Subsidiaries with under 50% foreign control eligible for service remittance: BB
Firms with less than 50% foreign ownership may remit payments if allowed by regulations and dependent on foreign investors or affiliates
The Bangladesh Bank has clarified that local subsidiaries with less than 50% foreign shareholding will be allowed to remit payments abroad for services received from or through their parent, group, or associated companies — subject to certain conditions.
In a circular issued today (24 June) to all scheduled banks authorised dealers (ADs) in the country, the central bank stated that the clarification expands the scope of eligibility to remit service payments.
It said companies with less than 50% foreign ownership may qualify if there are relevant regulatory provisions allowing such remittances in Bangladesh, and the business operations of the local company are dependent on its foreign investor or affiliated entities.
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Industry insiders say this clarification could ease operations for joint ventures and minority-foreign-owned firms reliant on global expertise, branding, or services.
Earlier, on 19 February, the Bangladesh bank allowed subsidiaries controlled by foreign parent or group companies holding more than 50% of the shares to remit service payments up to permissible limits.
According to the central bank, resident companies operating as subsidiaries of foreign companies in Bangladesh avail various services from their parent companies abroad. Considering this, and to facilitate transactions between subsidiaries and their parent or group companies, the new directive was introduced.
In the circular issued on 19 February, the central bank said the gross remittable amount (before source tax deduction) must not exceed 10% of the net profit in an accounting year. Moreover, the services obtained from the parent company must not be locally available and the subsidiary must be controlled by the parent company, holding more than 50% of shares.
It also instructed authorised banks to ensure that service payments made by subsidiaries are backed by valid contracts and invoices and are competitively priced. Additionally, the transactions must comply with tax regulations, including source tax, VAT, and transfer pricing laws.
