Legal Aspects of Doing Business in Pakistan
Pakistan’s liberal investment regime and its enthusiastic facilitation are the cornerstones for itsstrategy to achieve investors’ confidence and enable a conducive environment to attract local and foreign investment. The first Investment Policy was framed by BOI in 1997 which opened all economic sectors including infrastructure, social, and services for foreign investment. Keeping in view the importance of investment for economic growth and fast economic globalization trends around the world, Investment Policy 2013 was formulated to further improve the investment climate in the country. Guiding principles of Investment Policy 2013 are as follow:
- Reducing the cost of doing business in Pakistan
- Reducing the processes of doing business
- Ease of doing business with creation of industrial clusters and Special Economic Zones
- Linkages of trade, industrial and monetary policies for greater convergence
Investment Policy, 2013 is a logical evolutionary enhancement of the 1997 Policy. It reinforces the components of its predecessor policy, consolidates existing policies promulgated by the related line ministries, and introduces further liberalized policy along with futuristic strategic programs toimplement the policy. The formulation of Investment Policy, 2013 was done keeping in view the
global investment trends, regional trends & experiences, Pakistan investment data/ flows over time and present day economic challenges. The goal of Investment Policy 2013 is to address and adjust economic priorities in the face of changing global scenario of economic slowdown. The Policy will be instrumental to achieve progressive increase in FDI inflow. However, To address the economic priorities in the face of changing global and regional economic scenarios and to achieve the targets for sustainable economic growth in the country, Board of Investment (BOI) in collaboration with International Finance Corporation – World Bank Group is working on modification of the existing Investment Policy and has come up with the draft of Investment Policy 2020. The relevant Stakeholders have been consulted on the new draft of Investment Policy 2020. Further codal formalities are being fulfilled for approval of Investment Policy 2020.
Ease of Doing Business (EoDB)
BoI is the Secretariat of the steering Committee on EoDB, headed by the Prime Minister. World Bank’s EoDB report measures 10 business indicators across 190 countries on annual basis. In Pakistan, EoDB reforms are carried out through well structured plans. Doing Business Reform Strategy 2018-21 was a comprehensive plan to improve business environment in the country.most of the reforms have already been completed, some are under implementation under 6th EoDB reform plan. The strategy encompasses a set of comprehensive reform actions to be implemented by various stakeholders at federal and provincial level. The reforms focus on regulatory changes, improving technology and simplification of procedures. Key EoDB reforms performed in 2019
Pakistan has climbed 28 places and placed at 108th position out of 190 countries in the World Bank’s Doing Business Report, 2020. The enactment of six regulatory reforms has landed Pakistan among the world’s top 10 business climate improvers. In 2019, following reforms/steps taken by the government in consultation with provincial governments to improve Ease of Doing Business:
Starting a Business: Registering a company has been automated and it can now be registered in one day with SECP and FBR.
Export Processing Zone (EPZ)
The country also has Export Processing Zones (EPZ) where the investors enjoy:
- 100 percent ownership rights;
- 100 percent repatriation of capital and profits;
- No minimum or maximum limit for investment;
- Duty-free imports of machinery, equipment and material;
- No sales tax on input goods, including electricity and gas bills;
- Obsolete/old machinery can be sold on the domestic market of Pakistan after payment of applicable duties and taxes;
- No excise duty and no Custom duty on cement, steel, and any other material used in construction of buildings;
- Foreign Exchange Regulation of Pakistan is not applicable;
- Defective goods/waste can be sold in the domestic market after payment of applicable duties, at a maximum of up to three percent of total value of export;
- Domestic market of Pakistan is available on the same conditions as for imports of other countries;
- Only EPZ are authorised to collect presumptive tax at the time of export of goods at 1 percent (as revised on 1 July 2005), which would be final tax liability; and
- Production oriented labor laws, e.g. labor strikes are prohibited.
The sponsor/company registered in Pakistan, may apply for work visa by manually submitting the prescribed visa application form with the Board of Investment. In case views/comments/report are not received within the stipulated period of 4 weeks from the stakeholders, BOI issues recommendation for the grant of work visa to the Ministry of Interior for issuance of visa advice to Pakistan Missions abroad/Regional Passport Offices in Pakistan.
The visa application takes approximately 2-3 weeks to process. The work visa is issued for one year (multiple) validity, extendable on yearly basis. The maximum period that the visa is issued for is 5 years.
Tax on income is governed by the Income Tax Ordinance, 2001. The Federal Government prescribes the rates of taxes in the Annual Budget in June every year. For details please refer to the taxation section of this website.
Investment Policy Matrix
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