entering into agreements with foreign entities for remitting fees for the purpose of royalty, technical know-how, and technical assistance, provided that the total fees and other expenses do not exceed:
i) 6% of the previous year’s sales of the entity as declared in the tax return; and
ii) 6% of the cost of the commercial value of the imported machinery (in case of new projects)
It is important to note that once these aforementioned Agreements (which conform to the prescribed financial limit) are signed, they must be furnished to the BIDA for registration. Any agreement not conforming to the prescribed rules must be submitted to BIDA for prior approval.
4. Repatriation of capital and capital gains from Bangladesh
Repatriation of sales proceeds, including capital gain, of shares of companies listed in a stock exchange in Bangladesh may be made through an AD if such investment takes place through Non-resident Investor’s Taka Account (NITA) operation. Remittance of sales proceeds of shares of companies NOT LISTED in a stock exchange requires prior permission from the Bangladesh Bank, which is accorded for amounts not exceeding the net asset value of shares. Transfer of shares and securities from one non-resident to another non-resident requires no prior approval from Bangladesh Bank.
However, there are some exceptions, as elaborated in the Bangladesh Bank FEID Circular No. 01, dated June 18, 2020, with the detailed procedure (which is further simplified by BIDA Guidelines). As per the such process, the sales proceeds of non-resident equity investment in public limited companies not listed with the stock exchanges and private limited companies are repatriable without any approval from the central bank under example No. (a) and (b). However, no prior approval is required for example No. (c). In that case, the authorised dealer bank executing the transaction is required to take post facto approval from the central bank.
The situations are as follows –
(a) In cases where the valuation of the target company is determined through the net asset value approach based on the latest audited financial statements, there is no restriction on the amount of remittance from sales proceeds.
(b) In cases where the remittance amount from sales proceed does not exceed BDT 10 million or equivalent foreign currency, a professional valuation report issued by a merchant banker licensed by Bangladesh Securities and Exchange Commission (BSEC) or a chartered accountant listed by Bangladesh Bank is not required.
(c) In cases where the remittance amount from sales proceeds is above BDT 10 million but less than or equal to BDT 100 million or equivalent foreign currency and the fair value of which is determined in terms of valuation methods prescribed in FEID Circular No. 1 dated May 06, 2018. A professional valuation report issued by a merchant banker licensed by Bangladesh Securities and Exchange Commission (BSEC) or a chartered accountant listed by Bangladesh Bank is required. AD banks are also required to submit post facto reports detailing the transactions to the Foreign Exchange Investment Department at Bangladesh Bank Head Office within 30 days of remittances.
New developments on the horizon to ease the process of repatriation
The Govt. of Bangladesh reportedly decided to further ease the process of remitting capital to foreign investors, as reported by The Business Standards. As per the report, the lock-in period for foreign investors in the capital market could be reduced from three years to one year, including the introduction of e-signature to facilitate the process of share transfers for foreigners in non-listed companies. In addition, the Bangladesh Bank would ease the transfer and repatriation of the money earned from sales of shares where foreigners have not invested through the Non-Resident Investors’ Taka Account.