Bangladesh

Exchange controls

The provisions of the Foreign Exchange Regulation Act, 1947 (‘the FERA’) deal with the allowability of various types of foreign exchange transactions in Bangladesh. The Bangladesh Bank (i.e. the Central Bank of Bangladesh) issued ‘Guidelines for Foreign Exchange Transactions, 2018’ (GFET) to provide general guidelines to authorised dealer banks (‘AD Bankers’) for undertaking certain prescribed foreign exchange transactions, subject to fulfilment of conditions, in line with guidelines and circulars issued by the Bangladesh Bank from time to time.

Business combinations

Special income tax rules apply in case of amalgamation and demerger.

The expression ‘amalgamation’ means, in relation to a company, the amalgamation of one or more companies with another company or the amalgamation of two or more companies into a new company by such process, wherein:

• All the assets and liabilities of the amalgamating company become the assets and liabilities of the amalgamated company.
• Shareholders holding shares representing at least 75% of the voting power in the amalgamating company should become shareholders in the amalgamated company.
• The consideration for the amalgamation should be paid only in the form of issue of additional equity shares to the shareholders of the amalgamating company.
• The amalgamated company can carry forward and adjust the amalgamating company’s accumulated losses or unexpired depreciation allowances as if they were its own.
• The value of the amalgamated company’s capital assets must not exceed the depreciated value from the amalgamating company’s accounts, and no depreciation claims are allowed on revaluation surpluses.

The expression ‘demerger’ means an arrangement whereby a demerged company transfers one or more of its undertakings to a resulting company in such a manner that:

• All the assets and liabilities of the undertaking of the demerged company become the assets and liabilities of the resulting company.
• Capital gains from capital asset transfers during a demerger are not taxed unless shareholders receive non-share investments or shares exceeding the value of their proportionate shares in the demerged company, which are then taxable.
• The resulting company can treat the demerged company’s accumulated loss or unexpired depreciation allowance as its own, with specific conditions for direct and indirect relations to the transferred undertaking.
• The value of the resulting company’s capital assets must not exceed the depreciated value from the demerged company’s accounts in the demerger year, with no depreciation claims on revaluation surpluses.

Adoption of International Financial Reporting Standards (IFRS)

Bangladesh has been progressively adopting the IFRS, which are issued by the International Accounting Standards Board. The Institute of Chartered Accountants of Bangladesh (ICAB) is the primary body responsible for the adoption and implementation of IFRS in the country. The ICAB has been working on converging the local accounting standards, known as Bangladesh Financial Reporting Standards (BFRS), with the IFRS.

Currently, Bangladesh has adopted most of the IFRS, with certain modifications to suit the local economic and regulatory environment. These modified standards are referred to as BFRS.

Note that percentage of completion method is to be followed in case of long-term contracts.