In most jurisdictions, a representative or a liaison office means an office, which cannot engage in commercial activities, opened by a foreign company which is not registered (as a local subsidiary) in that jurisdiction.
For example, if an US Corporation who wants to sell its products in another country, it can open a representative office in that country and perform marketing activates. However, since the representative office is not permitted to undertake commercial activities, the customer/client needs to buy the products from the US Corporation directly. The representative office cannot sell the products directly to the customer/client.
Technically speaking, a representative office is not a separate entity. All of obligations and liability of a representative office must be borne by the parent company.
A representative office is not supposed to generate any income and engage in any commercial activities which may generate income. As such a representative office is not required to pay tax in most jurisdiction.
This option is widely used by foreign investors to enter into a new market. This option enables them to enter the market, engage in marketing activities, develop some sales and then possibly setup a permanent entity.
In most jurisdiction, a representative office and a liaison office refer to the same entity.
Its main activities are generally as follows (but may differ from country to country):
- Collect industry information and report to the parent company;
- Develop the market or conduct research;
- Supply marketing information of new products/services;
- Support inspection and quality control of products/service; and
- Supply advice to agencies or customers regarding products/service.
In most countries, permission for representative office is provided for a limited period and unless renewed, the permission expired and the representative office ceases to exist.
Representative office in Bangladesh:
In Bangladesh, Board of Investment (BOI) issues the approval for representative office. The approval is provided for mostly three years. A representative office is not required to pay tax, but it must obtain Tax Identification Number from National Board of Revenue.
Like most jurisdictions, a representative office in Bangladesh is not supposed to engage in commercial activities, and prior approval of BOI is required for this.