There are a lot of reasons why to invest in Pakistan. Some of its prime benefits are low competition, a huge population, and a rapidly growing economy.
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Allowed Foreign Ownership in Pakistan
Unlike many other similar markets, Pakistan is very welcoming towards foreign investors. Due to a negative international reputation, the country has significantly opened up to foreign investment over the past years.
For Example, you can even import some products without having an import license.
Moreover, foreign investors can set up 100% foreign-owned companies in most business lines. The shareholders can be of any nationality, except for Israeli nationals.
Minimum Capital Requirement in Pakistan
There are two types of share capital in Pakistan, paid-up capital and authorized capital. Both capitals must be declared in the Articles of Association when you register your company.
Paid-up capital is the amount of money that the company receives from its shareholders. On the other hand, authorized capital is the maximum amount of share capital that the company is allowed to authorize to issue to its shareholders.
There is no official minimum capital requirement for private limited companies in Pakistan. For this reason, a common practice is to consider PKR 100,000 (~US$823) as the minimum capital.
In reality, however, the paid-up capital you inject must be in compliance with your planned expenses. For example, if you plan on building a factory, you must also have sufficient capital for that.
Types of Legal Entities in Pakistan
More and more foreign investors recognize Pakistan as a market to invest in. In March 2018, for example, foreign investment in Pakistan increased by USD 152.7. It is expected to grow by 17.2% by 2020.
If you are planning to invest in Pakistan, here are the types of legal entities that you can choose from.
1. Private Limited Company
Foreign investors can set up fully foreign-owned private limited companies (LLCs) in Pakistan. The minimum number of shareholders needed in order to register this kind of company is two. Any foreign national can be a shareholder in this kind of company, except for those coming from Israel.
In general, PKR 100,000 is considered to be the minimum capital requirement. However, take note that the actual minimum capital you need to inject depends on your planned expenses.
Another requirement is that the registered address of the company’s office must be located in Pakistan.
The incorporation time of a limited liability company in Pakistan is generally six weeks. The registration is also subject to approval from the Board of Investment and you also need to obtain clearance from the Ministry of Interior.
2. Single Member Company
Foreign investors, apart from Israeli nationals, can also set up a single-member company in Pakistan with only one shareholder.
Just like a limited liability company, you can also set up a single-member company with only PKR 100,000 of minimum capital.
The standard time of incorporation is four weeks and also make sure that the registered address of the company will be in Pakistan.
3. Public Limited Company
Generally speaking, a public limited company has its shares offered to the general public. Those shares are with limited liability.
Anyone can acquire the shares. It may be through a public offering or through trading in the stock market.
There are two types of public limited companies in Pakistan, listed and unlisted.
How to register a company in Pakistan
Following are the general steps of Private Limited Liability Company Registration in Pakistan:
1) Approval of Company Name
2) Submission of Documents
3) Certificate of Incorporation
4) Deposit the shares
5) Registration for income, sales, and professional taxes
Its total time is 4-6 weeks.
The procedure of registering a public limited company is the same as above. However, they may require you to submit more documents.
Step 1: Approval of Company Name
This is the first step of company registration in Pakistan is choosing the company’s name. It is important to devise a unique company name that would set you apart from the rest of the industry.
You must follow the restrictions and guidelines. For example, make sure that your company’s name does not include any prohibited words.
Step 2: Submission of Documents
Once the company name gets approval, you need to submit the incorporation documents to the Securities and Exchange Commission of Pakistan (SECP).
Step 3: Certificate of Incorporation
After submitting the documents, the SECP evaluates them. They check their validity. A digital Signature is granted by the National Institutional Facilitation Technologies (NIFT) and can be acquired through the SECP.
Also, they issue the certificate of incorporation. Presentation of the company may be needed. However, this depends on where the business started.
Step 4: Deposit of shares
After the registration, shareholders must deposit their corresponding amount of shares to the company’s bank account.
Step 5: Registration of income, Sales, and Professional Taxes
In conclusion, the last step of company registration in Pakistan is the registration with the Federal Board of Revenue (FBR) and issuance of a national tax number (NTN). A sales tax registration number may be registered if applicable.
Alternatives to company registration in Pakistan
A branch office is a suitable alternative to company registration if your company wants to have a presence in Pakistan without setting up a separate legal entity.
Branches carrying out a contract in Pakistan can be established. However, a branch office cannot take part in any commercial or trading activities of whatever nature. Therefore, your activities depend on the contract you signed. The contract restricts your activities.
The parent company owns 100% of the branch office in the country of origin. Since it is not a limited liability company, it does not require any minimum capital either.
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Process time for the registration takes up to seven weeks. The permit can be valid for 1 to 5 years if it has approval from the Board Of Investment (BOI).