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Starting a business in Pakistan

Starting a Business in Pakistan: Essential Guide to Company Registration

Business Opportunities in Pakistan

The cities of Pakistan have a lot of promise, both as huge consumer markets and as potential sites for renovations that could attract significant investment. Cities have always been the country’s vanguards of progress, invention, and creativity. They are crucially the forces for economic expansion. 

Services make up the most significant portion of the economy in Pakistan, making up about 53% of the GDP. The three most significant subsectors of activities are public administration and defense (18% of GDP), retail and wholesale commerce (17%), and transportation (10%). Consumer goods, energy production, sustainable sources, telecommunications equipment and services, farming industrial machinery, franchise, waste disposal, healthcare, and education have been named the industries with the best prospects.

Pakistan presents several lucrative prospects for foreign companies prepared to put in the work required to establish a strategic market presence. The country has an estimated 220 million people and a growing GDP of Rs. 66,950 trillion ($325 trillion), representing an increase of 20% over the previous year. 

Establishing a presence in Pakistan will allow businesses that wish to grow worldwide to take advantage of the country’s expanding economy. Read on to learn how to start a business in Pakistan, read on.

Benefits of Starting a Business in Pakistan

Setting up a company in Pakistan offers numerous advantages to business owners:

  • Regarding natural resources, Pakistan is one of the wealthiest nations on earth. Pakistan possesses the fifth-largest coal reserves, the seventh-largest copper mine, and the second-largest salt deposits in the world. This opens up myriads of opportunities for businesses to explore business prospects in the country and lead you towards a profitable venture.
  • The cost of living in Pakistan is quite reasonable compared to many other Western nations. This covers food, utilities, rent, salaries, and transportation, so establishing a business here is smart. With the typical monthly skilled wage salary, a firm’s annual operational expenditures are quite modest. Hence, if you plan to set up an offshore company in Pakistan, be sure that your staff’s cost of living is reasonable, reducing your company’s costs. 
  • The Pakistani government has signed agreements with 47 nations to prevent double taxation. As a result, sending money to foreign stockholders would be more straightforward and subject to less withholding tax. In addition, the government provides four special economic zones in Gujranwala, Sialkot, Risalpur, and Karachi. Incentives for business and particular infrastructure support are available to international enterprises.
  • According to Pakistan’s Income Tax Law, directors can earn compensation from their businesses. This allows them to lower their net profit and, as a result, avoid paying taxes on their income.
  • The average age of the Pakistani population is 22.7. Companies planning to start a business in Pakistan can take advantage of the young and talented population.  

Requirements for Starting a Business in Pakistan

Companies must fulfill the following requirements to set up a business in Pakistan. The following conditions must be met before doing business in Pakistan:

Minimum capital

Private limited corporations in Pakistan are not subject to formal minimum capital requirements. For this reason, it is customary to regard PKR 100,000 (or around US$823) as the minimal capital. However, in practice, the paid-up capital you inject must match your anticipated costs. You must have enough money, for instance, if you intend to develop a factory for your company.

Important documents

Before starting a business in Pakistan, you must submit the following mandatory incorporation paperwork to the Security & Exchange Commission of Pakistan (SECP):

  • Memorandum of Association
  • Articles of Association
  • Scanned version of the Directors’ CNICs
  • Scanned receipt of Bank deposit (during offline payment)
  • Authorization by the subscribers
  • Registration/Filing fee

Name of the business

It is the first and most crucial stage in incorporating a business. Either uses an online application process or physically submit your application. On the SECP website, you may find information regarding the online application and application process.

Business license

Companies must apply for a business license before they start a business in Pakistan. Depending upon the nature of the business, apply for the license with the concerned authorities. 

  • Food business – Pakistan Food Authority
  • Travel company – Pakistan Department of Tourist Services
  • Textile business – Pakistan Ministry of Textile Industry
  • LPG business – Oil and Gas Regulation Authority

Types of Business Structures in Pakistan

When setting up a business in Pakistan, you can opt for any of the following business structures:

Sole proprietorship:

  • The simplest form of business ownership for an individual is a sole proprietorship. 
  • The proprietor is in charge of liabilities and debt because it is not a separate legal body. 
  • The concerned proprietor pays taxes on the sole proprietor’s personal income.

Partnership:

  • Another simple business structure is a partnership or Association of Persons (AOP). 
  • Even though there are more partners, it operates like a sole proprietorship. A straightforward agreement between partners outlines their respective shares and business rules. 
  • A partnership is not a legal entity; the partners are solely responsible for their obligations. 
  • Revenue generated from the partnership is only taxed once. Partners are not responsible for paying taxes on any wages or profits they receive.

Limited Liability Partnership

  • A Limited Liability Partnership is a distinct legal entity.
  • It protects its partners from joint liability brought on by another party’s wrongdoing. 
  • With minimal compliance costs, this business form combines the benefits of a Limited Liability Company and the adaptability of a general partnership (governed by the Partnership Act, 1932).

Private limited company

  • The best corporate structure for SMEs seeking small- to medium-sized amounts of funding is a Private Limited Company (PLC). 
  • It is a legal entity independent from its stockholders. 
  • The board, which the shareholders choose, works with the CEO to make operational choices for the business. 
  • The corporation pays corporate income tax on its revenues, and shareholders individually pay the taxes on their earnings (dividends or salary), contrary to an LLP in which only the partners’ income is taxed. 
  • Depending on size, a corporation may also require a company secretary, a legal counsel, and an auditor.

Company Registration Process

The first stage in the Pakistani company registration process is choosing your company’s legal corporate structure. The following steps must be taken for offshore company registration in Pakistan:

Step 1: Approval of business name

  • Choosing a name for the business is the first stage in registering a company in Pakistan. 
  • Creating a unique company name that will distinguish you from the competition in your industry is essential.
  • You have to adhere to the restrictions and guidelines. Make sure, for example, that your company’s name doesn’t contain any insensitive words or the names or acronyms of international institutions.

Step 2: Submitting the necessary documents 

  • You must submit the incorporation documentation to Pakistan’s Securities and Exchange Commission (SECP) once the company name has been approved.

Step 3: Obtaining the Certificate of Incorporation

  • After submission, the documents are evaluated by the SECP. They check their credibility.
  • Digital signatures are produced by the National Institutional Facilitation Technologies (NIFT) and are available through the SECP. They also issue the certificate of incorporation. 
  • A corporate presentation might be necessary. However, this will depend on where the company was founded.

Step 4: Deposit of shares

  • Upon registration, shareholders must deposit their corresponding shares to the company’s bank account.

Step 5: Taxes on income, sales, and professional services are registered.

  • The last steps in establishing a corporation in Pakistan are to receive authorization from the Federal Board of Revenue (FBR) and a national tax number.
  • Additionally, a sales tax registration plate can be acquired if needed.

You can register your firm as an employer once the process for company registration in Pakistan is complete. After that, you can set up your company in Pakistan and hire more staff.

How Much Does it Cost to Incorporate a Company in Pakistan?

Company registration process in Pakistan involves the costs cited below: 

Specifications

Cost (in PKR)

Name reservation fee

PKR 200

Filing fee

PKR 400

Registration fee

for online submission: PKR 1,000 for capital below PKR 100,000; Additional PKR 500 for every PKR 100,000 of capital or part thereof, above PKR 100,000 and up to PKR 10,000,000

Fee for registration with the Labor Department 

PKR 1,000

Are Foreigners in Pakistan on Certain Passes Allowed to Start a Business in Pakistan?

Foreign investors can start business operations in Pakistan. They are given a three-year visa with numerous entries. For gainful employment or activity in Pakistani private companies, foreign management and technical professionals are not subject to any restrictions or requirements for a work permit.

Government Assistance for Foreign-owned Businesses

Opening a business in Pakistan has become more accessible due to the simple business rules established by the Pakistani government. 

  • Since August 2018, Pakistan’s administration has worked to encourage foreign investment, promising to reform taxation, increase trade and investment, and combat corruption.
  • In July 2019, the government agreed to a $6 billion IMF Extended Fund Facility, pledging to implement structural changes that had been put off because of the COVID issue. 
  • Under the EFF program, the IMF Board approved the release of the most recent tranche in March 2021. Pakistan was able to join international bond marketplaces for the very first time since 2017.
  • While inflation has been under 10% for the reporting period, Pakistan has made substantial progress since 2019 in moving to a market-determined currency rate and decreasing its current deficit.

How Multiplier Can Help

When beginning a business abroad, great consideration must be given to planning, research, and money. After your business has been formally formed in Pakistan, you must hire the right staff to ensure effectiveness. This lengthy process could be easier with assistance from a multinational PEO-EOR business like Multiplier..

Multiplier lightens your HR workload by managing your worldwide team, taking care of payroll, and onboarding new hires. Our professionals can help you grow your company internationally without the requirement to establish a subsidiary by helping you recruit individuals from outside. You get to explore new markets and focus on the operational aspects of your business while we handle the routine HR duties.

Frequently Asked Questions

A foreign company must register with Pakistan’s Securities & Exchange Commission.

A foreign business that wants to open a branch or liaison office must get approval from the Board of Investment, Government of Pakistan.

The Board of Investment authorizes the opening of a branch or liaison office for a preliminary period of three to five years. A copy of such a permission letter must include the paperwork required for a foreign company’s registration.

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