Pakistan is a federal parliamentary republic in South Asia on crossroads of Central Asia and Western Asia.
In order to address energy shortages and direct the economy towards a quicker, more sustainable growth, the Pakistani government has launched a program of structural and fiscal reform, with the backing of the IMF. Positive demographic trends also promote potential growth and it serves as a gateway to the economically strong Far Eastern tigers, the financially stable Gulf States, and the energy-rich Central Asian States. Pakistan is a market brimming with opportunity just because of this strategic edge.
Pakistan’s current Taxation system is defined by Income Tax Ordinance 2001 (for direct taxes) and Sales Tax Act 1990 (for indirect taxes) and administrated by Federal Board of Revenue.
Corporate Tax is a direct tax levied on the net income or profit of a corporate entity from their business, foreign or domestic.
Income taxes are levies on wages and salaries earned by individuals, income from investments, and other income. The following tax rates apply where income of the individual from salary exceeds 75% of taxable income
Pakistani companies are governed by the Companies Act, 2017, an Act to reform and re-enact the law relating to companies and for matters connected to it. The business entities which can be established in Pakistan are:
It is one that is privately owned and managed by its shareholders, who are only partially liable for the debts of the business. A private limited business needs to have two shareholders minimum. The general public cannot purchase shares of private limited companies. In Pakistan, a private company is allowed to have as many offices as it wants.
This is a business structure in which the shareholders, who both own and manage the company, are only partially liable for its obligations. There is no maximum number of shareholders, although a public limited company must have at least seven shareholders. The public can buy and sell shares of this sort of firm because it is often listed on a stock exchange. A public company is permitted to have as many locations throughout Pakistan.
Private limited companies that only have one shareholder are known as single member companies. The number of offices a single-member private limited company may have in Pakistan is unlimited.
This is a business that was established outside of Pakistan but conducts operations there. To conduct business in Pakistan, a foreign corporation needs to register with the Securities and Exchange Commission of Pakistan “(SECP)”.
The term partnership firm or association of people (AOP) refers to a form of corporate entity made up of two or more people who collaborate to conduct a business activity. These people are typically referred to as Partners. A partnership firm’s or AOP’s liability is viewed as being equal. As many offices in a district may be owned by a partnership firm.
Partners in a limited liability partnership are only liable to the level of their contributions in this type of partnership business. There is no limit to the number of offices a limited liability partnership can have in Pakistan.
A sole proprietorship is a form of company where the owner and operator are solely accountable for the obligations and liabilities of the company. While the holder of the share capital manages the company, he or she is able to appoint one or more managers to represent the company in its transactions. A one-person company is dissolved upon the death of the holder of its share capital, unless the shares of the heirs are held by one person or the heirs decide to continue the company by restructuring it into another entity.
The law allows incorporating an unlimited private company, which requires a minimum of 2 members. If one registers a private unlimited company, the liability along with other members will be unlimited. The name of the company will include the word “unlimited” as the last words of its name. In case of winding up, all of the members will be liable to pay all the debts of the company.
Like a private unlimited company, the law allows incorporation of a public unlimited company, which requires a minimum of 3 members. The liability along with other members will be unlimited. The name of the company will include the word “unlimited” as the last words of its name.
In order to undertake public welfare activities, for better recognition and credibility one can incorporate a Not-for-Profit Company. Under the law, one can incorporate a Not-for-Profit company as a public company only. Specified sum is given to the company. In case of winding up, the contribution of paying the debts of the company is to a certain limit.
Pakistan is a federal parliamentary republic in South Asia on crossroads of Central Asia and Western Asia. In order to address energy shortages and direct the economy towards a quicker, more sustainable growth, the Pakistani government has launched a program of structural and fiscal reform, with the backing of the IMF. Positive demographic trends also promote potential growth and it serves as a gateway to the economically strong Far Eastern tigers, the financially stable Gulf States
Author: Chandrawat & Partners
Topic: Doing Business in Pakistan
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