How to Do Business In Pakistan? – Super Business Manager

Doing business in Pakistan involves navigating legal registration processes, understanding the available business structures, managing the tax landscape, and adapting to the local business culture.

Here is a breakdown of key aspects:

1. Legal Setup and Registration

The primary regulatory body for corporate affairs is the Securities and Exchange Commission of Pakistan (SECP). Key steps for establishing a new company (especially for foreign investors):

Choose a Business Structure:
- Private Limited Company (Pvt. Ltd.): The most common and preferred structure for foreign investors, as it provides limited liability and credibility. A subsidiary of a foreign company is often set up as a Private Limited Company.
- Branch Office: An extension of the foreign parent company. It is permitted to generate income in Pakistan but is restricted to the activities outlined in its registration. Requires approval from the Board of Investment (BOI).
- Liaison Office: Suitable for non-commercial activities like promoting products or market research. It cannot engage in any commercial activity or generate revenue. Requires BOI approval.
Registration Process (for a Private Limited Company):
1. Obtain PIN and Reserve Name: Apply online through the SECP e-portal.
2. Company Incorporation: Register the company, pay incorporation fees, and submit necessary documents (Memorandum and Articles of Association, proof of identity for directors/shareholders, etc.).
3. Obtain National Tax Number (NTN) and Other Registrations: This is often done concurrently through the SECP e-portal, which includes registration with the Federal Board of Revenue (FBR) for NTN and other departments like EOBI and SESSI.
4. Open a Bank Account: Open a corporate bank account with an authorized local or foreign bank.
5. Sales Tax Registration Number (STRN): Apply for an STRN with the FBR if your business involves sales subject to Sales Tax.
Key Foreign Investor Considerations:
- Foreign Equity: Pakistan generally allows 100% foreign equity ownership in companies.
- Repatriation: Foreign investors can generally repatriate profits, dividends, and capital in accordance with State Bank of Pakistan (SBP) foreign exchange regulations.

2. Taxation and Compliance

Pakistan has a sophisticated tax system, and it is highly advisable to engage a local chartered accountant or tax consultant.

Corporate Income Tax (CIT): The standard corporate tax rate is 29%. A reduced rate of 20% applies to small companies that meet specific criteria.
Sales Tax (similar to GST/VAT): The standard Federal Sales Tax rate is 18%, with provincial sales tax rates on services generally around 15% or 16%.
Withholding Taxes (WHT): Taxes are often withheld on payments made to vendors, contractors, and non-residents, with varying rates depending on the type of payment and the recipient’s tax status.
Super Tax: An additional tax imposed on high-earning companies, with rates that vary based on income slabs.
Incentives: Tax holidays and exemptions are available for businesses in specific areas like Special Economic Zones (SEZs), Special Technology Zones (STZs), and for certain sectors like IT and power generation.

3. Business Culture and Etiquette

Business in Pakistan is often relationship-driven, with a strong emphasis on hierarchy and hospitality.

Aspect	Etiquette/Custom
Relationships	Building personal trust is often a prerequisite for business. Be prepared to engage in initial meetings focused on rapport-building.
Greetings	A polite, firm handshake is common between men. For women, wait for them to extend their hand; otherwise, a respectful nod or hand over the heart is appropriate. Use formal titles (Mr./Ms./Dr.) followed by the surname until invited to use a first name.
Communication	Often indirect, prioritizing politeness and “saving face.” Avoid direct confrontation. Pay close attention to non-verbal cues.
Hierarchy	Respect for seniority and age is paramount. Defer to the most senior person in a meeting, who is typically the ultimate decision-maker.
Punctuality	While appreciated from foreign professionals, local meeting times can sometimes be flexible. Be patient and prepared for potential delays.
Hospitality	It is customary to be offered tea or snacks. Accept them graciously as a gesture of goodwill.
Dress Code	Professional and modest attire is expected. For men, a suit or business casual (trousers and dress shirt) is standard. For women, conservative dress (covering shoulders and knees) is advised.