International payment card networks, such as Visa, Mastercard, American Express, and UnionPay, may soon need to register as companies in Bangladesh to continue their operations under new regulations proposed by the central bank. Currently, these global card systems function from overseas with liaison or representative offices in Bangladesh, without being locally incorporated entities, thereby avoiding full compliance with local tax regulations.
The Payment System Operator (PSO) Regulation of 2025, drafted by Bangladesh Bank, would mandate foreign card networks to register under the Companies Act of 1994 if they wish to operate in Bangladesh. The draft also specifies that all international card schemes must seek a license from Bangladesh Bank within six months of the regulation’s implementation.
Initiated under the Payment and Settlement System Act of 2024, the draft requires all card networks, whether domestic or foreign, to be licensed and regulated within the country. The objective is to subject these companies to local tax laws as they currently evade corporate taxes on income generated in Bangladesh by operating through representative offices.
Major players like Visa, Mastercard, American Express, UnionPay, Diners, and JCB offer card network services to local banks and financial institutions, earning fees like Interchange Reimbursement Fees (IRF) from Bangladeshi banks. However, these earnings are transferred from overseas Nostro accounts to their global headquarters, bypassing the local tax jurisdiction and financial statements.
While the move is intended to bridge the regulatory and taxation gap, concerns have been raised about potential adverse effects on the market. A representative of an international card network suggested that the regulatory requirement might deter global operators, affecting local cardholders. Local bankers, including Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank, emphasize the need for stakeholder consultations and caution to prevent unintended consequences.
Upon local incorporation, these card schemes would be obligated to open local bank accounts, disclose earnings from transactions in Bangladesh, and comply with corporate tax laws. Bangladesh’s card payment sector has witnessed significant growth, with millions of debit and credit cards connected to international networks facilitating domestic and international transactions, contributing substantial fee income to the card schemes. Data from Bangladesh Bank as of August show a notable circulation of debit cards, credit cards, and prepaid cards, with Visa and Mastercard leading the cross-border payment network usage.