Comparative Chart – Foreign Investment Sector – India and Bangladesh

Invest India was set up in 2009 as a non-profit venture under the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India.

In addition to this, Bangladesh has also signed multilateral and regional treaties such as Asia-Pacific Trade Agreement (APTA), Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), Indian Ocean Rim Association (IORA), South Asian Preferential Trade Arrangement (SAPTA), South Asia Free Trade Agreement (SAFTA) to conveniently access market and investment opportunities.

1. As an incorporated entity by incorporating a company under the Companies Act, 2013 through a:

– Joint Venture; or

– Wholly Owned Subsidiary

2. As an office of a foreign entity through:

– Liaison Office / 

  Representative Office

– Project Office

– Branch Office

3. As a Limited Liability Partnership

1.Incorporating a limited (or unlimited) liability company; 

2. Establishing a place of business in Bangladesh (i.e. a branch, project or liaison office etc.) as an overseas company.

The domestic companies are given with an option to pay tax at a reduced rate of 22% (plus surcharge and cess), provided they do not claim certain deductions under the Income Tax Act.  The effective tax rate will be 25.17% including surcharge and cess. The rate is to be effective from Financial Year i.e. 2019-20.

New local manufacturing companies (those incorporating after 1st October 2019 and commencing manufacturing before 1st April 2023) will be eligible to opt for special corporate tax @ 15% (plus surcharge and cess), provided that the company does not claim other deductions or exemptions under Income Tax Act. The effective tax rate will be 17.01%, inclusive of surcharge and cess. 

Key Tax Incentives

1. Export Promotion

Applicability: SEZ units operational before 1st April 2020

Incentive: Deduction of 100% of profits and gains derived from export business for first 5 years of commencement, 50% of profits and gains derived from export business for next 5 years, 50% of ploughed-back profits and gains from export business for next 5 years. 

2. Research & Development

Applicability: Companies in respect of any expenditure on R&D in an approved in-house facility

Incentive: Weighted tax deduction of 200% granted to companies

Validity: 31st March 2020

3. Investment-linked

Incentive: To incentivize investment in certain sectors, any capital expenditure incurred for specified businesses is allowed as a deduction in the year in which it is incurred. 

4. Startup India Scheme

Incentive: Tax incentives granted to eligible start-ups are the tax holiday for any consecutive 3 years (from initial 5 years) in respect to 100% of their profits, including fast-tracking of patent applications with 80% rebate.

5. International Financial Services Centre

Applicability: Caters to customers outside the jurisdiction of the domestic economy. Such centres deal with flows of finance, financial products and services across borders.

Incentives: Tax concessions on capital gains, Minimum Alternate Tax and Dividend Distribution Tax.

Incentive for investment in the said zone: Business income exempted for next 10 years from the date of commercial operation in a specified manner;

Incentive for developing unit in the said zone: Business income exempted for next 12 years from the date of commercial operation in a specified manner.

2. Concessionary duty on imported capital machinery 

Incentive: Import duty, at the rate of 5% ad valorem, is payable on capital machinery and spares imported for initial installation. For 100% export-oriented industries, no import duty is charged in case of capital machinery and spares.

3. Tax exemption for Public Private Partnership (PPP) Project 

Incentive:(i) Business income 100% exempted for next 10 years from the date of commercial operation;

(ii) Income tax exemption of capital gains arising from the transfer of share capital of PPP Project company, royalty, technical know-how and technical assistance fee paid by such company;

(iii)Income Tax exemption for foreign technicians’ employees in PPP Project company.

4. Accelerated depreciation: Industrial undertakings not enjoying tax holiday will enjoy accelerated depreciation allowance. The concession rate varies as per the industry and set up location of the undertakings. 

5. Export Processing Zones

Incentive: Exemption on business income from 25% to 100% for a period of 5 to 7 years expending on the location where the undertaking is set.

Foreign nationals of non-Indian origin resident outside India are not permitted to acquire any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India.

A person (RoI) who has established in India, a branch/project office or other place of business (excluding a liaison office) in accordance with the provisions of FEMA and rules thereunder, for carrying on in India any activity can acquire any immovable property in India that is necessary for or incidental to carrying on such activity, subject to compliance with other applicable laws and RBI reporting in a prescribed format.

Lease – A foreign national of non-Indian origin can acquire or transfer immovable property in India, on lease, not exceeding 5 (five) years with the prior permission of the RBI.

These two laws do not have any provisions related to foreign national to acquire land in Bangladesh 

Foreign exchange regulation Act also does not exclusively provide for provisions regarding restrictions or non-restrictions for acquisition orr transfer of property in Bangladesh. 

Foreign nationals and entities are generally not allowed to own property in Bangladesh. However, a company incorporated in Bangladesh with 100% foreign ownership can own company on the name of the company. 

Lease – A foreign national may lease an immovable property in certain specialized areas like export processing zones as per the latest schemes and regulations of the government. 

industries

1.Lottery Business including Government/private lottery, online lotteries, etc.*

2.Gambling and Betting including casinos*

3.Chit Funds

4.Nidhi Company

5.Trading in Transferable Development Rights (TDR)

6.Real Estate Business or Construction of farmhouses **

7.Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes

8.Sectors not open to private sector investment- atomic energy, railway operations (other than permitted activities mentioned under the Consolidated FDI policy) 

However, following sector industries are exclusively reserved for public sector investment:

1. Arms and ammunition and other defence equipment and machinery

2. Forest Plantation and mechanized extraction within the bounds of reserved forests

3. Production of nuclear energy

4. Security printing (currency notes) and minting.

Except reserved sectors, private sector investment has been kept open without any ceiling. Private investment both local and foreign or joint venture between local and foreign or with public sector is allowed.