I received an email from two different prospects from Iran regarding setup of their businesses in Pakistan. They asked certain questions on the matter before deciding to open their offices here in Pakistan.
I am sharing their questions and my answers thereon. I have compiled their questions and restructured my answers for the audience of this website.
Table of Contents
- What Are Basic Requirements For Registering A Company In Pakistan?
- Can An Iranian National Register A Company In Pakistan?
- What’s The Information Of Iranian National Mentioned In SECP Specified Bio-Data Form?
- What’s An Overview Of A Private Limited Subsidiary Of A Foreign Company In Pakistan?
- What Are The Choices Of Directorships In Private Limited Subsidiary Of An Iranian Parent Company?
- What Are The Simple Steps To Setup an Import and Export Subsidiary Company in Pakistan?
- What Are The Required Documents And Information From The Parent Company?
- How Can The Business Setup Be Done Smoothly?
- What’s the Exact Time line of Setting up Bank Account of the Subsidiary?
- What’s The Total Cost To Setup The Subsidiary?
- How Much SECP Will Cost To Register A Company In Pakistan?
- Does Registering A Company In Pakistan By A Foreigner Requires A Pakistani Partner Or Shareholder Or Director Or Employee?
- How Much Is The Import Customs Duty In Pakistan?
- What Are The Special Custom Rules In Pakistan?
- How Much Is The VAT Rate In Pakistan? And In What Cases It Is Applicable?
- Is There Any Sensitivity For Importing Products To Iran?
- What Are The Pakistan Freezones?
- Need our support!
- Disclaimer:
Due to confidentiality requirements, I am not disclosing their names and other sensitive information.
Let’s move on to their queries. It can also help you out to decide for investing in Pakistan.
What Are Basic Requirements For Registering A Company In Pakistan?
The basic requirements for registering a company include:
- A physical registered office in Pakistan
- Name reservation
- Constitutional documents like Memorandum and Articles
- Legitimate business model
However, a local registered office address in Pakistan is required. The registered office address must be physical.
Can An Iranian National Register A Company In Pakistan?
Yes, an Iranian can register a company in Pakistan. Iranian investors can establish 100% foreign owned companies. However, there are certain documentation requirements. For a foreign director, these documents are required:
- Passport
- Photograph
- Bio-data form on SECP specific format
- Undertaking on SECP specific format
- Valid Visa to Pakistan (usually a business visa is preferable)
If the Iranian investor is sole, he can go with a single member company which is a company limited by shares. For the investors of more than 2 but less than 50, the option of a private limited setup is available.
Also remember, SECP is the Securities and Exchange Commission of Pakistan that regulates the corporate sector of Pakistan under the Companies Act 2017 and other supporting corporate laws.
The formats of undertaking and bio-data form are available at the official site of SECP.
What’s The Information Of Iranian National Mentioned In SECP Specified Bio-Data Form?
Bio-data form asks for the following information of your country fellow:
- Full name
- Date of birth
- Father’s name
- Origin of country
- Country and city of your residence
- Nationality (since your have UK and Nigeria)
- Temporary address abroad
- Permanent address abroad
- Email address
What’s An Overview Of A Private Limited Subsidiary Of A Foreign Company In Pakistan?
For a private limited company, there must be at least two shareholders and two natural persons as directors. The directors must own shares in this private company. Shareholders can be a natural person, limited company or a trust. But directors must be natural persons.
To setup a subsidiary in Pakistan, the foreign parent company must own at least 51% shares in it. 100% owned subsidiary can also be established.
For 100% owned shareholding, the Iranian parent company will own 98% shares in its subsidiary and the remaining 2% will be owned by its two authorized representatives with 1% each. In this way, the requirement of two directors can be fulfilled under the Companies Act 2017.
What Are The Choices Of Directorships In Private Limited Subsidiary Of An Iranian Parent Company?
You have two choices for directorship one is with Iranian nationals and other is Pakistani nationals.
What Are The Simple Steps To Setup an Import and Export Subsidiary Company in Pakistan?
The subsidiary can be setup in these steps:
- Step 1 – Documents of parent company be completed.
- Step 2 – Process of SECP registration of subsidiary will be submitted for approval.
- Step 3 – Bank account of your company will be opened.
- Step 4 – Sales tax registration of subsidiary will be complete (if applicable).
- Step 5 – Once sales tax registration is completed, export licence will be applied.
- Step 6 – After licence approval you can export the things from Pakistan.
Practically, for exporting goods you will need a helping hand of a customs agent. Before starting export or import, (a) get active bank account after registration with SECP, (b) obtain registration in sales tax and (c) get online account subscription on Pakistan Single Window.
What Are The Required Documents And Information From The Parent Company?
We need these documents from your parent company:
- Company profile
- Certificate of Registration
- Constitution of Setup
- Any changes in the constitution
- List of directors
- NOC by directors for setting up subsidiary
- Board Resolution for setting up subsidiary
- Signed undertaking by its Iran National representative director on subsidiary
The formats of undertaking and company profile are available at the official site of SECP.
All these documents must be certified by the regulatory authority in Iran that registered the parent company, attested by a notary public in Iran and counter signed by the Pakistan Embassy of Tehran. All these documents will arrive in Pakistan. They will be submitted physically at time of incorporation. The documents must be translated into the English Language.
The parent company must nominate its representative at the board of directors of subsidiary. The representative can be a foreigner or Pakistani.
The representative must own at least one share on behalf of the parent entity. In case of his foreign nationality, SECP will require the same documents as that of Iranian National shareholder.
How Can The Business Setup Be Done Smoothly?
| Sr. No | Technicality | Strategy for smooth setup |
| 1 | An undertaking (signed by directors) and valid visa of Iran national director will be submitted before registration. | Once director come in Pakistan, his signed undertaking will be arranged on legal paper issued under national ID of his PK representative. |
| 2 | An office address (based in Pakistan) will be required to setup your business. | It is advised to arrange an office in Pakistan. |
| 3 | A physical office is required for company registration, bank account opening, sales tax registration and customs license. | Once, you have setup a physical location then we will go for next steps. |
| 4 | A local Pakistani is required to do biometric on your behalf for sales tax and customs registration. | It can be found out here locally. If your subsidiary has PK national director, he is preferable for the biometric verification. |
What’s the Exact Time line of Setting up Bank Account of the Subsidiary?
If you go with Iranian Nationals as directors, the expected time for bank account opening can take up to 2 months. Within a month, banks normally bank accounts of foreign companies. The exact time line varies since it depends on the banks and industry.
Banks take time for KYC and account opening due to the foreign directors. The directors must be present in Pakistan at time of opening of bank accounts. If the directors are in Pakistan, so it would be easy to complete legal formalities.
What’s The Total Cost To Setup The Subsidiary?
The total setup cost varies on case-to-case basis. It comprises of
- SECP Registration fee for limited company setup
- CDC fee for the issuance of electronic shares
- Import or export licence fee
- Any other licence specific to your industry
The total cost ranges from PKR 12,000/- to PKR 50 million. The service charges of your consultant or accountant are not included in this fee estimate.
CDC is the Central Depository Company in the corporate sector of Pakistan. CDC holds the shares in electronic form. Physical shares are not issued anymore.
How Much SECP Will Cost To Register A Company In Pakistan?
Govt Fee varies depend on the capital structure which ranges from 50 USD to 140,000 USD. For your convenience, I have converted PKR to USD.
You can use SECP fee calculator for checking an estimated fee (in PKR) for your desired capital structure:
https://www.secp.gov.pk/company-formation/fee-calculator/company-incorporation-fee-calculator
Does Registering A Company In Pakistan By A Foreigner Requires A Pakistani Partner Or Shareholder Or Director Or Employee?
No, a Pakistani partner or shareholder is not mandatory. A foreigner can:
- Own 100% shares
- Act as director
- Remotely manage the company
How Much Is The Import Customs Duty In Pakistan?
Customs duty varies depending on the product. Its calculation depends on the respective HS code. Customs duty comprises of:
- Import or export duty (0 to 20%)
- Sales Tax (GST) which is 18%
- Income tax (1% to 10%)
- Federal excise duty in specific cases
- Regulatory duties in specific cases
What Are The Special Custom Rules In Pakistan?
Key highlights regarding the import and export process are:
- Imports / exports require NTN (national tax number) and Sales Tax (GST) registration.
- Mandatory online PSW (Pakistan Single Window) subscription for LC, goods clearance, customs filing and communication with govt departments for the customs purposes.
- For GST registration and PSW account activation, a local Pakistani will act as your principal officer for the purpose of biometric verification (a foreign national cannot do this).Before GST and PSW activation, bank account should be operated otherwise customs licence can’t be issued. Import Policy Order governs restrictions and licensing.
- Monthly filing of sales tax (GST) for importers and exporters
How Much Is The VAT Rate In Pakistan? And In What Cases It Is Applicable?
In Pakistan, VAT is Sales Tax (GST) which is 18% on import of goods and local supplies. Whereas, exports are zero rated and reduced rates and GST exemptions are applicable to certain goods. The provinces levy and collect sales tax on services which is 15% to 18% (standard rate).
Is There Any Sensitivity For Importing Products To Iran?
Yes, this area requires due diligence and careful handling because of international sanctions.
What Are The Pakistan Freezones?
Pakistan offers several Special Economic Zones (SEZs) and Free Zones, including:
- Gwadar Free Zone (Gwadar, Balochistan)
- Karachi Export Processing Zone (Karachi, Sindh)
- Allama Iqbal Industrial City (Faisalabad, Punjab)
- Rashakai SEZ (Nowshera, KPK)
- Dhabeji SEZ (Thatta Sindh)
SEZs offer tax incentives.
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Disclaimer:
The questions discussed in this article are based on real enquiries received from foreign business prospects. To protect confidentiality, all identifying and sensitive information has been omitted. This content is intended for general informational purposes only and should not be considered legal, tax, or professional advice.
