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.
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