December 1, 2021, 6:33 am

Abu Taher Bappa

2021-03-25 08:00:56 BdST

Outbound remittance up to 6.0pc allowed sans approval

The Bangladesh Investment Development Authority (BIDA) has allowed repatriation of outward remittance up to 6.0 percent of the previous year's sales value, for companies in commercial operation, without its approval to facilitate foreign investors.

With this relaxed measure, time for repatriation for payment of royalty, technical knowledge/know-how fees, technical assistance fees and franchise fees will be reduced by 15 days from now on.

To this effect, the BIDA has issued the 'Guidelines for outward remittance repatriation for payment of royalty, technical knowledge/technical know-how fees, technical assistance fee(s) and franchise fee(s)-2020', dated March 20.

It was a long-awaited demand of the foreign investors in Bangladesh.

BIDA executive chairman Sirazul Islam said the authorities have eased the process for foreign investors to repatriate remittance to a certain level without the BIDA's approval.

"It will reduce time of repatriation of outward remittance by 15-20 days and cut cost of repatriation as they don't have to pay any fees to the BIDA."

They could remit directly through AD (authorised dealer) banks without coming to the BIDA from now on, Mr Islam continued.

However, contract between a company registered in Bangladesh and a company registered outside of Bangladesh will have to be pre-endorsed by the BIDA to avail the facility.

After the endorsement, Mr Islam said, foreign investors would not require obtaining the BIDA's approval unless they bring any changes in the agreement.

"We've found some foreign investors, especially those from Germany, facing difficulties in repatriating different fees to their country," he added.

Many franchises coming to the country would also get benefit from the simplification of the process.


According to the circular, permissible amount of fee(s) to be remitted without approval has been set up to 6.0 percent, for the projects under implementation, of the total accumulated clearing and forwarding value of imported machinery of the concurrent year(s) before going into commercial operation.

It would also be up to 6.0 percent of the previous year's sales (excluding value-added tax), as declared in the income tax returns, for the projects in operation.

Shah Mahboob, director general of foreign investment at the BIDA, said foreign investors previously needed to come to the BIDA for approval to send each instalment of their remittance.

Fees were applicable ranging from Tk 10,000 to Tk 0.1 million based on the size of their remittance, he said.

Mr Mahboob, however, said it was not decided yet whether the BIDA would charge any fees at the time of prior endorsement of the agreement.

According to the circular, fee(s) more than $0.1 million will be allowed to be remitted in instalments.

"The 50-percent approved claim will be allowed to remit in the first year, 30 percent in the second year and the rest 20 percent in the third year."

All advance payments, if allowed before generating revenue, must be adjusted within one year of going into commercial operation by an entity, it added.

In case of recurring payments of fees to contractor(s) in a project, required by any obligatory agreement, maximum 6.0-per cent sales revenue (excluding VAT) might be allowed, the circular said.

However, the amount should be consistent with the declared amount of repatriation in the previous year's income tax returns or VAT returns.

VAT returns will be considered only for the first year in case of a new project.

"The payment of such fee(s) may be allowed on a quarterly, semi-annual and annual basis as stipulated in the agreement," the circular said.

The BIDA has tagged three conditions to avail the facility.

Private industrial enterprises as registered by the BIDA and defined in section 15 (3) of the BIDA Act-2016 will be considered for such permission.

All proposals for outward remittance will be considered based on the value addition of the transaction.

Transaction of no or minimum value addition, transaction made without following arm's length principle and/or transaction for rudimentary nature will be discouraged.

Fee(s) will be allowed to remit by the local companies to their foreign collaborator usually on a yearly basis.

This condition of remittance may be relaxed in case of genuine contractual obligation for any transaction.

Advance payment of remittance will be allowed, only with prior approval from the BIDA in each and every case of repatriation, on some conditions.

Technical knowledge/know-how or assistance fee(s) up to $10,000 per agreement will be allowed to remit once a year.

This advance payment must be adjusted with the accumulated C&F value of import of machinery or with the sales revenue of the company after going into operation.

Advance amount beyond the said amount will be allowed only on the terms and conditions mentioned in the contract (verified/endorsed by BIDA) signed between the local company and the foreign company.

"Any kind of advance payment as stipulated in the guidelines must be adjusted with the 6.0 percent of the C&F value of all imported machineries or with the 6.0 percent of the revenue/sales within two years of starting commercial operation."

The BIDA might consider any request to extend the duration of adjustment in cases of unforeseeable situation, the circular cited.

Application for allowing advance payment must be accompanied with bank guarantee, affidavit or any other appropriate guarantee, it said.

In case of sending fees beyond the permissible amount, the companies will need prior approval of BIDA despite having BIDA's endorsement in their agreement.

On transfer pricing issue, if the proposed remittance is being paid or remitted to a sister concern or parent or subsidiary of the applicant company, a third-party assessment should be submitted explaining whether the arm's length principle has been followed in the said transaction in accordance with the rules stipulated in the Income Tax Ordinance-1984.

When contacted, a member of the Foreign Investors Chamber of Commerce and Industry said they are scrutinising the circular before commenting on it.

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