LICENSING PROCESS for Garments Business in Bangladesh:
Generally, establishing a garment factory or Garments Business in Bangladesh begins with registering a business with the Registrar of Joint Stock Companies, often known as RJSC. A public or private limited company is available. Private limited corporations have a fixed list of shareholders, but public limited Garments Business in Bangladesh can sell shares to the public to raise capital.
The incorporation process for any firm begins with a Name Clearance Certificate and continues according to the RJSC’s list of required documents. The Articles of Association and Memorandum of Association define the ownership and operation of the companies.
Depending on the needs of the RJSC, the paperwork requirements for Garments Business in Bangladesh will vary when foreign owners are involved. Foreign owners have the option of establishing a subsidiary business that is a limited liability corporation in which the parent company has ownership.
Bangladesh’s Top 10 Textiles Imports By Countries
| Sr No | Country Name | Import Value (in Million $) | Import Share Percentage (%) |
|---|---|---|---|
| 1 | China | 4161.97 | 35.11 |
| 2 | India | 1944.59 | 16.41 |
| 3 | Hong Kong, China | 1645.27 | 13.88 |
| 4 | Pakistan | 639.43 | 5.39 |
| 5 | Other Asia, nes | 339.48 | 2.86 |
| 6 | Korea, Rep. | 263.65 | 2.22 |
| 7 | Uzbekistan | 250.31 | 2.11 |
| 8 | Unspecified | 237.36 | 2 |
| 9 | Singapore | 235.49 | 1.99 |
| 10 | United Arab Emirates | 231.06 | 1.95 |
| Total Textile Import Market Size of Bangladesh : | USD $ 11.85 (in Billion) |
List of licenses for Garments Business in Bangladesh:
Once a firm has been established, the next necessary steps involve acquiring factory licenses. The following is an approximate list of the licenses that may be required for a garment factory to operate, depending on the type of operations. This list is not conclusive or determinative:
- Registration Certificate for Export (E.R.C)
- Import Registration Certificate (I.R.C)
- Approval of Factory Layout Plan.
- Fire License.
- Factory Permit
- Environment Certificate.
Chamber of Commerce membership 7.
Membership and certification of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA)
Certificate of Value Added Tax Registration - Trade License.
- Export Promotion Bureau Enrolment Certificate.
- Identification number for taxes (TIN)
Bank Solvency Certificate No. 13. - BOND License & General BOND (where applicable) etc.
Purchasing houses play a significant role in the apparel business. Some of the world’s largest brands place orders with local businesses and manufacturers via buying houses. Purchasing real estate can be organized as a Sole Proprietorship, Partnership, or Corporation.
The sole proprietorship for Garments Business in Bangladesh is the simplest type of ownership in which the owner is liable for all liabilities, including earnings, dues, and taxes. It can be established by acquiring a Trade License, which must be renewed annually. Bangladesh requires a minimum of Two and a maximum of Twenty partners for partnerships. It can be done through a registered partnership agreement with the RJSC.
BIDA authority and Garments Business in Bangladesh:
There is also the possibility of establishing a buying house as a subsidiary company whose shares are held by the parent company. The majority of foreign owners, however, prefer to have a branch office or liaison office dedicated to this business. This branch/liaison office is required to receive authorisation to conduct business from the Bangladesh Investment Development Authority (BIDA).
Aside from these exceptions, all foreigners who wish to work in Bangladesh must possess a Work Permit. The procedure begins with a request to BIDA for an E-visa recommendation, accompanied by all documentation requested by BIDA.
The expatriate is then required to apply to the respective Bangladesh Embassy or High Commission in their country, along with the prescribed documents, in order to receive the initial E-visa that will be used for travel to Bangladesh. The duration of this visa is often between Three and Six months.
After entering Bangladesh, the expatriate will have fourteen days to submit a Work Permit application to BIDA with the required documentation. The Work Permit is typically granted for one year by an inter-ministerial meeting at BIDA. The National Security Intelligence and the Special Branch of the Police conduct the Security Clearance process once the Work Permit is authorized.
They conduct the appropriate screenings and publish the names of all cleared expatriates. Only after obtaining a Security Clearance can the expatriate extend the initial E-visa to cover the duration of the Work Permit. Likewise, the FE visa is necessary for any family members accompanying an expatriate to Bangladesh.
LEGAL ISSUES in regards to Garments Business in Bangladesh:
As stated previously, the entire procedure is fraught with legal concerns from beginning to end. Aside from registration and licenses, there are challenges pertaining to land acquisition, which include acquiring the necessary land with the appropriate papers for the establishment of factories. Typically, establishing factories takes a substantial amount of land.
The ownership and title of the land must be appropriately transferred to factory owners who wish to establish factories on their own land. In accordance with Bangladeshi law, it is important to undertake a land search in order to verify the title and interest of the land’s legal owners.
According to Bangladeshi law, in order to transfer land ownership, it is essential to execute and register the sale of deed and modify the records to the name of the new owner (known as Mutation).
Banking law and Garments Business in Bangladesh:
As the clothing sector involves numerous international transactions, the execution of banking legislation raises legal concerns. When the materials for a garment are purchased from a foreign country, for instance, the company must obtain a Letter of Credit, and therefore the banking restrictions regarding foreign exchange come into play. Similarly, when a ready-to-wear item is shipped to its clients, the foreign cash must enter the country securely. Bangladesh Bank plays a significant role in regulating these transactions in accordance with Bangladesh’s foreign exchange legislation.
Contract law and Garments Business in Bangladesh:
There are legal complications resulting from the contracts. There are several bilateral agreements between nations, and disagreements are prevalent when deadlines are missed. Claims originate from parties in Bangladesh, for instance, against a party that was obligated to supply specific materials on time but did not.
Similarly, international corporations may file claims against Bangladeshi manufacturing for late deliveries. Since the majority of garments materials and garments themselves are carried by ship and by air cargo, these consignments can have legal consequences regarding the transfer of products via cargo. The majority of legal disputes involve breaches of international economic contracts, which are typically addressed by international arbitration.
Numerous legal difficulties surrounding termination, unfair dismissal, leaves, remuneration, etc. develop frequently due to the enormous number of workers in the industry. In recent years, workers and compliance departments have placed a premium on the working environment. The Bangladesh Labour laws require compliance with working hours, number of leaves, all employment perks, termination benefits, trade union issues, workers’ welfare issues, etc. The Department of Inspection for Factories and Establishments (DIFE) is the government agency charged with overseeing all labor-related matters.
Environmental Clarence certificate for Garments Business in Bangladesh:
Due to the size of the business in Bangladesh and the fact that the RMG sector is deeply anchored in the textile industry, its operations have environmental repercussions. Even though Environment Clearance Certificates are required to establish a plant, it is fairly uncommon for legal ramifications to result.
Description of the Tahmidur Rahman Remura Wahid TRW and its services
Tahmidur Rahman Remura Wahid TRW is one of the leading law firms in Bangladesh, with vast expertise representing foreign and domestic clients in the garments business. Over the course of its existence, Tahmidur Rahman Remura Wahid TRW’s work has earned an incredibly dependable reputation.
As a full-service law practice, Tahmidur Rahman Remura Wahid TRW is able to provide legal support in practically all sectors of the RMG industry, beginning with the name clearing, company articles and memorandum of association drafting, and RJSC registration. Tahmidur Rahman Remura Wahid TRW also offers assistance in acquiring various licenses, such as I.R.C, E.R.C, VAT, TIN, Trade License, etc.
Tahmidur Rahman Remura Wahid TRW specializes in all types of immigration concerns pertaining to expatriates and offers assistance in acquiring E-visas, FE visas, and work permits.
Regarding their expats, Tahmidur Rahman Remura Wahid TRW collaborates with some of the largest companies, both domestic and abroad. Additionally, account opening support and assistance with acquiring encashment certificates are provided. Tahmidur Rahman Remura Wahid TRW offers an entire division dedicated to financial and tax matters that can handle all tax matters, payroll, etc.
Tahmidur Rahman Remura Wahid TRW’s expertise in labor issues is unmatched, and the organization often offers guidance on all types of labor difficulties, including termination, payments, etc. Tahmidur Rahman Remura Wahid TRW’s legal team is comprised of exceptional attorneys who can effectively represent any RMG industry-related labor, contract, or pertinent matter in the Bangladeshi judicial system.
Importantly, in the RMG industry, where conflicts frequently arise between companies from various countries and time to resolve them is typically limited, parties typically choose for alternative dispute resolution.
Tahmidur Rahman Remura Wahid TRW has a very qualified staff for arbitration, mediation, and negotiation counsel. Overall, Tahmidur Rahman Remura Wahid TRW is a comprehensive service provider for all types of legal matters.
The labor laws of Bangladesh give a great deal of protection for workers against wrongful termination, as well as regulations governing layoff situations and the type of compensation workers can receive in these instances.
In the event of a layoff, employees with at least one year of service are entitled to compensation equal to one-half of their entire basic pay plus the full amount of housing allowances they would have received if they had not been laid off. The Employer has the option of retrenchment after the initial 45-day period of layoff. Redundancy is a permissible reason for retrenchment, which allows the owner to claim that there is no work available for the employees, who may then be laid off.
In conclusion, it is extremely difficult to predict the future state of the RMG industry in light of the current unanticipated crisis caused by the Novel Corona Virus. It has already cost the economy billions. Work must resume as soon as possible to recuperate the sector’s losses, but because this is a labor-intensive business, the struggle is currently more for survival than for the economy.
Taxation for Garments Business in Bangladesh:
The current general tax rate in Bangladesh is 32.5 percent, as stipulated by its legislation. Locally created limited liability companies are required to submit a variety of reports to the National Board of Revenue (NBR), including: opening a Tax Identification Number (TIN), submitting an annual return, and submitting an annual return for the previous year.
Monthly Tax Deduction Statement, Semi-Annual Withholding Tax Statement, Annual Statement Relating to Employee Tax Return Filing, Annual Statement Relating to Salary Paid by the Company to Employees. Quarterly Advance tax deposit, Annual tax return submission, representing the company at appeal/hearing sessions, Monthly VAT return, etc. Tahmidur Rahman Remura Wahid TRW may provide guidance and assistance to ensure that all regulatory compliances are met, allowing the business to operate without difficulty.
In conclusion, the RMG industry remains one of the most dynamic industries in the country. The Bangladesh government has declared the creation of new export processing zones due to its strong support for this industry. In addition, the government has authorized the construction of a deep-sea port and a second airport, as well as a substantial investment in the nation’s internal infrastructure, which will facilitate trade in the near future. The government of Bangladesh also encourages international investors to invest in the country. Considering the state of the industry, this may not be such a bad idea.
Bangladesh’s Top 10 Textiles Exports By Countries
| Sr No | Country Name | Export Value (in Million $) | Exporter Share Percentage (%) |
|---|---|---|---|
| 1 | United States | 5847.26 | 20.65 |
| 2 | Germany | 4450.47 | 15.72 |
| 3 | United Kingdom | 3294.19 | 11.63 |
| 4 | Spain | 1755.12 | 6.2 |
| 5 | France | 1688.27 | 5.96 |
| 6 | Italy | 1255.53 | 4.43 |
| 7 | Canada | 1031.78 | 3.64 |
| 8 | Belgium | 787.34 | 2.78 |
| 9 | Japan | 720.87 | 2.55 |
| 10 | Netherlands | 665.31 | 2.35 |
| Total Textile Export Market Size of Bangladesh : | USD $ 28.31 (in Billion) |
Future of RMG investment in Bangladesh and Garments Business in Bangladesh:
The Ready-Made Garments (RMG) industry is the leading exporter in Bangladesh. The sector has grown steadily over the past few years and continues to do so. The RMG sector is a labor-intensive industry with manufacturers located throughout the nation. In this industry, both domestic and international investors have made substantial investments.
It is not the most difficult industry to enter, particularly in Bangladesh, where the government has shown a great deal of foresight towards this area. The government has established export processing zones outside the ordinary industrial zones to help boost the productivity of this business. The establishment of factories requires a variety of permits from several government departments to protect the health, safety, and excellent working environment of the workforce and the business as a whole. Textiles and buying houses also play significant roles in the RMG business, with the former giving companies orders and the latter supplying raw materials.
Numerous businesses, including import/export, labor, and finance, among others, have a direct impact on the RMG industry’s performance. In light of this, the legal concerns surrounding the RMG industry have also been substantial. From the formation of a corporation to the establishment of a factory, which is the minimal amount of groundwork any entity must do to thrive in this sector, there are a multitude of legal services to be supplied, particularly in terms of licenses, such as trade license, TIN, VAT, I.R.C, E.R.C, etc. The presence of expatriates, who require a work permit to work in the country, is also a result of the large number of foreign investors investing in this particular sector.
Tahmidur Rahman Remura Wahid TRW is one of the best full-service law firms in Bangladesh, competent to provide any legal industry solutions for the RMG industry. Tahmidur Rahman Remura Wahid TRW has extensive experience in company formation and license acquisition, as necessary in this instance. Tahmidur Rahman Remura Wahid TRW also has departments dedicated to expats’ immigration issues and the financial department, which handles issues such as taxation, payroll, etc.
Are you planning to do Garments Business in Bangladesh?
Garments Business in Bangladesh with Tahmidur Rahman Remura: TRW: The Law Firm in Bangladesh:
The legal team of Tahmidur Rahman, The Law Firm in Bangladesh: TRW, The Law Firm in Bangladesh are highly experienced in providing all kinds of services related to forming and incorporating a Garments Business in Bangladesh. For queries or legal assistance, please reach us at:
E-mail: info@trfirm.com
Phone: +8801847220062 or +8801779127165
Address: House 410, Road 29, Mohakhali DOHS