Foreign Firms Must Now Register with BIDA for Govt Projects in Bangladesh — Here’s What You Need to Know (New Update from BIDA)

Bangladesh has introduced a major change in the way foreign companies operate on government projects. If you’re a foreign contractor, planning to set foot in the country for a government venture — whether solo, in a joint venture (JV), or even as a subcontractor — you now need to register with the Bangladesh Investment Development Authority (BIDA).

This move is all about transparency, accountability, and making sure that financial flows are traceable and above board. Here’s a breakdown of what’s happening and what it means for businesses.

🔍 Why the New Rule?

According to the Bangladesh Bank, many foreign firms have been operating under the radar — not registering with BIDA and often not acquiring work permits for their employees. This has raised concerns over:

• Tax evasion
• Unclear capital inflows
• Unfinished projects
• Lack of transparency in operations

To address this, Bangladesh Bank rolled out a guideline titled “Guidelines for Operations of Business in Bangladesh by Joint Ventures/Consortiums/Associations (JVCA) Having Foreign Partners” on November 20, 2023. Government agencies have since started making BIDA registration mandatory for foreign firms bidding on tenders.

📋 What Does This Mean for Foreign Firms?

If you’re a foreign firm eyeing government contracts in Bangladesh, here’s what you need to keep in mind:

• BIDA registration is mandatory before participating in government tenders — even if you’re entering as a joint venture or subcontractor.
• You must report to the Bangladesh Bank (FEID Division) within 30 days of BIDA registration, per the Foreign Exchange Regulation Act, 1947.
• Bangladesh Bank approval is required before sending profits back to your home country.

💼 Long-Term vs Short-Term Projects: Who Benefits?

Experts say the move could be a boon for firms with long-term goals in Bangladesh.

According to M Masrur Riaz, Chairman of Policy Exchange Bangladesh:

“This initiative is highly positive for foreign firms operating long-term, bringing in personnel and repatriating capital. But it might discourage those focused on short-term projects.”

That means companies that were previously dipping in and out of the country for smaller projects might now think twice — potentially leaving a gap in technical expertise for local partners.

🏗️ Which Sectors Are Affected?

The new requirement impacts a wide range of industries, including:

• Roads and Highways
• Railways
• Bridges
• Power
• Energy and Mineral Resources
• ICT

Over 100 foreign contractors from countries like India, China, Japan, South Korea, and the U.S. are currently involved in infrastructure development projects in Bangladesh.

In fact, this policy came to the forefront recently when China Harzone Industry Corp Ltd, a Chinese firm, was provisionally awarded a project without BIDA registration. The tender was later put on hold until registration was completed.

📑 Other Compliance Requirements

Foreign JV firms must also:

• Sign a valid agreement with a Bangladeshi entity
• Obtain TIN, BIN, and VAT registration from the National Board of Revenue
• Maintain audited financial statements as per Bangladesh Financial Reporting Standards
• Open local bank accounts and report transactions through authorised dealer (AD) banks
• Ensure work permits for foreign employees and disclose salaries in financials
• Contribute to the Workers’ Profit Participation Fund, as per the Labour Act 2006

For profit repatriation, firms need to provide:

• Audited financials
• Dividend approval
• Tax assessments
• Proof of capital contribution
• A one-year bank statement

For office closures and loan repayments, additional documentation is needed, such as:

• Office closure permission
• Project completion certificates
• Final audit reports
• Proof of full tax and employee payments

📝 Final Thoughts

Bangladesh is tightening its regulations to ensure transparency and improve governance — especially when it comes to foreign firms tapping into public funds. While this may raise the bar for compliance, it also promises a more accountable and fairer business environment for all.

If you’re a foreign company considering opportunities in Bangladesh, it’s time to get your paperwork in order and play by the rules. This isn’t just about ticking boxes — it’s about being part of a system that’s moving toward greater transparency and trust.

Why VAT is So Important for an Organization in Bangladesh: A Deep Dive into the VAT and Supplementary Duty Act, 2012

As an entrepreneur or business owner in Bangladesh, understanding the importance of Value Added Tax (VAT) and how it impacts your business is crucial for long-term success and legal compliance. The VAT and Supplementary Duty Act, 2012, introduced key reforms that changed how VAT works in Bangladesh. Today, VAT is not just a tax obligation—it’s a strategic aspect of running a business efficiently and staying competitive in the market.

In this blog post, we’ll explore why VAT is so important for organizations in Bangladesh, how the VAT system works under the VAT and Supplementary Duty Act, 2012, and the benefits of staying compliant.

📚 Understanding VAT and the VAT and Supplementary Duty Act, 2012

VAT (Value Added Tax) is an indirect tax that is levied on the value added at each stage of production or distribution. It’s paid by the consumer, but businesses are responsible for collecting and remitting the tax to the government.

The VAT and Supplementary Duty Act, 2012, is the central piece of legislation governing VAT in Bangladesh. It replaced the earlier VAT Act of 1991 and aimed to modernize and streamline VAT practices across the country. The Act introduced several reforms designed to make VAT collection more transparent, efficient, and business-friendly, such as:

• Digital VAT registration
• Online filing of returns
• Improved input tax credit (ITC) mechanisms

This system has made it easier for businesses to comply with VAT regulations, and it has enhanced the role of VAT in the country’s economic development.

🏢 Why VAT is Essential for Businesses in Bangladesh

1. 🛡️ Legal Compliance and Avoiding Penalties

In Bangladesh, VAT is mandatory for businesses that meet a certain revenue threshold (usually BDT 3 million per year or more). Compliance with VAT laws is essential to avoid:

• Heavy fines and penalties for non-compliance
• Audits from the National Board of Revenue (NBR)
• Legal action and possible business disruptions

The VAT and Supplementary Duty Act, 2012 outlines clear obligations for businesses, including VAT registration, filing returns, and payment deadlines. By adhering to these regulations, your business avoids costly legal complications.

2. 💼 Enhancing Business Credibility and Trust

Being VAT-registered and compliant not only keeps you within the bounds of the law but also adds to your business’s credibility. For many customers, especially large corporations or government agencies, working with a VAT-registered business is a sign of professionalism and reliability.

If you want to:

• Supply goods or services to large enterprises
• Secure government contracts
• Build trust with investors and stakeholders

…you need to be VAT-compliant. It’s not just about following the law—it’s about building a reputable and trustworthy brand.

3. 💸 Access to Input Tax Credit (ITC)

A key benefit of the VAT system in Bangladesh is the Input Tax Credit (ITC). This allows businesses to deduct the VAT they’ve paid on purchases (input tax) from the VAT they collect on sales (output tax). This system helps to:

• Reduce overall tax burden by offsetting VAT payments on raw materials or goods purchased for resale
• Improve cash flow by minimizing taxes paid upfront
• Lower production costs, which can help you stay competitive in pricing

By taking advantage of ITC, VAT-compliant businesses effectively pay taxes only on the value they add to products or services, not on the entire value of the transaction.

4. 📈 Better Financial Management and Planning

The VAT system requires businesses to keep detailed records of sales, purchases, and VAT payments. This leads to better financial management, as businesses are forced to:

• Maintain accurate accounting systems
• Regularly track revenue, expenses, and tax obligations
• File monthly VAT returns and maintain records of all transactions

These practices help improve overall financial transparency and make it easier to forecast future revenues and expenses.

For entrepreneurs, proper financial records also increase the chance of obtaining loans or investment because they demonstrate sound financial practices and organizational discipline.

5. 🏦 Improved Access to Credit and Investments

Banks, financial institutions, and investors often require businesses to provide proof of tax compliance when applying for loans or investment. Being VAT-registered and up to date with your tax filings makes your business more credible in the eyes of lenders and investors.

Having accurate and timely VAT records can:

• Improve your creditworthiness
• Demonstrate business viability to potential investors or stakeholders
• Increase your chances of securing funding for expansion

6. 🌍 Contributing to National Development

One of the most significant aspects of VAT is that it contributes directly to the government’s revenue, which is then used to fund important public services such as infrastructure development, healthcare, education, and welfare programs. By paying VAT, you’re helping the government develop the nation’s economy and provide essential services to the population.

As a business owner, this contribution enhances your organization’s social responsibility and gives your company a positive public image.

⚠️ What Happens If You Don’t Comply with VAT Laws?

Failing to comply with VAT laws in Bangladesh can have severe consequences, including:

• Fines that can reach up to 50% of the unpaid VAT amount
• Interest charges on overdue VAT payments
• Audits and investigations, leading to additional penalties
• Reputation damage that can affect customer trust and future business opportunities

Moreover, not being VAT-registered means your business won’t have access to the Input Tax Credit, effectively increasing your overall tax burden and reducing profitability.

📌 How to Stay VAT Compliant in Bangladesh

Staying compliant with VAT regulations in Bangladesh is not difficult if you follow these steps:

1. Register for VAT online through the NBR portal if your business meets the required threshold.
2. Issue VAT-compliant invoices for all sales, showing the VAT amount separately.
3. Maintain accurate records of all sales, purchases, and VAT payments.
4. File monthly VAT returns (Mushak-9.1) on time and pay the due VAT to the NBR.
5. Consult with a tax consultant or VAT expert to ensure your business is fully compliant with all requirements.

🚀 Conclusion

For any business in Bangladesh, VAT compliance is not just a legal obligation—it’s a strategic move that can unlock growth opportunities, improve financial management, and enhance your company’s credibility. The VAT and Supplementary Duty Act, 2012 has made it easier than ever to comply, offering businesses a more transparent, automated, and streamlined tax process.

By staying compliant with VAT laws, you not only safeguard your business against legal penalties but also contribute to national development and position your organization for long-term success.