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The Justice Corner 06 Jul, 2025

Top law firm in dhaka - legal & regulatory framework for (NGOs)

The legal and regulatory environment for Non-Governmental Organizations (NGOs) in Bangladesh is multifaceted, involving several laws, regulatory bodies, and procedures. Here's a breakdown of the key aspects:   

Primary Regulatory Authorities:

  • NGO Affairs Bureau (NGOAB): This is the primary body under the Prime Minister's Office responsible for registering and regulating all NGOs and International Non-Governmental Organizations (INGOs) that receive foreign funds. The Foreign Donations (Voluntary Activities) Regulation Act, 2016 (FDRA), and its predecessors empower the NGOAB.   
  • Department of Social Services (DSS): Under the Ministry of Social Welfare, the DSS registers NGOs and charities involved in providing welfare services to specific groups like children, youth, women, and people with disabilities. The Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961, governs this.   
  • Registrar of Joint Stock Companies and Firms (RJSC): NGOs can also register as societies under the Societies Registration Act, 1860, or as non-profit companies under the Companies Act, 1994, both overseen by the RJSC under the Ministry of Commerce.
  • Department of Women and Children Affairs (DWCA): This department, under the Ministry of Women and Children Affairs, registers organizations working for the welfare of women and children.
  • Government NGO Consultative Council (GNCC): Established to foster dialogue and cooperation between the government and NGOs.   

Key Legislation:

  • Foreign Donations (Voluntary Activities) Regulation Act, 2016 (FDRA): This is the main law governing NGOs receiving foreign donations. It mandates registration with the NGOAB, project approval, fund management through designated bank accounts, and regular reporting.
  • Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961: This ordinance requires organizations providing specific welfare services to register with the Department of Social Services.   
  • Societies Registration Act, 1860: Allows for the registration of societies formed for literary, scientific, charitable, or other similar purposes.   
  • Trust Act, 1882: Governs the creation and registration of trusts for various purposes, including charitable activities.
  • Companies Act, 1994: Provides for the incorporation of non-profit companies

Formation/Establishment NGOs in Bangladesh may be formed or established under the following pieces of legislation:

Societies Registration Act of 1860

  • Registrar of Joint Stock Companies, Ministry of Commerce
  • For any “literary, science, or charitable purpose,” including literature, fine arts, education, libraries, museums, etc.
  • Environment, human rights, and historic preservation qualify only under a modern, progressive concept of “charitable”
  • No provision made for social or sporting clubs, self-help groups, contemplative societies, etc.
  • A society is not a true legal person; it must sue or be sued in name of officers, but judgments lie only against property of society
  • 7 or more individuals or legal persons
  • Most NGOs are formed under this Act. 

Trusts Act of 1882

  • Trust can be “for any lawful purpose,” private or public 
  • Can be created by any person competent to form a contract.
  • No government registration required
  • Trustee is legal owner of property
  • Trust is not a legal person
  • Trustee must deal with the trust property “as carefully as a man of ordinary prudence would if it were his own.”  S/he is personally liable for breach of trust
  • Some NGOs are formed as trusts (e.g., PRIP Trust)
  • No special provisions for charitable trusts 

Companies Act of  1994

  • Permits joint stock companies, companies limited by guaranty, nonprofit companies (sections 26& 27), and unlimited companies
  • Nonprofit company must be “formed for promoting commerce, art, science, religion, charity, or any other useful object”
  • 7 or more persons, or 2 or more if a private company
  • Registrar of Joint Stock Companies, Ministry of Companies
  • Full legal personality plus limited liability
  • Increasingly popular for NGOs and other not-for-profits

Other laws

  1. Waqf Ordinance of 1962
  2. Hindu Religious Welfare Trust Ordinance of 1983
  3. Christian Religious Welfare Trust Ordinance of 1983
  4. Buddhist Religious Welfare Trust Ordinance of 1983

Registration In addition, NGOs must be “registered” under the following laws, in certain circumstances:

The Voluntary Social Welfare Agencies (Registration and Control Ordinance), 1961 (SWO)

Mandatory registration for any formal or informal organization formed to render welfare services for: 

children, youth, women, family, physically or mentally handicapped, family planning, recreation, civic responsibility, released prisoners, juvenile delinquents, socially handicapped, beggars and the destitute, patients, the aged or infirm, social work, or co-ordination of social welfare agencies, Not applicable to, or available for, art, science, culture, environment, etc. Administered by Social Welfare Department of the Ministry of Social Welfare and Human Development, Broad discretion and control, Right to suspend or dissolve, No judicial appeal stated permitted under the Act, Most NGOs are registered under this Ordinance.

Foreign Donations (Voluntary Activities) Regulation Ordinance of 1977 (amended 1982)(known as FDR)

  • Covers any formal or informal organization established to carry out voluntary activity
  • “Voluntary activity” means agricultural, relief, missionary, educational, cultural, vocational, social welfare, development, and any other activity specified by the Government
  • Forbids any voluntary activity using foreign donations unless the organization is registered with the NGO Affairs Bureau (NGOAB), which is established within the Prime Minister’s Office
  • Each foreign grant must be approved and monitored by the NGOAB
  • Foreign Contributions (Regulation) Ordinance of 1982 (known as FCR)
  • Amendment to 1977 law to expand scope to cover every kind of contribution from abroad

Registration Process:

The registration process for NGOs in Bangladesh varies depending on the chosen legal framework and the regulatory authority involved. Generally, it includes the following steps:   

  1. Name Clearance: Obtaining clearance for the proposed name from the relevant authority (e.g., RJSC).   
  2. Application Submission: Submitting a formal application with required documents, which may include:  
    • Memorandum and Articles of Association or Trust Deed or equivalent constitutive documents.   
    • List of executive committee members/trustees with their details (including National ID copies and photographs).
    • Operational plan and activities report.
    • Source of funding and budget.
    • Proof of registered office address.
    • For foreign-funded NGOs, a letter of intent from the donor and details of the foreign donation are required by the NGOAB.   
  3. Payment of Fees: Paying the prescribed government registration fees. For registration with the NGOAB, there is a fee of BDT 50,000 for local NGOs and USD 9,000 (or equivalent in BDT) for foreign NGOs.   
  4. Security Clearance: Law enforcement agencies like the Special Branch of Police and the National Security Intelligence conduct security checks on the organization and its key members.
  5. Review and Inspection: The relevant regulatory authority reviews the application and may conduct physical inspections.
  6. Issuance of Certificate: If all requirements are met, the registration certificate is issued. For NGOAB registration, the initial certificate is valid for 10 years and can be renewed.

Compliance and Reporting:

Registered NGOs are subject to ongoing compliance requirements, which typically include:

  • Annual Reporting: Submitting annual reports on activities and financial statements to the relevant regulatory authority. NGOs funded by foreign donations must submit these to the NGOAB.
  • Financial Audits: Providing audited financial reports. The NGOAB requires audits by approved auditors for foreign-funded NGOs.
  • Project Approval: For foreign-funded NGOs, each project requires approval from the NGOAB, including budget and implementation plans. Funds can only be released with NGOAB approval.   
  • Fund Management: Foreign donations must be received and managed through a designated "mother account" in a scheduled bank.   
  • Monitoring and Inspection: Regulatory authorities have the power to monitor and inspect NGO activities and financial records.   
  • Restrictions: There are restrictions on the use of funds, with a cap on administrative expenses (e.g., 20% for foreign-funded projects). Certain individuals and entities, such as candidates in elections and political parties, are prohibited from receiving foreign donations.

Internal Governance and External Accountability:

The rules for internal governance and external accountability for NGOs in Bangladesh are fairly rudimentary, unless they are registered with DSW or NGOAB.  The laws for establishment do very little to impose a workable internal governance regime or external accountability standards. 

  • Societies Act – requirement of annual meeting but no requirement of annual accounts.
  • Trusts Act – clear accounts must be maintained; beneficiary may obtain on request (charitable trusts rules unclear)
  • Nonprofit companies – extensive book-keeping, audit, report-filing requirements (as with for-profit companies); this is the only law that contains any fiduciary responsibility rules
  • Waqfs and other religious trusts – annual audited accounts required by the Administrator

Role of NGOAB This agency was established in 1990 to oversee the FDR and FCR Ordinances.  NGOAB was set up in the Prime Minister’s Office in 1990.  According to the World Bank’s 1996 study, the rationale for setting up NGOAB was the “huge backlog of projects pending Government approval” under the then-existing system, which required multiple levels of government review. All sources refer to NGOAB as being set up to be a “one-stop shop” for NGOs seeking and administering foreign funds.  The Government assigned NGOAB all responsibilities under the FDR and the FCR, but it was, of course, never the only “stop” an NGO would need to make on its way to carrying out its activities in Bangladesh.  All NGOs seeking to be legal entities would also have to establish themselves under the Societies Act or the Companies Act.  And NGOs engaged in activities defined by the Social Welfare Ordinance would still have to register with the Social Welfare Department.

Nevertheless, NGOAB became a focus of oversight for many NGOs because many of them were at the time largely supported by foreign funds.  Its functions include the following:

  • NGO registration; 
  • Approval of project proposals and releasing funds for them;
  • Approval of expatriate consultants;
  • Scrutiny and evaluation of statements and reports on projects;
  • Monitoring and evaluating NGO projects;
  • Receiving information on foreign travel by NGO personnel; and
  • All other matters relating to NGOs receiving foreign funds.

To register with NGOAB, an NGO must be approved by Home Ministry and at least one line ministry; it must submit a 5-year plan along with its application. For each grant, an NGO must submit project proposal and letter of intent from donor.  All foreign funds must go through specific bank account; the bank in which the NGO has its account must provide full reports to central bank, which reports to NGOAB.  NGOs must submit annual audits done by auditors who are approved by NGOAB. 

Penalties The following penalties are provided for in the legislation. 

 

Societies Act – no provisions for fines, penalties, or involuntary dissolution are to be found in the Act

Nonprofit companies (NPCs)

Like all companies, NPCs may be wound up if they cannot pay their debts, if they are in default on filing a required report, etc. 

The government may cancel the right of an NPC to omit use of “limited” after its name – but only after written notice and opportunity to respond

Trusts 

A beneficiary may request a court to order a trustee to fulfill a duty or remove a trustee 

Trusts may be wound up if their purposes become unlawful or impossible to achieve, but the doctrine of “cy pres” – reforming as near as may be -- applies to and may save charitable trusts

Waqfs

dissolution is not provided for because waqfs are perpetual

the Administrator can intervene if the mutawalli is improperly carrying out required functions

 

Social Welfare Organizations (SWOs)

  • The Director of Social Welfare (DSW) may “suspend the governing body” of a SWO if it has committed any irregularity with funds, any mal-administration in the conduct of its affairs, or has failed to comply with the provisions of the Ordinance
  • No SWO can be dissolved on its own motion
  • The DSW may recommend that the Government dissolve a SWO because it has violated its constitution, the Ordinance, or rules made thereunder, or acted “in a manner prejudicial to the interest of the public” 
  • Before recommending dissolution, the DSW need only give the SWO such opportunity to be heard “as it thinks fit”
  • An SWO ordered to be dissolved has 30 days to appeal to the Government, but there is no right to appeal to a court
  • Any person who contravenes the Ordinance or any rule thereunder or makes a false statement to the DSW can be fined or imprisoned for up to six months
  • Where an offense is committed by an SWO, every director or officer of it is deemed guilty of that offense unless s/he proves that the offense was committed without his/her knowledge or consent 

 Foreign Donations Ordinance

For a “reason to be recorded in writing,” NGOAB can inspect or, acting under the Code of Criminal Procedure, seize accounts and other documents . After providing a reasonable opportunity to be heard, NGOAB can cancel  registration of an organization or stop any activities for a failure to submit required declarations, willful submission of false declarations, or any other contravention of the Ordinance. Anyone who receives or uses a foreign donation in contravention of the Ordinance or any rules thereunder is liable for a fine of double the amount of the donation or imprisonment for up to three years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The fiscal framework for NGOs in Bangladesh

 

Tax Exemption under the Income Tax 

 

The tax exemption landscape for Non-Governmental Organizations (NGOs) in Bangladesh is primarily governed by the Income Tax Act, 2023 (which repealed the Income Tax Ordinance, 1984). While NGOs are generally considered taxable entities, there are specific provisions for exemptions and deductions, particularly concerning donations and income used for charitable purposes.

Here's a breakdown of the key aspects of tax exemption for NGOs:

1. Exemption on Donations and Grants:

  • Clause 12 of Part 1 of the Sixth Schedule of the Income Tax Act, 2023 states that any donation or grant received by a religious institution or an organization operating for charitable purposes, approved by the Tax Commissioner, and spent for religious or charitable purposes, shall be deducted from the total income. This essentially means such income is not considered taxable.   
  • Similarly, if voluntary contributions, grants, or donations are received by any person approved by the NGO Affairs Bureau (NGOAB) and utilized for their intended purpose, this income is also not considered taxable.
  • However, it's crucial to note that Sub-sections (5) and (6) of Section 76 of the Income Tax Act, 2023, regarding undisclosed income, will always be applicable in these cases.

2. Approval is Key:

  • For an NGO's income from donations and grants to be tax-exempt under Clause 12, the organization operating for charitable purposes needs to be approved by the Tax Commissioner.
  • Alternatively, if the NGO is approved by the NGO Affairs Bureau, the donations and grants received by them for their activities are also tax-exempt.   

3. Utilization of Funds:

  • The exemption is contingent upon the received donations and grants being spent for religious or charitable purposes. If the funds are used for other activities, they may become taxable.

4. NGOs Defined as Companies:

  • The National Board of Revenue (NBR) has clarified that Non-Governmental Organizations (NGOs) would be considered companies under the new Income Tax Act, 2023.
  • However, tax authorities have indicated that NGOs will not necessarily face the same tax rates as other companies, especially concerning income from micro-credit operations and donations used for social welfare and development.

5. Income from Microcredit:

  • Income from microcredit operations may be tax-exempt, provided it is kept in a revolving fund and used for microcredit activities. If these funds are diverted to other businesses, they may become taxable.

6. Tax on Other Income:

  • It's important to understand that while donations and grants used for charitable purposes may be exempt, other income sources of an NGO, such as income from commercial activities, bank interest, or rent from conference halls, are generally taxable.

7. Reporting Requirements:

  • NGOs registered with the NGOAB are required to file income tax returns annually.

In summary, NGOs in Bangladesh can avail tax exemptions primarily on the donations and grants they receive, provided they meet the criteria of approval from the Tax Commissioner or the NGOAB and utilize these funds for their stated religious or charitable objectives. Other income-generating activities of NGOs are generally subject to taxation.

It is advisable for NGOs to consult with tax professionals to understand their specific tax obligations and ensure compliance with the Income Tax Act and related regulations.

 

Deductibility of Donations 

 

Under specific conditions, donations to charitable NGOs in Bangladesh can be deductible for the donor from their taxable income. The relevant provisions are found in the Income Tax Act, 2023.Here's a breakdown of the conditions under which donations to charitable NGOs can be deductible:

For the Donor:

  • Donation to Approved Institutions: Donations to the following types of institutions can be deductible: 
    • Charitable hospitals established outside the city corporation area within one year prior to the donation and approved by the National Board of Revenue (NBR).
    • Organizations established for the welfare of persons with disabilities if the organization has been established for at least one year prior to the payment and is approved by the Department of Social Welfare and by the NBR.
    • Amount paid as Zakat to the Zakat Fund or as a donation to any charitable fund established by or under the Zakat Fund Management Act, 2023.
    • Grants to any public welfare or educational institution approved by the government.   
  • Specific Approved Institutions (Pre-existing): Some specific institutions have historically been granted tax-exempt status for donations. These have included: 
    • Liberation War Museum   
    • Aga Khan Development Network
    • Ahsania Cancer Hospital   
    • Asiatic Society
    • ICDDR'B
    • Centre for the Rehabilitation of the Paralysed (CRP).

 

Important Considerations for Deductibility:

  • Approval is Crucial: The NGO or institution receiving the donation generally needs to be approved by the relevant authority, which could be the Tax Commissioner, the National Board of Revenue (NBR), or the Department of Social Welfare, depending on the nature of the organization.
  • Documentation: Donors must maintain proper receipts and documentation of their donations to claim deductions.
  • Limits: There might be limits on the amount that can be claimed as a deduction, often linked to a percentage of the donor's taxable income. 
  • New Income Tax Act, 2023: The new Act emphasizes the need for approval for the receiving organization for the donation to be deductible.

 

For the Charitable NGO (Recipient):

  • As discussed in the previous response, for the NGO itself to have its income from donations and grants tax-exempt, it needs to be approved by the Tax Commissioner or the NGO Affairs Bureau (NGOAB) and utilize the funds for religious or charitable purposes. This is a separate matter from the donor's ability to deduct the donation.

In conclusion, donations to certain charitable NGOs in Bangladesh are deductible for the donor, provided the receiving organization meets the specific approval criteria outlined in the Income Tax Act, 2023, and the donor has proper documentation. It is advisable for both donors and NGOs to stay informed about the specific guidelines and any updates from the National Board of Revenue regarding tax exemptions and deductions.

 

 

VAT Exemption:

 

While the standard Value Added Tax (VAT) rate in Bangladesh is 15%, there isn't a blanket VAT exemption specifically for all Non-Governmental Organizations (NGOs). However, certain goods and services are exempt from VAT as per the First Schedule of the Value Added Tax and Supplementary Duty Act, 2012. If an NGO's activities fall under these exempted categories, they would not be subject to VAT on those specific supplies or imports.   

 

1. Standard VAT Rate: The standard VAT rate in Bangladesh is 15% on most goods and services.   

 

2. VAT Exemptions: The First Schedule of the VAT and Supplementary Duty Act, 2012 lists specific goods and services that are exempt from VAT. These exemptions are generally based on the nature of the goods or services rather than the entity providing or receiving them. Therefore, if an NGO is involved in the supply or import of goods or services listed in the First Schedule, those particular transactions would be VAT exempt. Examples of VAT-exempt items include certain agricultural products, healthcare services, and educational services.   

 

3. VAT Deduction at Source (VDS): Interestingly, Non-Governmental Organizations (NGOs) approved by the NGO Affairs Bureau or the Directorate General of Social Welfare are listed as entities responsible for VAT Deduction at Source (VDS). This means that when making payments to vendors for taxable supplies, these NGOs are required to deduct VAT at the source and deposit it to the government treasury on behalf of the supplier. This doesn't imply a VAT exemption for the NGO itself but rather a role in the VAT collection process.

 

4. No General Exemption Based on NGO Status: There isn't a general clause in the VAT law that exempts all activities or purchases made by NGOs solely based on their non-profit status. Each transaction is typically evaluated based on the nature of the goods or services involved.

 

5. Specific Project-Based Exemptions (Possible but not guaranteed): In some instances, specific projects undertaken by NGOs, particularly those funded by international donors or focusing on critical social welfare areas, might be eligible for specific VAT exemptions through Special Regulatory Orders (SROs) issued by the National Board of Revenue (NBR). However, these are not automatic and would require specific approvals and notifications.

 

6. Import VAT: Unless specifically exempted through an official notification, the import of goods by NGOs is generally subject to 15% VAT, payable by the importer at the time of import.

 

In conclusion, while NGOs in Bangladesh are not automatically exempt from VAT, they may not be liable for VAT on transactions involving goods or services listed in the First Schedule of the VAT and Supplementary Duty Act, 2012. Additionally, certain project-specific exemptions might be granted through SROs. It is crucial for NGOs to carefully assess their activities and consult with tax advisors to determine their specific VAT obligations and potential exemptions.