Legal Aspects of Doing Business in Pakistan: A Comprehensive Guide for Foreign Investors

Usman Rasheed and Co Chartered Accountants a leading Pakistani financial, tax, and corporate advisory firm with extensive experience working with foreign businesses and entities, welcomes you to this comprehensive guide on the legal aspects of doing business in Pakistan. We understand that navigating a new legal landscape can be challenging, and this guide aims to equip you with the knowledge you need to make informed decisions for your business venture in Pakistan.

Company Formation and Registration:

• Key Legislation: The Companies Act, 2017 (Act No. XVIII of 2017)
• Business Structures: Pakistan offers various business structures, including:
  
  
  • Private Limited Company (Ltd.) – Most popular choice for foreign investors.
  • Public Limited Company (PLC) – Suitable for larger businesses seeking public listing.
  • Single Member Company (SMC) – One shareholder with limited liability.
  • Branch Office (BO) – Extension of a foreign company with limited operational freedom.
• Registration Process: Involves obtaining a name approval, filing incorporation documents with the Securities and Exchange Commission of Pakistan (SECP), and opening a bank account.
• Foreign Investment Regulations: The Foreign Investment (Promotion and Protection) Act, 2022 (FIPP Act) governs foreign investment. It offers incentives and guarantees repatriation of profits under certain conditions.

Taxation:

• Income Tax Ordinance, 2001: Sets out income tax framework for resident and non-resident companies.
• Tax Rates: Corporate tax rate for companies is 29%.
• Sales Tax: A value-added tax (VAT) levied on the supply of goods and services. The standard rate is 18%, with exemptions for certain items.
• Tax Compliance: Filing tax returns and adhering to withholding tax regulations are crucial.
• Double Taxation Agreements: Pakistan has double taxation agreements with more than 66 countries to avoid double taxation of income

Employment Laws:

• Industrial Relations Ordinance, 2002: Provides framework for employee rights and employer obligations.
• Minimum Wage: Set by the federal government and may vary by province and industry.
• Working Hours: Standard workweek is 48 hours, with mandatory rest periods and overtime regulations.
• Social Security: Employers contribute to social security schemes for employee benefits.
• Termination: Requires following due process and providing proper notice or severance pay.

Intellectual Property (IP):

• The Patents and Designs Act, 2000: Protects inventions and industrial designs.
• The Trade Marks Act, 2004: Safeguards trademarks and brand names.
• The Copyright Ordinance, 1962: Grants protection to literary, artistic, and musical works.
• Registration: Registering IP rights with the relevant Pakistani authorities is recommended.

Regulatory Environment:

• Sector-Specific Regulations: Many sectors, like banking and insurance, have specific regulatory bodies.
• Foreign Exchange Controls: The State Bank of Pakistan regulates foreign exchange transactions.
• Environmental Regulations: Businesses must comply with environmental laws and obtain necessary permits.

Dispute Resolution:

• • Litigation: Courts in Pakistan provide legal recourse for disputes.
  • Arbitration: Alternative Dispute Resolution (ADR) mechanisms are increasingly popular.

Benefits of Working with Usman Rasheed and Co.

Our team of experienced professionals can assist you with every step of your journey in Pakistan, including:

• Company registration and incorporation
• Tax planning and compliance
• Setting up payroll and employee benefits
• Obtaining necessary permits and licenses
• Negotiating contracts and agreements
• Navigating regulatory challenges