Setting Up a Buying House or Indenting Business in Bangladesh: Structure, Registrations, Commission Remittance and Tax

In this guide: What a buying house and an indentor actually are · Structure, foreign ownership and the corporate set · Sector registration: Department of Textiles and CCI&E · Getting paid: commission and the Foreign Exchange Guidelines · Tax and VAT on commission

The short answer

Incorporate a private limited company with objects that cover buying agency, sourcing, quality inspection and indenting (see our registration guide); take the trade licence, the company TIN and BIN, and open a current account with an authorised dealer branch, because the income will arrive in foreign currency. Then the sector registration: a buying house registers with the Department of Textiles (application with the trade licence, TIN certificate, incorporation documents, bank solvency certificate and the buyer or agency agreements; registration valid for three years), and an indenting business registers as an indentor with the CCI&E (application with the same corporate documents, the principal’s authority or agency agreement and the fee for the category). Sign a written agency or buying-agent agreement with each foreign buyer or principal — the AD bank keeps a copy and needs it to credit commission without Bangladesh Bank’s prior approval. Commission is then received as inward remittance, converted and credited; the business files monthly VAT returns and the annual company tax return. Budget six to ten weeks from incorporation to the first commission received.

What a buying house and an indentor actually are

A buying house acts for a foreign buyer — a retailer or brand — in Bangladesh: it finds and audits factories, negotiates prices, places orders on the buyer’s behalf, follows production, inspects quality and arranges shipment, and is paid a commission (typically a percentage of FOB value) by the buyer or, under some arrangements, deducted from the export proceeds the factory receives. It does not export in its own name; the factory is the exporter. An indenting firm (indentor) acts for a foreign supplier: it secures orders from Bangladeshi importers, issues a pro-forma invoice (“indent”) in the supplier’s name, and is paid a commission by the supplier once the importer’s letter of credit is honoured. It does not import in its own name; the importer holds the IRC. Both are agents, not traders, and that is what decides the licences and the tax: if the business starts buying and reselling on its own account, it needs an ERC or IRC and becomes an exporter or importer, with a different regime. Our IRC/ERC guide covers that side.

Structure, foreign ownership and the corporate set

Buyers and principals of any size contract with companies, and their compliance teams ask for the certificate of incorporation, Memorandum and Articles, Form XII and the latest Schedule X, so the private limited company is the practical form; a proprietorship or partnership is lawful and common for small indentors. The objects clause should expressly cover acting as buying agent, sourcing agent, indenting agent, commission agent, quality control and inspection, and the provision of related services to foreign parties — a narrow objects clause is fixable only with the Court. A buying house may be 100% foreign-owned; the foreign shareholder subscribes the capital by inward remittance with an encashment certificate, the company registers with Invest Bangladesh where required, and foreign staff need Invest Bangladesh work permits. The corporate set then follows the usual order: name clearance, incorporation, trade licence (category “buying house” or “indenting/commission agent”), company TIN, BIN, and the bank account with an AD branch. Keep the company’s annual filings current; a buyer’s vendor-onboarding audit asks for them every year.

Sector registration: Department of Textiles and CCI&E

The Department of Textiles still takes the application largely on paper. Note also that import and export registration now sits under the Import and Export (Control) Act 2023, and the indentor rules made under the 1981 Order are being carried into the new framework; the CCI&E office will tell you which form it currently issues. The CCI&E registration is what the importer’s bank checks before accepting an indent as the basis for opening a letter of credit, so an indentor without a current certificate loses the business as soon as a bank asks.

Getting paid: commission and the Foreign Exchange Guidelines

Chapter 17 of the Guidelines for Foreign Exchange Transactions (2018, Vol.1) deals with inward remittance of commission: commission due to local agents of foreign buyers and suppliers may be received and encashed by the authorised dealer without Bangladesh Bank’s prior approval, provided the AD bank holds a copy of the agency agreement and is satisfied the remittance relates to it; the commission must be brought in through banking channels when the underlying transaction closes. Three arrangements are common. Direct remittance by the buyer or principal to the agent’s account — the cleanest. Deduction from export proceeds, where the factory’s export LC provides for a buying commission paid to the local agent out of the proceeds — permitted within the limits and documentation the Guidelines set, which the factory’s bank will apply. Commission retained abroad — not permitted; commission earned on Bangladeshi business by a Bangladeshi resident belongs in Bangladesh, and an agent paid offshore is exposed under the Foreign Exchange Regulation Act and the Money Laundering Prevention Act. A portion of export-related foreign currency may be retained in an ERQ account on the terms the Guidelines allow.

Tax and VAT on commission

Income tax: commission is business income of the company (or proprietor) and is taxed in the annual return at the applicable rate, with credit for any tax deducted at source. Where commission is deducted from export proceeds, the factory’s bank withholds tax at source under the Income Tax Act 2023 on the commission paid; where it comes by direct inward remittance, the AD bank may deduct at the rate for foreign-remitted service income. Keep the agency agreements, invoices and bank advices for each remittance — they are the evidence for both the turnover and the credit. VAT: commission and agency services are taxable supplies under the VAT and Supplementary Duty Act 2012; services rendered to a foreign buyer and paid for in foreign exchange can qualify as an export of service, zero-rated, if the conditions in the Act and NBR rules are met (the service is supplied to a person outside Bangladesh and consumed outside it, payment is received in convertible currency through banking channels). Indenting commission paid by a foreign supplier on goods imported into Bangladesh is treated differently in practice, and the NBR has taken the view that some indenting services are consumed in Bangladesh; take advice on the classification before the first return, because a wrong zero-rating builds up as arrears. Our VAT registration guide covers the BIN and returns.