How to Register a Sole Proprietorship in Bangladesh

Bangladesh, located in South Asia, is the world's 39th largest economy in terms of market exchange rates and the 29th largest in purchasing power parity, which ranks second in South Asia. Bangladesh is also one of the world's fastest-growing economies and one of the fastest-growing middle-income countries. With that said, this country is a good choice for starting a business.

Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.

Sole proprietorship in Bangladesh

A sole proprietorship also referred to as a sole trader, is an unincorporated business with just one owner who pays personal income tax on profits earned from the business. It is the easiest and least expensive business structure to set up.
In the past two decades, the sole proprietorship concept has gained popularity. This is is a social mindset that is applicable in any kind of business or setting. Sole proprietorships can be beneficial for developing economies due to the government, civil society, private sector, and the public-private partnership approaches.

If you intend to start your own business in Bangladesh, the following paragraphs will help you understand the process step-by-step.

Registering a sole proprietorship in Bangladesh

Firstly, you need approval for your business name from The Registrar of Joint Stock Companies and Firms (RJSC). You should create an account on this site to start with the online business name registration. The RJSC office will check the database and issue name clearance if it does not closely match or resemble any of the already existing names. It will be valid for the next 180 days. You will have to apply for registration within this timeline. The fee for registering a business name is BDT 600.00 for each of the proposed names.

Here are the documentation requirements to complete the registration process:

• Article of Association (AOA)
• Memorandum of Association (MoA)
• The Notice on the Situation of the Registered Office and any change there may be
• Consent of the Director to act 
• Evidence of Name Clearance

Other requirements:

• A bank account
• Rent agreement for the office
• A trade license
• VAT and Tax Identification number registration

All documents should be submitted to RJSC.

Keep in mind the fees to RJSC depend on the authorized capital of the business. There could also occur other out-of-pocket expenses and professional fees involved.

Trade license

Businesses obtain a trade license from the City Corporation, by filling an application at the nearest City Corporation. The following documents must accompany the application form:

• A certified copy of the Memorandum and Articles of Association 
• A copy of the Certificate of Incorporation 
• Tax Identification Number certificate 
• The address and nature of business 
• A copy of the lease agreement of the registered office 
• 2 copies National ID or Passport 
• Ownership proof
• Work Permit from Bangladesh Investment Development Authority‍

Tax registration for a sole proprietorship in Bangladesh

To start business operations, every company must register for taxes at the appropriate taxation authority (Deputy Commission of Taxes of Company Circle, Zonal Taxation Department) under the National Board of Revenue (NBR) and obtain a tax identification number (TIN). Obtaining a TIN can be done online within a day. 

VAT in Bangladesh

Application for Value Added Tax (VAT) registration is submitted online. The following documents must accompany the VAT application:

• Proprietorship Trade License

• Bank Solvency Certificate

• Two photographs of the business owner

• National ID or Passport copy of the business owner

• IRC or ‍ERC if the proprietorship is importing and exporting

• Article and Memorandum

• TIN Certificate

VAT return is required to be submitted quarterly and is dealt with by Tax and VAT department. The standard rate of VAT in Bangladesh is 15%. A standard tax year is calculated between July 1st to June 30th.

Corporate tax

Resident entities are taxed on worldwide business income; non-residents are taxed only on Bangladesh-source income. The corporate tax rate is 22.5%. Which becomes 25% if the following conditions are not met:

• All receipts and income must be transacted through bank transfers;
  cash transactions are limited to BDT 3,600,000 per annum and each transaction is limited to BDT 500,000; andE
• Expenses and investments above BDT 3,600,000 must be made through bank transfers.

All businesses with a gross income above BDT 5 million are subject to an alternative minimum tax of 0.6% on gross receipts if the amount due is higher than corporation tax.