Starting Business in Pakistan

Starting Business in Pakistan

Of all the decisions you make when Starting Business in Pakistan, probably the most important one relating to taxes is the type of legal structure you select for your company.

Not only will this decision have an impact on how much you pay in taxes, but it will affect the amount of paperwork your business is required to do, the personal liability you face and your ability to raise money.

Paying taxes might be easy but collecting on behalf of government and their compliance is complicated.

Even after you settle on a business structure, remember that the circumstances that make one type of business organization favorable are always subject to changes in the laws.

Types of business entities:

  • Sole Proprietorship
  • Partnership
  • SMC Private Limited
  • Private Limited Company
  • Limited Company

The above legal entities plays very important role in getting yourself started with your business idea in Pakistan.

When you are going into a new venture in Pakistan and before starting business in Pakistan you should be very careful in deciding on a legal entity in Pakistan.

Comparison Sole Proprietorship AOP / PARTNERSHIP SMC Company Pvt. Ltd Company Limited Company
Registration authority FBR Registrar

Partnership Act, 1932

SECP

Companies Act, 2017

SECP

Companies Act, 2017

SECP

Companies Act, 2017

Tax regulatory authority FBR FBR FBR FBR FBR
NTN Required Required Required Required Required
165 statement required Not required unless sales more than 50m Required if sales more than 50m Required Required Required
Penalty of 165 If Sales more than 50m u/s 182 of Income Tax Ordinance, 2001 u/s 182 of Income Tax Ordinance, 2001 u/s 182 of Income Tax Ordinance, 2001 u/s 182 of Income Tax Ordinance, 2001
165 frequency Monthly

149 and 165

Monthly

149 and 165

Monthly

149 and 165

Monthly

149 and 165

Monthly

149 and 165

WHT Agent Not required unless sales more than 50m Acts as WHT Agent for Government Acts as WHT Agent for Government Acts as WHT Agent for Government Acts as WHT Agent for Government
Annual Income Tax Return Required Required Required Required Required
Audit Not Required Not Required Required Required

if capital above 1 m

Required
FBR filing fee No Fee No Fee No Fee No Fee No Fee
Wealth statement Required Not applicable Not Applicable Not applicable Not applicable
Salary income Yes Not applicable Not applicable Not applicable Not applicable
Comparison Sole Proprietorship AOP / PARTNERSHIP SMC Company Pvt. Ltd Company Limited Company
Personal Liability Owners have unlimited liability Shareholders typically not liable for corporate debts. Shareholders typically not liable for corporate debts Shareholders typically not liable for corporate debts Shareholders typically not liable for corporate debts
Requirements Relatively few Relatively few WHT agent; annual reports required Board meetings, WHT agent and minutes required; annual reports required Board meetings, WHT agent and minutes required; annual reports required
Management Sole proprietor has full control. Partnerships have flexible management structure. Sole Director has full control. Managed by directors who are elected by shareholders Managed by directors who are elected by shareholders
Taxation Not a separate entity. Income/loss passed through to owners Partners and partnership firm are separately taxed. Director and partnership firm are separately taxed. Director and partnership firm are separately taxed. Director and partnership firm are separately taxed.
Recommended for: Owners wanting minimal formalities, maximum flexibility. Owners wanting liability protection of an entity with the simplicity of taxation. Owners wanting liability protection and more trusted business form. Owners wanting liability protection and more trusted business form. Owners wanting liability protection and more trusted business form.
Accounting/ Bookkeeping Mandatory Mandatory Mandatory Mandatory Mandatory

Call us for more information on how to Kick-Start Business in Pakistan with options available for type of entity to select and knowing the legal obligations, tax compliance requirements, corporate compliance requirements, filing of statements under section 165 and 149.

Write us at info@thebscon.com or call at +92 321 8408828.

Read more blogs here and to contact FBR click here.

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