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Foreign Investments into Bangladesh: Tax Structuring

Foreign Investments into Bangladesh: Tax Structuring

Foreign investors invest funds into Bangladeshi companies in anticipation of financial returns. These returns usually take the form of dividend payment by the Bangladeshi companies, interest payment (in case of debt securities that are yet to be converted into equity) and capital gains on sale of investment. Although all three types of returns are liable to tax in Bangladesh, foreign investors are presented with a small menu of options to minimise such tax by taking advantage of double taxation avoidance agreements (DTAAs) entered into by the Government of Bangladesh with certain other countries. Foreign investors typically route their investments through tax-friendly jurisdictions (with whom Bangladesh has beneficial DTAAs) so as to take advantage of these tax benefits. Popular among such jurisdictions are Mauritius, Cyprus, and more recently, Singapore. Among these, Mauritius has attracted the largest number of investments from various countries that are flowing into Bangladesh.

Although there are only marginal differences in the rates of taxation and the financial benefits available to investors in each of the jurisdictions, there are various other differences in the local laws of each jurisdiction, and their level of economic development, ease of establishing and carrying on business, and several other social and political factors. These are equally important to foreign investors in determining whether to use one jurisdiction or another to route their investments into Bangladesh.

In this context, an article titled International Investment Gateways To Bangladesh by Nandan Nelvigi and Brendan McNallen of White & Case that appears in Mondaq provides a concise, but useful analysis of the tax regime as well as advantages and disadvantages of investing through any one of Mauritius, Cyprus or Singapore into Bangladesh. The article on Mondaq can be accessed only through registration, which is free.

About the author

Barrister Tahmidur Rahman

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