Foreign Company Registration

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Foreign Company Registration

A foreign company must obtain a permission letter from the Board of Investment with a specific validity period for opening and maintaining its branch or liaison office in Pakistan. Copy of this permission letter is mandatory to be filled with the documents destined for the registration. Renewal or extension lead to the approval to open/maintain a branch/liaison office is also required to be attained from the Investment Board on the expiration of the validity period of the initially granted permission. A copy to the concerned registrar must be furnished on grant of such renewal/extension.

Before going into a brief discussion, it is essential to apprehend some of the related terms which will be used in this article;

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20 - 04 - 2021

Definition and Explanation of Related terms

What is a Foreign Company?

A Foreign Company is a company registered somewhere outside Pakistan under a foreign law other than Pakistani law and established its place of business in Pakistan.

What is a Place of Business?

A place of business includes branch, share transfer or registration office, management, factory, mine, or fixed place of business but does not involve an agency unless the agent exercises a general authority to negotiate and conclude an agreement or contract or maintains stock of merchandise on behalf of the company.

What is a branch office?

An office recognized by a foreign company to fulfil its promised obligations with either public or private sector in Pakistan is known as a branch office. Its activity shall be limited to the work revealed in the signed agreement or contract. However, the office cannot carry out any commercial or trading activities. Remittance of profits is allowed subject to submission of information or documents as required in Para 13 Chapter XIV of the Foreign Exchange Manual of SBP.

What is a Liaison office?

A foreign company establishes a liaison Office to promote products, provide technical assistance & advice explore the opportunity of collaboration, and export promotion. However, they cannot undertake any trading activities. No remittance facility is being allowed in the liaison office in Pakistan.

Who needs to get registered?

Each foreign company that creates a place of business in Pakistan has to provide the required particular documents to the concerned registrar within thirty days of establishing a business in Pakistan.

Registration of a Foreign Company

In Pakistan, several foreign companies are coming in a registration net every year. In recent years several foreign companies have been registered in Pakistan, particularly companies from the Germany, China, Italy, Canada, Turkey, Japan, Korea, France, USA, UK and also other countries making investments in Pakistan and started their Branch offices and liaison offices in all over the Pakistan.

The process of foreign company registration is arduous and lengthy compared to the process of Pakistan’s local private limited company. It involves three steps described as follows;

Obtain permission from the board of investment
Seeking availability of Company name
Filling of documents.

Step.1 Obtain permission from the board of investment:

A foreign company must obtain a permission letter from the Board of Investment with a specific validity period for opening and maintaining its branch or liaison office in Pakistan.
Copy of such permission letter is mandatory to be filled along with documents of registration.

For the opening of branch or liaison office following documents are required to be filled:

Request letter for closure,
Activity Report, Proceeds Realization Certificates, and Audited Accounts for the last permitted period,
Copies of press clippings relating to closure, published in two national dailies,
Confirmation from tax authorities that all Assessments and dues are precise.

Renewal or extension of the permission

For renewal or extension to open or maintain a branch office and liaison office, the company must obtain permission from the Board of Investment to terminate the validity period of the license granted initially. Once renewal or extension is granted, a copy must be furnished to the concerned registrar.

Step 2. Seeking availability of name of the company:

The second step in registering a Foreign Company is to search for the available name of the projected company from the registrar.
The proposed name of the said company should not be:

Deceptive
Inappropriate
Aimed to exploit or offend the religious feelings of the people.
Similar or having a close resemblance with a company already in existence.
Suggesting the link with any Government or its organization or any international organization

Step 3. The Documentation:

After seeking the availability of company name, the next step is filling in documents. A foreign company (under the provisions of the Ordinance) has a compulsion to file the following documents within thirty days of establishment of its place of business in Pakistan, to the concerned registrar:

Forms (38-43) as prescribed in the Rules:
Form 38: Certified copy of the deed, statute, Memorandum and Articles of the respective company.
Form 39: Address of registered office or address of the principal office of the company.
Form 40: Particulars of directors, CEO, and Secretary of the company, if any.
Form 41: Particulars of the principal officer of the company in Pakistan.
Form 42: Particulars of a person resident in Pakistan authorized to take services on behalf of the foreign company and the certified copy of the appointment order, authority letter of the board of directors' resolution, and consent of the principal officer.
Form 43: Address of principal place of business in Pakistan of the foreign company.
Authority letter in the name of an authorized representative of the foreign company.
And a fee Challan.

All foreign documents will be attested from Notary Public, Pakistani High Commission, Foreign Office. In case, documents are other than in English, they must be attested, translated, and certified by authorities, as mentioned above.

Registration of foreign company under sales Tax

The registration process of a foreign company under sales tax is discussed under;

Mandatory Documents for the Sales Tax Registration in Lahore;

Documents required for sales tax registration are listed below;

Bank Account Maintenance Certificate containing IBAN Number.
Photographs of Business Premises.
Electricity Bills of Business Premises

The procedure of Sales Tax Registration for a foreign company:

The procedure for sales tax registration is discussed below;

The person shall use credentials of his Iris Portal to login.
After log-in, the person shall select Form 14(1) (Form of Registration filed voluntarily through Simplified) (Sales Tax) from the drop-down menu of Registration.
On selection of Form 14(1), i.e. the Form of Registration filed voluntarily through Simplified. (Sales Tax), the person will be required to fill in the following detail:

Tax Period
Information of Sales Tax in case of;
- Individual, the type of registration, either it is a Manufacturer or Non-Manufacturer.
- AOP or Company, CNIC of the Member/Director/Principal Officer with the registration type, either it is a Manufacturer or Non-Manufacturer
CNIC of the Member or Director or Principal Officer along with the type of registration.
Detail of Bank Account that includes the Bank Account Certificate furnished by the bank in the name of the respective company's business
Detail of business including Business Name, Capacity, Acquisition date and Business operations along with the detail of all branches of business in case of multiple branches at different locations.
GPS-tagged photos of the business premises
Registration number with the gas and electricity supplier along with the images of utility meter

The person shall be registered under sales tax by the system on submission of the aforementioned detail and documents.

Bio-Metric Verification

After obtaining the registration Number, the Applicant is required to have biometric verification by visiting E-Sahulat Centre of NADRA within thirty days.

If verification fails, the name of registered person is withdrawn from the Active Taxpayer list of Sales Tax.

Sales Tax Registration through Iris Mobile Application

Sales Tax Registration can also be applied via Iris Mobile Application i.e. Tax ASAAN Mobile Application.

Requirements for the foreign company operating in Pakistan

Foreign company business operations in Pakistan are considered as local companies.
Main requirements for foreign companies are as discussed below:

Obtain approval from the Investment Board of Pakistan before registration.
The company is required to maintain its Books of Accounts.
Accounts should be audited from a Certified Chartered Accountant firm in Pakistan.
Annual as well as monthly or quarterly tax returns shall be filled in the Federal Board of Revenue (FBR)