Bangladesh Bank has issued new guidelines for Joint Ventures, Consortiums, and Associations (JVCA) involving foreign partners. These updates aim to simplify reporting, financial management, and compliance for businesses operating in Bangladesh.
The central bank stated that JVCAs with foreign partners involved in implementing government development projects have exhibited varying practices in areas such as reporting activities, cross-border transactions, financial preparation, dealings with branch offices, profit remittances, tax payments, and return submissions.
1.?Establishment and Reporting
- Joint Ventures, Consortiums, and Associations JVCA entities need Project Permission from the Bangladesh Investment Development Authority (BIDA).
- They must report their operations to Bangladesh Bank within 30 days of approval.
- Activities must follow BIDA permissions, and tax registrations (TIN/BIN/VAT) are mandatory.
2.? Banking Transactions
- All financial transactions must go through designated accounts with authorized banks.
- JVCAs can open local currency accounts in different banks or branches, but changes must be reported to the Bangladesh Bank.
- Foreign currency accounts can be opened for international projects without prior approval but must follow contract terms.
- Auditors will verify tax calculations and compliance with financial regulations.
3.? Financial Management?
- JVCA entities are required to prepare separate financial statements, adhering to Bangladesh Financial Reporting Standards (BFRS).
- Auditors will verify tax calculations and compliance with financial regulations.
- Income from both local and international sources must be included in the books of accounts.
- Tax compliance, including TIN/BIN registration and regular tax filing, is mandatory.
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4.?Profit Remittance and Loans
- Profit remittance needs Bangladesh Bank approval with required documentation.
- Loans can be taken under specific rules, including interest-free loans from head offices.
5.??Other Key Provisions
- JVCA entities must comply with labor laws, including the Workers’ Profit Participation Fund (WPPF).
- When a project is completed, bank accounts must be closed, and the Bangladesh Bank must be notified.
- The import of machinery as capital contribution is permitted, but relevant documents, must be retained.
- Branch offices with project offices cannot transfer funds to JVCA without prior approval of BB's FEID (Foreign Exchange Investment Department).?
- JVCA is allowed to open a Foreign Currency (USD) Account.?
- JVCA can open a bank account outside Bangladesh by obtaining approval from BB's FEID.?
- Only work order payments are permitted to be credited to the JVCA's bank account.?
- JVCA can secure loans from local banks.?
- For obtaining short-term loans, JVCA requires approval from the project authority.?
- Branch offices can provide loans to JVCA with approval from BB.?
- BB approval is mandatory for the repatriation of profits.?
- BIDA's approval is required for sending technical assistance fees and technical know-how fees.?
- Machinery can be used as capital.?
- BIDA's approval is required for obtaining long-term loans.?
- The remaining balance can be transferred to the branch office with BIDA's approval.?
These guidelines will be greater transparency, improved compliance, and streamlined processes for JVCAs operating in Bangladesh. Businesses will benefit from clearer regulations, reducing the risks of non-compliance and ensuring smoother cross-border transactions. The government will also gain better oversight of JVCA operations, leading to enhanced accountability and effective monitoring of tax contributions, financial reporting, and labor law compliance. Ultimately, these measures aim to create a more business-friendly environment while maintaining regulatory integrity.
1.????? Foreign Exchange Policy Department, Bangladesh Bank - FEID Circular No.-02.
2.????? BIDA Guideline 2023
