Depending on the location, registration with provincial governments may be required. The SECP website www. The OSS is also available for foreign investors. Pakistan does not promote or incentivize outward investment. Although the cumbersome government approval process can discourage potential investors, larger Pakistani corporations have made major investments in the United States in recent years.
Pakistan is negotiating free trade agreements with Turkey and Thailand. Pakistan has double taxation agreements with 63 other countries. In , Pakistan updated its tax treaty with Switzerland. Pakistan relies heavily on multinational corporations for a significant portion of its tax collections.
Foreign investors in Pakistan regularly report that both federal and provincial tax regulations are difficult to navigate and tax assessments are non-transparent. On average, calculating these payments requires that businesses spend over hours per year. The Convention will help Pakistan exchange banking details with the other 80 signatory countries to locate untaxed money in foreign banks.
Most draft legislation is made available for public comment but there is no centralized body to collect public responses. The relevant authority gathers public comments, if deemed necessary; otherwise legislation is directly submitted to the legislative branch. For business and investment laws and regulations, the Ministry of Commerce relies on stakeholder feedback from local chambers and associations — such as the American Business Council and Overseas Investors Chamber of Commerce and Industry OICCI — rather than publishing regulations online for public review.
Prior to implementation, non-government actors and private sector associations can provide feedback to the government on different laws and policies, but authorities are not bound to collect nor implement their suggestions. Respective regulatory authorities conduct in-house post-implementation reviews for regulations in consultation with relevant stakeholders. However, these assessments are not made publicly available.
Foreign businesses complain about the inconsistencies in laws and policies from different regulatory authorities. There are no rules or regulations in place that discriminate specifically against U. The SECP is the main regulatory body for foreign companies in Pakistan, but it is not the sole regulator.
Each body is overseen by autonomous management but all are required to go through the Ministry of Law and Justice before submitting their policies and laws to parliament or, in some cases, the executive branch; parliament or the Prime Minister is the final authority for any operational or policy related legal changes. The SECP is empowered to notify accounting standards to companies in Pakistan, however, execution and implementation of the notifications is poor. Pakistan has adopted most, though not all, International Financial Reporting Standards.
The government does not publicly disclose the terms of bilateral debt obligations. However, there is no regional cooperation between Pakistan and other member nations on regulatory development or implementation. Pakistan notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade, albeit at times with significant delays.
Laws governing domestic or personal matters are strongly influenced by Islamic Sharia Law. Regulations may be appealed within the court system and enforcement actions may also be appealed through the courts. The lower courts are composed of civil and criminal district courts, as well as various specialized courts, including courts devoted to banking, intellectual property, customs and excise, tax law, environmental law, consumer protection, insurance, and cases of corruption.
The lower judiciary is influenced by the executive branch and seen as lacking competence and fairness. It currently faces a significant backlog of unresolved cases. British legal decisions, where relevant, are also cited in courts. In the education, health, and infrastructure sectors, percent foreign ownership is allowed. In the agricultural sector, the threshold is 60 percent, with an exception for corporate agriculture farming, where percent ownership is allowed. While there are no regulatory requirements on the residency status of company directors, the chief executive must reside in Pakistan to conduct day-to-day operations.
If the chief executive is not a Pakistani national, she or he is required to obtain a multiple-entry work visa. Companies operating in Pakistan are statutorily required to retain full-time audit services and legal representation. Established in , the Competition Commission of Pakistan CCP ensures private and public sector organizations are not involved in any anti-competitive or monopolistic practices. Complaints regarding anti-competition practices can be lodged with CCP, which conducts the investigation and is legally empowered to award penalties; complaints are reviewable by the CCP appellate tribunal in Islamabad and the Supreme Court of Pakistan.
The CCP appellate tribunal is required to issue decisions on any anti-competition practice within six months from the date in which it becomes aware of the practice. Pakistan does not have a strong history of expropriation. In , the Pakistani government instituted a Rental Power Plant RPP plan to help alleviate the chronic power shortages throughout the country. Walters Power International Limited was a participant in three RPP plants and brought power generation equipment into Pakistan to service these plants.
In mid, NAB formally acknowledged that settlement with the Walters Power International Limited had been made, which under Pakistani law released Walters Power International Limited from any further liability, criminal or civil, and should have permitted re-export of equipment. However, the Government of Pakistan a has refused to allow the equipment to be exported so that some salvage value could be obtained, and b prevented the plant from operating despite a critical need for power in the country during the disputed period.
Despite repeated efforts by Walters Power International Limited, NAB has declined to instruct the appropriate parties to issue a Notice of Clearance to Pakistan Customs to allow the re-export of the equipment. Walters Power International Limited alleges that the unreasonable delay in permitting re-export of equipment following settlement constitutes expropriation.
The case is still pending with NAB. Arbitration and special judicial tribunals do exist as alternative dispute resolution ADR mechanisms for settling disputes between two private parties. To mitigate such risks, most foreign investors include contract provisions that provide for international arbitration. Special tribunals are able to address taxation, banking, labor, and IPR enforcement disputes.
However, foreign investors lament the lack of clear, transparent, and timely investment dispute mechanisms. Protracted arbitration cases are a major concern. Pakistani courts have not upheld some international arbitration awards. The government is currently in discussions with the consortium to arrive at an out-of-arbitration settlement.
Pakistan does not have a single, comprehensive bankruptcy law. Foreclosures are governed under the Companies Act and administered by the SECP, while the Banking Companies Ordinance of governs liquidations of banks and financial institutions. On average, Pakistan requires 2. The Companies Act regulates mergers and acquisitions. Mergers are allowed between international companies, as well as between international and local companies.
In , the government enacted legislation for friendly and hostile takeovers. The law requires companies to disclose any concentration of share ownership over 25 percent. Pakistan has no dedicated credit monitoring authority.
However, SBP has authority to monitor and investigate the quality of the credit commercial banks extend. Though some incentives are included in the federal budget, the government relies on Statutory Regulatory Orders SROs — ad hoc arrangements implemented through executive order — for industry specific taxes or incentives.
The government does not offer research and development incentives. Nonetheless, certain technology-focused industries, including information technology and solar energy, benefit from a wide range of fiscal incentives. Pakistan currently does not provide any formal investment incentives such as grants, tax credits or deferrals, access to subsidized loans, or reduced cost of land to individual foreign investors.
In general, the government does not issue guarantees or jointly finance foreign direct investment projects. The government made an exception for CPEC-related projects and provided sovereign guarantees for the investment and returns, along with joint financing for specific projects. Providing unique fiscal and institutional incentives exclusively for export-oriented industries, the government established the first Export Processing Zone EPZ in Karachi in The Special Economic Zones Act, amended in , allows both domestically focused and export-oriented enterprises to establish companies and public-private partnerships within SEZs.
Pakistan has a total of 23 designated special economic zones SEZs ; 10 of these were recently established by the government. None of the identified SEZs are fully developed, but they have attracted some investment and are available to any company, domestic or foreign. Apart from SEZ-related incentives, the government offers special incentives for Export-Oriented Units EOUs — a stand-alone industrial entity exporting percent of its production.
EOU incentives include duty and tax exemptions for imported machinery and raw materials, as well as the duty-free import of vehicles. EOUs are allowed to operate anywhere in the country. Pakistan provides the same investment opportunities to foreign investors and local investors.
Foreign business officials have struggled to get business visas for travel to Pakistan. When permitted, business people typically receive single-entry visas with short-duration validity. Technical and managerial personnel working in sectors that are open to foreign investment are typically not required to obtain special work permits. In Pakistan announced updates to its visa and no objection certification NOC policies to attract foreign tourists and businesspeople; however, the new visa policies do not apply to U.
Foreign investors are allowed to sign technical agreements with local investors without disclosing proprietary information. Likewise, there are no specific performance requirements for foreign entities operating in the country. Similarly, there are no special performance requirements on the basis of origin of the investment. However, onerous requirements exist for foreign citizen board members of Pakistani companies, including additional documents required by the SECP as well as obtaining security clearance from the Ministry of Interior.
Companies operating in Pakistan have not registered complaints with the embassy regarding encryption issues. Officially, accreditation from the Electronic Certification Accreditation Council under the Ministry of Information Technology is required for entities using encryption and cryptography services, though it is not consistently enforced.
Other data, including emails, can be legally transmitted and stored outside the country. Recent draft regulations requiring social media companies to maintain local servers in Pakistan received significant criticism in the press and from service providers. The government subsequently allowed for additional comment and revisions to draft data protection legislation; the comment and revision process remains ongoing.
With the exception of the agricultural sector, where foreign ownership is limited to 60 percent, no specific regulations regarding land lease or acquisition by foreign or non-resident investors exists. Corporate farming by foreign-controlled companies is permitted if the subsidiaries are incorporated in Pakistan.
There are no limits on the size of corporate farmland holdings, and foreign companies can lease farmland for up to 50 years, with renewal options. The Industrial Property Order safeguards industrial property in Pakistan against government use of eminent domain with insufficient compensation for both foreign and domestic investors.
The Foreign Private Investment Promotion and Protection Act guarantees the remittance of profits earned through the sale or appreciation in value of property. Though protection for legal purchasers of land are provided, even if unoccupied, clarity of land titles remains a challenge. Improvements to land titling have been made by the Punjab, Sindh, and Khyber Pakhtunkhwa provincial governments dedicating significant resources to digitizing land records.
The Government of Pakistan has identified intellectual property rights IPR protection as a key economic reform and has taken concrete steps over the last two decades to strengthen its intellectual property IP regime. In , Pakistan created the Intellectual Property Office IPO to consolidate government control over trademarks, patents, and copyrights. IPO as an institution has historically suffered from leadership turnover, limited resources, and a lack of government attention.
The IPO Act stipulates a three-year term, person policy board with at least five seats dedicated to the private sector. IPO is severely under-resourced in human capital, currently working at only 52 percent of its approved staffing.
New hiring rules await final approval from the Ministry of Law. IPO aims to start recruiting new staff in the first half of IPO is also charged with increasing public awareness of IPR through collaboration with the private sector. In , in collaboration with various academic institutions and chambers of commerce, IPO conducted over public awareness sessions.
Academics and private attorneys have noted that the creation of the IPO has improved public awareness, albeit slowly. While difficult to quantify, contacts have also observed increased local demand for IPR protections, including from small businesses and startups. Pakistani educational institutions, including law schools, have rarely included IPR issues in their curricula and do not have a culture of commercializing innovations.
IPO plans to create two more tribunals, with the proposal awaiting approval from the Ministry of Law. These tribunals have not been a priority in terms of assigning judges. They have experienced high turnover, and the assigned judges do not receive any specialized technical training in IP law. The IPO Act provides the overall legal basis for IP licensing and enforcement while subordinate laws apply to specific IP fields, but inconsistencies in the laws make IP enforcement difficult.
Since , Pakistan has made piecemeal updates to IPR laws in an unsuccessful attempt to bring consistency to IPR treatment within the legal system. Per the Foreign Exchange Regulations, foreign investors can invest in shares and securities listed on the PSE and can repatriate profits, dividends, or disinvestment proceeds.
The investor must open a Special Convertible Rupee Account with any bank in Pakistan in order to make portfolio investments. In , the government modified the capital gains tax and imposed 15 percent on stocks held for less than 12 months, The free flow of financial resources for domestic and foreign investors is supported by financial sector policies, with the SBP and SECP providing regulatory oversight of financial and capital markets.
Interest rates depend on the reverse repo rate also called the policy rate. Interest rates reached a high of Pakistan has adopted and adheres to international accounting and reporting standards — including IMF Article VIII, with comprehensive disclosure requirements for companies and financial sector entities. Foreign-controlled manufacturing, semi-manufacturing i. Foreign-controlled minimum 51 percent equity stake semi-manufacturing concerns i.
For non-manufacturing concerns, local borrowing caps are set at 50 percent of paid-up capital. While there are no restrictions on private sector access to credit instruments, few alternative instruments are available beyond commercial bank lending. According to the most recent statistics published by the SBP, only 23 percent of the adult population uses formal banking channels to conduct financial transactions while 24 percent are informally served by the banking sector; women are financially excluded at higher rates than men.
The remaining 53 percent of the adult population do not utilize formal financial services. According to the latest review of the banking sector conducted by SBP in December , improving asset quality, stable liquidity, robust solvency and slow pick-up in private sector advances were noted. The asset base of the banking sector expanded by The five largest banks, one of which is state-owned, control The risk profile of the banking sector remained satisfactory and moderation in profitability and asset quality improved as non-performing loans as a percentage of total loans infection ratio was recorded at 8.
In , total assets of the banking industry were estimated at USD As of December , net non-performing bank loans totaled approximately USD The penetration of foreign banks in Pakistan is low, having minimal contribution to the local banking industry and the overall economy. International banks are primarily involved in two types of international activities: cross-border flows, and foreign participation in domestic banking systems through brick-and-mortar operations.
In addition, foreign banks are required to maintain the following minimum capital requirements, which vary based on the number of branches they are operating:. Foreigners require proof of residency — a work visa, company sponsorship letter, and valid passport — to establish a bank account in Pakistan.
There are no other restrictions to prevent foreigners from opening and operating a bank account. As a prior action of its July IMF program, Pakistan agreed to a flexible market-determined exchange rate. The SBP regulates the exchange rate and monitors foreign exchange transactions in the open market, with interventions limited to safeguarding financial stability and preventing disorderly market conditions.
Banks are required to report and justify outflows of foreign currency. While cross-border payments of interest, profits, dividends, and royalties are allowed without submitting prior notification, banks are required to report loan information so SBP can verify remittances against repayment schedules.
Although no formal policy bars profit repatriation, U. Mission Pakistan has provided advocacy for U. Exchange companies are permitted to buy and sell foreign currency for individuals, banks, and other exchange companies, and can also sell foreign currency to incorporated companies to facilitate the remittance of royalty, franchise, and technical fees.
There is no clear policy on convertibility of funds associated with investment in other global currencies. The SBP opts for an ad-hoc approach on a case-by-case basis. The Income Tax Ordinance of Pakistan exempts taxes on any amount of foreign currency remitted from outside Pakistan through normal banking channels.
Remittance of full capital, profits, and dividends over USD 5 million are permitted while dividends are tax-exempt. No limits exist for dividends, remittance of profits, debt service, capital, capital gains, returns on intellectual property, or payment for imported equipment in Pakistani law.
Similarly, banks are required to account for outflows of foreign currency. Investor remittances must be registered with the SBP within 30 days of execution and can only be made against a valid contract or agreement. Foreign SWFs are taxed like any other non-resident person unless specific concessions have been granted under an applicable tax treaty to which Pakistan is a signatory.
As a result, large and inefficient state-owned enterprises SOEs retain monopolistic powers in a few key sectors, requiring the government to provide annual subsidies to cover SOE losses. There are SOEs in the power, oil and gas, banking and finance, insurance, and transportation sectors. Some are profitable; others are loss-making. They provide stable employment and other benefits for more than , workers. Some SOEs have governing boards, but they are not effective. PR is the only provider of rail services in Pakistan and the largest public sector employer with approximately 90, employees.
PR has received commitments for USD 8. PR relies on monthly government subsidies of approximately USD 2. The company loses USD 5 million a week, and has not produced steel since June , when the national gas company cut its power supplies due to over USD million in outstanding bills. SOEs competing in the domestic market receive non-market based advantages from the host government. Two examples include PIA and PSM, which operate at a loss but continue to receive financial bailout packages from the government.
Post is not aware of any negative impact to U. S firms in this regard. Adherence to the OECD guidelines is not known. Terms to purchase public shares of SOEs and financial institutions for both foreign and local investors are the same. The government announced plans to carry out a privatization program but postponed plans due to significant political resistance. Start your Business Now. Investor's Guide. Doing Business Portal. Atif Bokhari meeting with Dy. Bela Fazekas,… 12 Nov Read More. Atif R Bokhari meeting with V.
Ease of Doing Business The focus of all reforms efforts is to facilitate investment. Investment Regime Pakistan offers liberal investment regime. Investment Regime. Special Economic Zone is a blanket term for various types of specialized zones.
National Initiatives. We are a country where industries Flourish! Food Processing. Housing and Construction. Explore All Sectors. One of the top ten in key natural resources. Mike Nithavrianakis. British Deputy High Comissioner. CPEC's promising development in Pakistan has caught interest of many foreign investors. Manuel Duran Gimenez-Rico. Ambassador of Spain to Pakistan.
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