Offshore Company Setup and Bangladesh Law

Offshore company setup is one of the most misunderstood topics in Bangladesh. Online formation agents sell Dubai, Singapore, Hong Kong or BVI companies to anyone, but for a person or business resident in Bangladesh, incorporating or funding such a company without approval can breach foreign exchange law, anti-money laundering law and income tax disclosure rules.

This page explains, in plain terms, who can lawfully use an offshore structure, when Bangladesh Bank approval is needed, how the Income Tax Act 2023 treats foreign assets of residents, and the legitimate alternatives. It is written for Bangladeshi entrepreneurs and exporters, non-resident Bangladeshis, and foreign groups investing into Bangladesh through a holding company.

Offshore company setup by Bangladeshi residents: the legal position

Bangladesh maintains capital account controls. The Foreign Exchange Regulation Act 1947 and Bangladesh Bank's Guidelines for Foreign Exchange Transactions require prior permission before a resident sends money abroad for investment, buys or holds foreign securities, or holds foreign currency assets outside the permitted channels. Current account transactions such as paying for imports, travel or foreign education are allowed through authorised dealer banks within the rules; capital outflows for setting up or capitalising a foreign company are not freely allowed.

Since 2022, rules on equity investment abroad have allowed eligible export-oriented businesses to apply to Bangladesh Bank for permission to invest overseas, subject to conditions on export track record, the source of funds, the purpose of the investment and ongoing reporting. Applications are assessed case by case and approval is not automatic. Outside such approvals, a resident individual or company should assume that creating or funding an offshore company is not permitted.

• Paying formation fees abroad from a Bangladeshi card or account for an offshore company can itself be a foreign exchange issue.
• Keeping export proceeds, commissions or freelance income abroad instead of repatriating them can breach repatriation rules.
• Holding undisclosed foreign assets exposes residents to scrutiny under the Money Laundering Prevention Act 2012.

Tax disclosure of foreign assets and income

A Bangladeshi tax resident is taxed on worldwide income under the Income Tax Act 2023, and the statement of assets and liabilities filed with the return is meant to include assets held abroad. A share in an offshore company, its bank balance or its profits cannot simply be left out. Where a foreign country has also taxed the income, relief may be available under a double taxation agreement or the Act's foreign tax credit provisions.

Bangladesh also has transfer pricing rules for international transactions between associated enterprises, so an approved overseas subsidiary trading with its Bangladeshi parent must price those dealings at arm's length and document them.

Who can lawfully use offshore structures

• Foreign investors: a Singapore, UAE or other holding company can invest into a Bangladeshi subsidiary as foreign direct investment, with capital brought in through an AD bank and reported properly.
• Genuine non-resident Bangladeshis: those living and working abroad are generally treated as non-residents for foreign exchange purposes and can own foreign companies under the laws of their country of residence, though they must still observe Bangladeshi tax residency rules.
• Eligible exporters with Bangladesh Bank approval: approved overseas subsidiaries or branches used for marketing, distribution or acquiring inputs.
• Bangladeshi companies selling abroad: they can appoint foreign agents or distributors and pay commissions through banking channels without owning a foreign company.

Lawful alternatives to an offshore company for residents

Most residents asking about offshore companies actually need one of a few things: a way to receive foreign payments, a foreign-facing brand, or easier banking with overseas clients. These can usually be met lawfully inside Bangladesh.

• A Bangladeshi private limited company that invoices foreign clients and receives export proceeds through an AD bank, using the export retention quota facility where eligible.
• Exporters' foreign currency retention accounts and the facilities Bangladesh Bank provides for service exporters and IT/ITES businesses.
• Setting up in an economic zone, EPZ or hi-tech park for offshore-style incentives within Bangladesh.
• A formal application to Bangladesh Bank for overseas investment if your business meets the eligibility conditions.

Red flags and mistakes to avoid

• Agents promising a foreign company and bank account with no questions about your residency.
• Routing payments through hundi or informal channels to fund a foreign entity.
• Under-invoicing exports or diverting commissions to an offshore account.
• Assuming a foreign company is invisible: information exchange and bank due diligence make that unrealistic.
• Filing a tax return that omits foreign holdings or income.

How the process works

1. Residency and goal checkWe establish whether you are a resident for foreign exchange and tax purposes and what commercial objective the offshore idea is meant to serve.
2. Legal route assessmentWe map your options: a domestic structure, an inbound holding structure, or an application to Bangladesh Bank for outward investment.
3. Eligibility reviewFor exporters, we test the business against the current outward investment conditions and the documents Bangladesh Bank expects.
4. Application supportWhere eligible, we prepare the proposal, financial projections and supporting papers for submission through your AD bank.
5. Tax and reporting setupWe set up transfer pricing documentation, foreign asset disclosure and the periodic reports the approval requires.

Typical timeline: An initial assessment can be completed quickly once facts are clear; Bangladesh Bank applications for outward investment can take several months, depending on documents and the authority's processing, and approval is never guaranteed.

How Tax & VAT Associates helps

• Plain-language advice on whether an offshore structure is lawful for you
• Inbound holding-company structuring for foreign investors into Bangladesh
• Outward investment application preparation for eligible exporters
• Foreign asset and income disclosure in your income tax return
• Transfer pricing documentation for cross-border group transactions
• Domestic alternatives: company formation, export banking, EZ/EPZ options

Frequently asked questions

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Last reviewed: 6 October 2026. Bangladesh tax and regulatory rules change with each Finance Act, SRO and authority circular. This page is general guidance; confirm current requirements for your case before filing.