ICT industry and Software business in Bangladesh
The ICT industry can be divided into two broad areas, namely IT and ITES.
IT services include two types of services:
• Application Services (comprising system integration, IT infrastructure, and consulting;
• Engineering Services (including development and testing of hardware and software)
The ITES category can be further subdivided as follows:
• Outsourcing of Processes Horizontally (which include call centers and business process management such as HR and Supply Chain functions),
• Process Outsourcing Vertical (which include banking, manufacturing, telecom, pharmaceutical),
• Knowledge Process Outsourcing (business research, animation, data analytics, and other specialized procedures) and
• Computerized Services
Software Business in Bangladesh and IT industry in brief statistics:
Number of ICT Companies Registered: 4,500+
The number of BASIS member firms: 1,03
Software demand within the domestic market: $1.18 billion
Number of IT/ITES Professionals: three million (appr.)
The IT/ITES market price exceeds $400 million (Ministry of Finance)
Professionals: three million (appr.)
The market price for IT/ITES exceeds $400 million (Ministry of Finance)
Bangladesh’s leading outsourcing destinations include the United States, the United Kingdom, Canada, and Australia, where over 500 IT companies presently export.
LICENSE AND REGISTRATION PROCESS for Software business in Bangladesh
There are numerous ways for an investor to form a firm in the ICT industry, including sole proprietorship, partnership, and limited liability company. Foreign investors are not eligible for the first two alternatives.
SOLE PROPRIETARY RIGHTS for Software business in Bangladesh
In Bangladesh, a Sole Proprietorship is not a separate legal entity, hence it is not distinct from its owner/ proprietor. In the event that any liability occurs during the course of business, the owner will be held personally liable. Any Bangladeshi citizen at least 18 years old may establish a sole proprietorship.
Registration Method for Software business in Bangladesh
In order to establish a single proprietorship for ICT business in Bangladesh, the following actions must be taken:
Step 1: Proposed Bangla business name
Step 2: Obtaining a Business License
General Licenses for Software business in Bangladesh
Trade License —- This is the fundamental need for business ownership. This can be obtained by submitting an application to the appropriate City Corporation or local government together with the office lease or rental agreement. Entities that will operate in the commercial sector must apply for a commercial trade license, while those that will operate in the industrial sector must apply for an industrial trade license.
TIN Certificate —- The application must be submitted through the National Board of Revenue’s online portal (NBR).
VAT certificate —— The application must be submitted using the National Board of Revenue’s online portal (NBR).
Partnership Registration Method for ICT business in Bangladesh
The Registrar of Joint Stock Companies and Firms of Bangladesh (“RJSC”) must register a partnership business.
STEP 1- CHOOSING THE PARTNERSHIP NAME
The Registrar of Joint Stock Companies And Firms must grant a Name Clearance for the proposed name of the Partnership Business (RJSC).
STEP 2 – PREPARE A PARTNERSHIP DEED
In compliance with the Stamp Act, the Partnership Deed must be prepared on stamp paper, and all partners must sign it before having it notarized.
STEP 3- REGISTER PARTNERSHIP DEED WITH RJSC
The partnership agreement and a completed Form I must be submitted to RJSC. The RJSC officials will analyze the submitted documents and issue a Certificate of Registration.
Step 4: Timeline –
It takes approximately two weeks to get the Certificate of Registration from RJSC after submitting the required papers in accordance with STEP 3.
General Licenses for ICT business in Bangladesh:
TIN Certificate —
The application must be submitted through the National Board of Revenue’s online portal (NBR).
Trade License –
The application, along with the applicable government fees, must be submitted to the relevant municipal corporation office/local government office, along with the business paperwork and the lease/rent deed of the Business’s office space. Entities that will operate in the commercial sector must apply for a commercial trade license, while those that will operate in the industrial sector must apply for an industrial trade license.
VAT certificate —
The application must be submitted using the National Board of Revenue’s online portal (NBR).
PRIVATE LIMITED COMPANY and Method for company formation:
The steps involved in establishing a company are as follows:
Company Formation for Software business in Bangladesh:
a Name Clearance must be obtained from RJSC for the proposed name of the company.
The second step is to draft and sign the following:
• The company’s Memorandum and Articles of Incorporation;
• Form IX: Consent of director to act has been completed;
• Form XII: Particulars of the directors, manager, and managing agents has been completed.
STEP 3 –
Opening a bank account for the Bangladeshi company and transferring the foreign owners’ share capital (not required for local shareholders)
The bank must give an encashment certificate for the international transfer (not required for local shareholders)
The documents specified in step 2 must be signed and submitted to the RJSC along with the encashment certificate and the incorporation fees.
The RJSC will conduct a document verification and give the certified incorporation paperwork.
General Licenses for Software business in Bangladesh:
TIN certificate – After the company has been properly created, an online application must be submitted to get the certificate. In addition, the application requires a local phone number and a registered office address.
Trade License – The application, along with the applicable government fees, must be sent to the relevant city corporation office, along with the company’s paperwork and the lease/rent deed for its office space. Entities that will operate in the commercial sector must apply for a commercial trade license, while those that will operate in the industrial sector must apply for an industrial trade license.
The application for a VAT certificate must be submitted via an internet portal, together with company documentation.
Specific licenses/approvals for Software business in Bangladesh:
These entities, namely If a company, sole proprietorship, or partnership want to import, they must also hold a BASIS membership and an import license.
Process for BASIS Membership Enrollment for Software business in Bangladesh:
To become a BASIS Member (General or Associate), the following steps must be taken:
Complete the online Membership Application Form
2.The following attachments must accompany the form:
• Copy of a current business license indicating the nature of the enterprise in accordance with the scope of membership criteria
• Copy Certificate of Taxpayer Identification Number.
• Certified copy of the most recent Income Tax Clearance Certificate
• Brief profile of the entity on the letterhead of the entity (including human resources with organogram, list of infrastructure, area of business with the product line up, client List etc.).
• Memorandum and Articles of Association must be provided for corporations, and a Partnership Agreement for partnerships.
• Details about the representative’s educational and professional background, along with two copies of his or her portrait and signature in passport size.
• Copy of the Board Resolution in favor of the BASIS representative.
• Printed company pamphlet (if available)
Fees for Membership for Software business in Bangladesh:
• One Time Admission Fees-Tk. Twenty thousand dollars for General and Tk. 10,000 for an Associate membership (non-refundable)
• Annual Subscription Fees based on Membership Type
Conditions of membership subscription:
• All documents (including the application for membership) must be attested by the entity’s owner.
• Two references from recognized BASIS member firms are required on the application form (List available at www.basis.org.bd)
After BASIS Secretariat verifies the information, they will transmit the application to the Membership Approval Committee for their recommendation, followed by the Executive Council for approval.
Import Registration Certificate (IRC) – Entities importing products and/or services are required to get IRC. IRC is a crucial certification for investors that wish to import ICT items or equipment.
IRC applications must be submitted to the Office of the Chief Controller of Imports along with the entity’s incorporation documentation, TIN certificate, trade license, bank solvency certificate, chamber of commerce membership certificate, and applicable government fees. The certificates must be renewed each year.
Certification of service providers for ridesharing Software business in Bangladesh
According to the 2017 Ride Sharing Guidelines, Ride Sharing Service Providers such as Uber, Pathao, and Shohoz are required to receive an enrollment certificate. The service provider must be a limited liability business, and the following requirements must be met to get this certificate:
• Application must be submitted online to BTRC using Form “Ka”
• Submit a copy of the service provider’s E-TIN certificate, VAT certificate, and other pertinent documents, together with the required government fees of BDT 1,000,000
Upon verification of the application and supporting documentation, a one-year certificate will be issued, which must be periodically renewed. The certificate’s renewal fees shall be BDT 10,000.
In accordance with the same 2017 regulations, the vehicles used by ride-sharing service providers must also be registered. To receive such a certificate, the following requirements must be met:
- Application must be submitted online to BTRC using Form “Ga”
- Provide a copy of Registration certificate,
- up-to-date fitness certificate and
- current tax token for the vehicle
- the driver’s license must be current
- Identification of the owner and driver by nationality
- Certificate of E-TIN issued to the vehicle owner.
Upon verification of the application and supporting documentation, the certificate will be issued for a three-year period that must be periodically renewed. The renewal payments for motorcycles will be BDT 500, while those for all other vehicles would be BDT 1,000.
LEGAL ISSUES in regards to Software business in Bangladesh:
Annual General Compliances of Business Entities – Entities are needed to comply with annual filing obligations, such as updating trade license, BASIS membership, IRC, submitting taxes, and updating annual flings with the RJSC for limited liability corporations.
Implications of Contract Law – The entities’ relationships with those who provide products or services to the business are an integral component.
There must be a vendor agreement in place prior to receiving any goods or services from a vendor. Vendor Agreements can include a wide range of services, including software, professional services, office supplies, technical services, event organizing, marketing, and consultants. In the event of a dispute, the agreement, in addition to the applicable laws, plays a crucial part in resolving the dispute; therefore, it is crucial to protect one’s interests when drafting agreements.
The employee’s appointment letter must include their job title, job description, compensation, benefits and welfare, applicable working hours and leaves, etc. It is important to note that the employer cannot, by contract or appointment letter, give less than what is required by the labor laws. It is also the responsibility of the employer to ensure a safe and healthy work environment.
Foreign Exchange laws for Software business in Bangladesh –
Entities having foreign investors must ensure that the first investment is made through a legitimate financial channel, e.g., a wire transfer. Foreign investors should transfer the share capital amount from their foreign bank account to the business’s bank account with the notation “investment in the share capital of (Company Name)” at the time of company incorporation or share purchase.
This will demonstrate that the investment was made through the proper channels, and when remitting the profit, these initial investment paperwork and information will facilitate a smooth transfer in accordance with Bangladesh Bank regulations.
Ride Sharing App Guidelines for Software business in Bangladesh
– Ride Sharing Guidelines 2017 mandates that providers of ride-sharing services adhere to a number of criteria and requirements, including the ones listed below.
The ride-sharing service provider’s software application must be approved by BTRC or other relevant government agencies.
The software application must include an SOS button that, when activated, automatically sends the driver’s details and the passenger’s GPS location to 999.
The ride-sharing service provider shall maintain strict confidentiality about the ride-related information received, including driver, owner, and passenger information. The information on each ride must be maintained by the service provider for at least three months.
The software application must include a complaint receiving option and notify the complainant of the complaint’s resolution.
The ridesharing service provider shall never assert control over the automobiles registered with their service.
The service provider shall enter into a contract with the vehicle owner and the driver in which the rights and responsibilities of all parties are spelled out and the parties have the opportunity to terminate the contract with a one-month notice period.
The service provider is only permitted to register the car one year after Bangladesh Road Transport Authority has registered the vehicle (BRTA).
Mobile application-based meal deliver service –
There is currently no specific rule governing restaurants’ mobile application-based food delivery services. However, they shall be required to obtain a license from the licensing authority under the Ministry of Posts, Telecommunications and Information Technology in accordance with the Mailing Operator and Courier Service Rules, 2013 as they fall under the definition of courier services according to the aforementioned Rule and the Post Office Act, 1890.
Mobile Financial Service for Software business in Bangladesh-
Bangladesh Bank may permit Mobile Financial Services such as- Disbursement of inward foreign remittances, Cash in /out using mobile account through agents/Bank branches/ ATMs/Mobile Operator’s outlets, Person to Business Payments, Business to Person, Government to Person Payments,Person to Government Payments, Person to Person Payments (One registered mobile Account to another registered mobile Account), and other payments such as overdrawn facsimile balances.
• In order to provide this service, Bangladesh Bank authorization must be obtained.
• The interested bank must give Bangladesh Bank with complete information about its services, including a rough implementation schedule.
• Executed contracts/MOUs incorporating a Service Level Agreement (SLA)
Before launching the product, contracts should be submitted between banks and their partners/agents.
• The bank will pick the Cash Points/Agents, and a list containing their names and addresses will be given to the Department of Currency Management and Payment System (DCMPS), Bangladesh Bank, and updated on a monthly basis.
• The inbound international remittance transfer arrangement via specified Cash Points/Agents will only be used for local currency delivery.
• The platform should not be utilized for international outbound remittances without the prior approval of the Bangladesh Bank.
• Bangladesh Bank has the right to withhold, stop, or revoke approval for the provision of MFS services if it deems any activity by a system participant to be detrimental to the public interest.
• A ‘Mobile Account’ has been established for each user in order to utilize MFS with the necessary documentation.
• The Bangladesh Bank shall determine the transaction limit and overall limit.
• Banks and their partners must comply with Anti-Money Laundering and Countering the Financing of Terrorism regulations.
• MFS transaction records must be kept for a minimum of six (6) years from the date of entry creation. If requested by its customer or the Receiving Bank(s), the Participating Bank(s) must supply transaction-related information in the form of a printout or reproduction of Banks.
Information and Communication Technology Act 2006 for Software business in Bangladesh –
To legally validate and provide security for Information and Communication Technology and other relevant matters, ICT ACT 2006 is the governing law. This law determines the validity of Digital Certificates. The ICT law gives legal recognition for electronic documents and a framework to promote electronic commerce, m-commerce, and electronic filing, e-. It also gives guidelines for storing electronic records of deeds, information, etc.
It also addresses matters pertaining to – License, such as license application, renewal, cancellation or suspension, license display, license surrender, etc. This statute grants the controller the authority to investigate and access computer-stored information. ICT law also provides a framework for investigating and mitigating cybercrime. The Information and Communication Technology Act, 2006 is amended by the ICT ACT 2008 (Amendment) and ICT ACT 2009 (Amendment).
Relevancy of Digital Security Act of 2008 Software business in Bangladesh:
– This Act is enacted to ensure National Digital Security and to implement legislation covering Digital Crime Identification, Prevention, Suppression, and Trial, as well as other connected topics. The act addresses preventative measures, such as the authority to remove or limit certain data-information that risks Digital Security. If a cyber or digital attack occurs, or if cyber or digital security is compromised, the Emergency Response Team takes prompt corrective action.
This act includes crimes and punishments such as punishment for Illegal Entrance in Critical Information Infrastructure, Illegal Entrance in computer, digital device, computer system, etc. and punishment, damage of computer, computer system, etc. and punishment, offenses relating to Computer Source Code Change and Punishment, Punishment for any propaganda or campaign against liberation war, cognition of liberation war, Father of the nation, National Anthem or National Flag, and punishment for any propaganda or campaign against liberation war, cognition of liberation Investigation-related issues such as Time limit of Investigation, Power of Investigation Officer: -Search and Seizure through Warrant, Search, Seizure, and Arrest without Warrant, Data preservation, and Confidentiality of the Information Obtained During the Investigation.
Tahmidur Rahman Remura Wahid TRW and its team for Software business in Bangladesh:
As a full-service law practice, Tahmidur Rahman Remura Wahid TRW Associates provides all forms of legal and financial services through its knowledgeable and competent employees.
Tahmidur Rahman Remura Wahid TRW Associates provides services for establishing entities, such as sole proprietorships, partnerships, and/or limited liability companies, in Bangladesh and getting the necessary permits from the applicable government authorities.
The services for Software business in Bangladesh include drafting relevant documents, forms, and providing the required document list and procedure, as well as submitting the application with the relevant documents to the appropriate government office, liaising with them throughout the verification process, and obtaining the required certified documents.
Drafting and vetting agreements for Software business in Bangladesh:
As stated previously, the entities require the drafting of various types of agreements, such as vendor, employment, and franchises agreements, which are required to be drafted in accordance with the applicable laws of Bangladesh, while at the same time safeguarding their interests in order to use these agreements to their advantage in the event of future disputes.
Legal Opinion and/or Due Diligence Report: Tahmidur Rahman Remura Wahid TRW Associates gives legal opinion to clients in regards to the implication of laws and its impact on a variety of matters, allowing them to make informed business decisions by considering the legal aspect.
In addition, Tahmidur Rahman Remura Wahid TRW Associates offers interested customers for Software business in Bangladesh with a due diligence report for their entities that highlights all the legal criteria that must be met and any non-compliances that must be addressed.
Tahmidur Rahman Remura Wahid TRW Associates offers a formidable litigation team that assists and represents clients in defending/filing disputes before courts or tribunals for all sorts of litigation including ones related to Software business in Bangladesh.
According to the poll, 69% of ICT businesses believe they can run their business for a maximum of one to two months under these unfavorable conditions, 24% believe they can survive for a maximum of three to four months, and 7% believe they can continue for more than four months.
In addition to existing clients canceling their present work orders, the companies are also unable to acquire new clients at this moment, which is a serious issue.
The operating expenditures, such as employee salaries, office rent, and other overhead expenses, will become a burden when the companies lose clients and are unable to find new employment.
BASIS is now working hard to convince the government of the gravity of the issue and the challenge that the affected organizations are facing.
BASIS has asked financial assistance from the government to cover employee salaries, a percentage of operational costs, and rent and utility payments for at least six months. BASIS advocated that the local software should be excluded from value-added tax until at least 2024.
The government has also announced a 2% interest financing program for export-oriented firms. The loan will be deposited immediately into the bank accounts of employees.
Local entities are also eligible for another form of lending facility with a 4% interest rate within the category of small and medium-sized businesses. Effectively a few banks have assured BASIS that they will grant unsecured credit up to 1 billion Bangladeshi Taka to its members.
During the outbreak, the government intends to provide increasingly online-based health, entertainment, and emergency response services. In these areas, BASIS is prepared to provide support.
Force Majure and Software business in Bangladesh:
Entities are contemplating whether they are permitted to use force majeure under the terms of their contracts and defer the fulfilment of their contractual obligations without incurring any penalties. A force majeure event is a circumstance or incident that is beyond the control of the parties to a contract. In general, these events or conditions include acts of God (such as natural disasters) or war, pandemic, strike, rioting, etc.
If a force majeure provision can be successfully used, the parties are often released from their respective contractual obligations and/or responsibilities. A force majeure clause does permit a party’s complete inability to execute, but only for the length of the force majeure occurrence. If properly prepared, the force majeure clause may indicate that if a force majeure event continues for longer than a specified period, either party may terminate the contract without incurring any financial liability.
Since the theory of force majeure does not have any clear legislative foundation under Bangladeshi law, its reliance is primarily on the parties’ agreement and the particular conditions of the contract entered into between the contracting parties.
The Contract Act of 1872 (the “Act of 1872”), which is governed by Bangladeshi law, governs all contracts. The idea of frustration is codified in Section 56 of the Act of 1872, which states that a contract is null and void if its performance becomes impracticable or if, as a result of some occurrence, it becomes illegal after it has been entered into.
Therefore, if the contract becomes difficult to perform due to the Corona epidemic, it may be considered null and void under Bangladeshi law, provided that the defaulting party did not know or with reasonable diligence could not have known that the contract would become impossible to perform. A null contract has the effect that it cannot be enforced by law and the parties are released from their respective duties.
To use the doctrine of frustration, the fulfilment of the contract must become totally impossible due to the occurrence of an unanticipated catastrophe, such as a pandemic of the Corona virus.
In the absence of an appropriately worded force majeure clause in a contract, the parties in Bangladesh may be able to rely on existing provisions of Bangladeshi law, specifically Section 56 of the Act of 1872, to excuse themselves from timely performance of their respective obligations under the contract.
Taxation for Software business in Bangladesh:
Currently, Information Technology-enabled services are free from taxation under Bangladeshi legislation. However, Nominal requirements for a limited company formed locally include a number of reporting to be done to NBR, including: Opening a TIN, Monthly Tax deduction statement, Half Yearly Withholding Tax statement, Yearly statement related to tax return submission of its employees, Yearly statement related to salary disbursed from company to employees, Quarterly Advance tax deposition, Annual Tax return submission, and attending appeal/hearing session as required on behalf of the company.
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.
The ICT sector has produced approximately 300,000 employment opportunities. In addition, the horizontal and vertical integration of the software and IT-enabled services (ITES) sector has improved the quality of life of the populace, as well as industrial and government productivity, in a number of ways. According to BTRC (2018), 80.83 million individuals use the internet, and 59 million are registered for mobile financial services as of January of this year (Bangladesh Bank, 2018). Bangladesh is experiencing a digital revolution that is primarily supported by its multidimensional ICT industry.
At this moment, it is vitally important to assist the nation’s booming ICT industry. There is no way to dispute that all sectors have been affected by the Corona virus pandemic and the need for government assistance. The government should place special emphasis on the ICT industry, as IT and IT-enabled service (ITES) companies would be the government’s primary partner in realizing the Digital Bangladesh vision.
Potential growth for Software business in Bangladesh:
For “Digital Bangladesh” to become a reality, ICT industry growth must be a top priority. The ICT sector of the country has maintained an average export growth rate of 57.21 percent. The IT outsourcing, business processing outsourcing (BPO), and software development sectors of the ICT industry in Bangladesh are advancing significantly. Considering that the ICT industry has grown over the past three decades, investing in it is unquestionably a wise choice.
Investors may choose between Sole Proprietorship, Partnership Business, or Private Limited Company in order to participate in the ICT industry. To promote a business-friendly climate, BIDA has opened a one-stop services center for investors, where services ranging from entity incorporation to post-incorporation licenses are accessible.
Tahmidur Rahman Remura Wahid TRW Associates is a full-service law firm that offers all types of legal and financial services, including entity registration for Software business in Bangladesh, license acquisition, agreement and notice drafting, annual compliances, and litigation services. Tahmidur Rahman Remura Wahid TRW Associates is comprised of competent Barristers and Advocates with knowledge in a variety of legal fields, allowing them to perform the required services at a high degree, and allowing customers to acquire all essential and supplementary legal services under one roof.
Are you planning to do Software business 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 Software business in Bangladesh. For queries or legal assistance, please reach us at:
E-mail: [email protected]
Phone: +8801847220062 or +8801779127165
Address: House 410, Road 29, Mohakhali DOHS