Closing a Business in Bangladesh: The Exit Checklist for Workers, VAT, Tax, Licences, Bank, Lease and the Entity, in the Order the Authorities Expect

In this guide: Step 1: workers' notice and final dues · Step 2: VAT deregistration under s.9 and Rule 8 · Step 3: final income tax return and TIN cancellation under s.262 · Step 4: licences, bank, lease, and the trade licence · Step 5: ending the entity · Selling instead: the going-concern route

The short answer

Start with the people and end with the paper. Workers first, because their claims survive everything else: retrench under s.20 with reasons and the copies to DIFE and the union, or terminate under s.26, compute the dues (wages, leave, notice, compensation or gratuity, provident fund) and pay within 30 working days against receipts; notify DIFE of the closure. Then the NBR: stop issuing tax invoices, file the last periodic VAT return, apply on Mushak-2.4 for cancellation, file the final return with the stock adjustment, pay what is due, and collect the cancellation order; file the final income tax return to the date of closure, settle any assessment, and apply to the circle for cancellation of the TIN under s.262 with the closure evidence. Then the licences, the lease and the bank: surrender each sector licence by letter with the original, close the premises and utilities, clear the facilities and close the accounts. Then the trade licence, by letter to the zonal office with the original and the resolution, keeping the received copy, which is the only proof of closure the city corporation gives. Then the entity: strike-off under s.346 for a company with nothing left to distribute (our strike-off guide has the forms), voluntary winding up where assets must be distributed, dissolution and public notice for a partnership. If the business has value, sell it as a going concern under s.36 of the VAT Act first and let the buyer take the licences afresh. The generator below builds the list; the sections take each step.

Step 1: workers' notice and final dues

The Labour Act has no closure chapter; a closure is a retrenchment of everyone, and the sections that apply are s.20 (retrenchment), s.26 (termination), s.16 (lay-off, if the closure is temporary), s.28A (closure of an establishment by disaster or urgent necessity, with the Government’s permission in some cases) and s.30 (final dues). The route for a permanent closure is s.20: one month’s written notice stating the reasons, or wages in lieu, a copy to the Inspector General of DIFE and to the collective bargaining agent, and compensation of 30 days’ wages for each completed year of service or gratuity, whichever is higher, for every worker with a year’s service; workers with less than a year receive notice pay and dues. Section 26 (120 days’ notice and the same compensation) is used where the employer prefers to give no reason, and costs more in notice. Section 29 preserves the provident fund including the employer’s contribution on retrenchment, and s.30, inserted in 2013, requires all amounts due to be paid within 30 working days after employment ends (s.123(2) says the same for wages). The settlement for each worker lists wages to the last day, encashment of unused annual leave (s.11), notice pay, the s.20 compensation or gratuity, the provident fund balance, any festival bonus due and lawful deductions, and is paid against a signed receipt with a certificate of service (s.31). A business sold as a going concern has no statutory transfer-of-undertaking rule to rely on: the Act is silent, continuity rests on s.14 and the sale agreement, so either the seller settles every worker to the transfer date or the buyer assumes the accrued liabilities expressly and the workers consent to the transfer in writing. Our termination guide has the arithmetic; the closure point is that DIFE and the Labour Court will look for the s.20 notice and copies, and a closure without them is a mass unlawful dismissal.

Step 2: VAT deregistration under s.9 and Rule 8

The rule timeline is 15 plus 15 days after suspension; the real timeline is governed by the enquiry, which the office will not close while a return is missing or a demand is unpaid, and by the stock adjustment, which owners forget and which can be the largest payment of the closure. There is no six-month statutory process. Thresholds for context: turnover enlistment above Tk 30 lakh and registration above Tk 80 lakh as the NBR’s current guide states; check the latest Finance Act before relying on them, and read our BIN guide.

Step 3: final income tax return and TIN cancellation under s.262

A business that stops trading files its return under s.166 of the Income Tax Act 2023 for the period up to the date of discontinuance and, under the provision mirroring the old s.89, gives the Deputy Commissioner of Taxes notice of discontinuance within fifteen days so that an accelerated assessment can be made; income tax deducted at source on payments received to the closing date is claimed in that return. Once the assessment is complete and tax paid, s.262 provides for cancellation of the registration (the TIN) on grounds that include dissolution or closure of the business, nil taxable income for three consecutive years with none expected, permanent departure from Bangladesh with no Bangladesh income, death, erroneous registration or change of legal status, and any other reasonable ground, on three conditions: all tax paid, no assessment or dispute pending, and the reasons substantiated; the Board may also cancel on its own motion. In practice the application is a letter to the Deputy Commissioner of the circle (through the Commissioner) enclosing the TIN certificate, the NID, the acknowledgement receipts of the returns for the last three years, the closure evidence (VAT cancellation order, trade licence cancellation receipt, and for a company the strike-off or dissolution evidence from the RJSC) and, for a departing individual, the s.193 departure assessment; no fee; an authorised representative may file. The NBR executes cancellation as deactivation of the TIN rather than deletion, so that records remain; an online “cancel TIN” menu on the e-return portal was not confirmed at the date above, and the circle office route is the one that works. Until the TIN is deactivated the return obligation continues and the proof of submission of return (s.264) is demanded by banks and other offices, which is why owners who skipped this step receive penalty notices years after closing.

Step 4: licences, bank, lease, and the trade licence

The trade licence is left late deliberately: the VAT office, the tax circle and the bank each ask for it as identity. Once the other steps are done, the receipt of the cancellation application is the document that proves to every later enquiry that the business stopped on the date it did.

Step 5: ending the entity

Private company with nothing to distribute: strike-off. Section 346 of the Companies Act 1994 lets the Registrar strike a defunct company off: the company applies with a board resolution and special resolution, an affidavit by the directors that the company has no assets and no liabilities, the latest returns, and tax and VAT clearance; the Registrar sends two letters a month apart, publishes a notice in the Gazette, and strikes the company off three months later; the liability of directors and members for anything undisclosed continues, and the company can be restored by the court within the period the Act allows. Company with assets to distribute: members’ voluntary winding up under s.286 onward: a declaration of solvency by the directors, a special resolution, appointment of a liquidator, realisation and distribution, a final meeting and return, and dissolution three months after the return is registered; creditors’ voluntary winding up where the company is insolvent, and court winding up on a creditor’s petition where a debt above the statutory figure is unpaid three weeks after demand. Partnership. Dissolution by agreement (s.40), compulsorily on insolvency or illegality (s.41), on the contingency the deed names (s.42), by notice in a partnership at will (s.43) or by the court (s.44); until public notice is given the partners remain liable for acts done in the firm’s name (s.45); accounts are settled and the surplus distributed under ss.46–48; a registered firm notifies the RJSC; a deed of dissolution records the settlement and the release. Sole proprietorship. There is no entity to dissolve; the proprietor’s TIN continues as an individual’s, the trade licence is cancelled, and personal liability for the business’s debts continues without limit. Our strike-off guide and partnership guide have the forms and fees for each route.

Selling instead: the going-concern route

A business with customers, licences and staff is usually worth more sold than closed, and the law makes the sale cheaper than the closure in one respect: s.36 of the VAT and Supplementary Duty Act 2012 treats the transfer of an establishment as a running business, in the course of economic activity, as a single supply that is not regarded as a supply made in Bangladesh, provided the buyer acquires what is needed to carry on the activity without interruption and all taxes and arrears are paid (or an unconditional bank guarantee is accepted by the Commissioner); the buyer becomes the seller’s successor from the transfer date. Rule 22 requires a joint application by seller and buyer on Form Mushak-4.2, the bank guarantee lodged at least fifteen days before the sale, and the Commissioner’s approval within seven days, with the seller handing over the ownership, financial, asset and debt, case and licence information. The value of the sale is excluded from the registration and enlistment thresholds. Two forms of sale: a share sale of a company, where the company, its TIN and BIN, licences, contracts and employees continue and only the shareholders change (RJSC Form 117 and the annual return), and an asset sale, where every licence must be re-issued in the buyer’s name, the trade licence cannot be transferred, employees transfer only by agreement with their accrued dues settled or assumed, and stamp duty applies to any immovable property conveyed (currently 1.5% plus the 1% registration fee, with capital gains tax on the seller under the Income Tax Act 2023 at the rate in force). A buyer should see the seller’s VAT cancellation or s.36 approval, the tax returns, the licence register and the workers’ settlement before completion; a seller should insist on the s.36 route rather than closing and selling the assets separately, which triggers the Rule 32 stock adjustment and loses the going-concern treatment.