Foreign subsidiary companies in Bangladesh can now send various types of service payments to their foreign parent companies without prior approval from Bangladesh Bank. On Wednesday (February 19), Bangladesh Bank issued a circular instructing all authorized dealer banks in the country to follow this directive. The circular states that the amount of service payments sent by subsidiary companies to their foreign parent companies (before with holding tax deduction) cannot exceed 10% of their total net profit. Additionally, subsidiaries can only receive services from their parent companies that are not available in Bangladesh. The circular also mentions that if the parent company controls the business decisions, service provisions, or other activities of the subsidiary through shareholding (more than 50% shareholding), then they will be eligible to send service payments.
Banks must ensure that there are proper agreements and invoices for service payments, the service pricing is competitive, tax regulations (with holding tax, VAT, and transfer pricing) are followed. The estimated profit allocated for service payments has been audited by a certified auditor, and the subsidiary company has committed to adjusting any additional payments in the following year. Banks must report these transactions to Bangladesh Bank through the online reporting module and include them in the monthly statements. If the service payment exceeds the specified limit, subsidiary companies must submit an application along with the required documents to Bangladesh Bank through their designated bank.
Source: The Business Standard
