Step-by-Step Guide to Registering a Company in Pakistan

Legal issues often seem so complex that we end up paying high fees to professionals who benefit from the general public’s lack of legal knowledge. However, if you are an aspiring

entrepreneur looking to register a company in Pakistan, you can now navigate the registration process easily by filling out an online application, eliminating the need to visit offices in person.

Simple Steps to Register a Company in Pakistan with SECP

Registering a company in Pakistan is straightforward if you follow these steps with the Securities and Exchange Commission of Pakistan (SECP):

Visit the SECP e-Services Portal: Start by navigating to the SECP e-Services website.
Create an Account: Sign up for a new account on the SECP e-Services portal.
Reserve Your Company Name: Use the portal to reserve a unique name for your company.
Complete the Online Form: Fill out the necessary details in the online form accurately.
Submit the Challan: Once the form is complete, submit the challan for payment.
Provide Necessary Information: Enter all relevant details as required.
Pay the Incorporation Fee: A fee of PKR 1,800 is required for company incorporation.

For a comprehensive guide on each step, including tips and detailed instructions, follow the guidelines provided in the article to smoothly register your company in Pakistan.

Types of Legal Companies You Can Register In Pakistan

According to the legal companies act (2017) an individual can legally register three types of companies in Pakistan. Before knowing how to register a company, you first know the three main types of companies in Pakistan.

Single Limited Company
Private Limited Company
Public Limited Company

Single Limited Company
As the name defines its meaning on its own that a single-member company (SMC) is formed by an individual member. An SMC complies with the requirements laid out in the First Schedule, Part II, Section 4 of the Companies Act. These requirements include
- The company does not invite the public to subscribe to any shares in the company.
- They do not register any share(s) in the name of two or more persons to hold one or more shares together.
- The number of members of the company shall be limited to one.
- All foreign nationals, except for Israeli nationals, are also eligible to set up an SMC in Pakistan.
Private Limited Company

SECP regulations define when two or more persons associated with lawful purpose can form a Private Limited Company. They can subscribe names to the Memorandum of Association and comply with the requirements of the Companies Act, 2017.
The requirements for the registration of a private limited company in Pakistan:
- A company that restricts the right to transfer its shares.
- Limits the number of its members to fifty, not including persons who are in the employment of the company.
- Prohibits any invitation to the public to subscribe for the shares (if any) or debentures or redeemable capital of the company.

Public Limited Company
A public limited company has its shares offered to the general public. Those shares are with limited liability. The share may be offered to the public. 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, Listed and Unlisted.

	listed	Unlisted
Allowed Foreign ownership	100%	100%
Minimum Capital	PKR 200 Million	PKR 100,000
Listed In Stock Exchange	Yes	No
Minimum No of Shareholders	7	3
Time of incorporation	6 weeks	6 weeks

Capital Required To Register A Company In Pakistan

Type of Entity	Minimum No. of Shareholders	Minimum Capital Requirement	Standard Time of Incorporation
Private Limited Company	2	1000 PKR	6 weeks
Branch Office	No shareholders	N/A	7 weeks
Public Listed Company (Unlisted)	3	100,000 PKR	6 weeks
Liaison Office/	No shareholders	N/A	7 weeks
Public Listed Company (Listed)	3	200 Million	6 weeks
Single Member Company	1	100,000 PKR	4 weeks

Requirements Before Registeration

Make sure that following information is available before registration:

Requirements For An Individual

CNIC
Phone number
E-mail address
Nationality
Residential address
Accounting period
Business name
Business address
Principal business activity
Name and NTN (If salaried)
Address of property (property income)
Requirements For Principal Officer OF Company And AOP
- Name of company
- Business name
- Business address
- Accounting period
- Business phone number
- E-mail address
- Cell phone number of principal officer
- Principal business activity
- Address
- Company type
- Date of registration
- Incorporation certificate (by SECP)
- Registration certificate
- Registration certificate in case of society
- Name of representative and CNIC

The Step-by-Step Guide to Company Registration in Pakistan

The procedure for registering a company in Pakistan is given below;

Acceptance Of Company Name.
Providing Documents.
Declaration Of Incorporation.
Shares Deposited.
Registration Of Income, Sales, And Professional Taxes.

Step 1: Acceptance Of Company Name

Choosing a name for the company is the first stage in the registration of a company in Pakistan. It is crucial to come up with a distinctive company name that will set you apart from the competition in your sector.

You must abide by the limitations and rules of withholding tax . Make sure, for instance, that no offensive terms are present in the name of your company.

Step 2: Providing Documents

The second step in the procedure of registering a company is the submission of all required documents. You must submit the incorporation documentation to the Securities and Exchange Commission of Pakistan (SECP) once the company name has been approved.

Step 3: Declaration Of Incorporation

The SECP assesses the documents after they are submitted. They verify their legitimacy. The National Institutional Facilitation Technologies (NIFT) issues digital signatures, which can be obtained via the SECP.

The certificate of incorporation is also issued by them. There can be a requirement for a company presentation. However, where the business began will determine this.

Step 4: Shares Deposited

The fourth step in the registration process is the deposition of shares. Shareholders must deposit their corresponding number of shares to the company’s bank account upon registration.

Step 5: Registration Of Income, Sales, And Professional Taxes

The last step in the registration process is the Registration of income, sales, and professional taxes. The Federal Board of Revenue (FBR) registration and issuing of a national tax number are the final steps in registering a company in Pakistan (NTN). If necessary, a sales tax registration number may be registered.

We hope the information provided is going to help you register your company with convenience. Know the sale tax rates in Pakistan as well and grow with your products.

Explaining Withholding Tax: Various Types and Their Calculation

Understanding Withholding Tax in Pakistan: A Comprehensive Guide to Saving on Your Tax Bill

Did you know that whether you’re a salaried employee, a pensioner, or earning through commissions or other sources, a portion of your income is withheld as tax? Withholding too little can lead to an unexpected tax bill, while over-withholding allows you to use your money interest-free until you get a refund.

This guide covers everything you need to know about withholding taxes and compliance to help you make informed decisions. Once you understand the concept of withholding tax and how to manage it, you could save thousands of rupees every year.

What is Withholding Tax?

Withholding tax (WHT) in Pakistan is a ‘presumptive’ tax, meaning it’s deducted from your income by your employer and paid directly to the government. Essentially, it’s an advance tax on your income, ensuring tax obligations are met before you receive your earnings. Employers deduct this tax before paying salaries to mitigate the risk of unpaid taxes during tax season.

The Importance of the Withholding Tax System in Pakistan

In Pakistan, withholding tax is a major source of federal revenue. For the financial year, 73% of direct tax collection came from various withholding taxes. These taxes are levied on salaries, imports, bank interests, dividends, utilities, technical fees, cash withdrawals, and more, each with varying rates.

Key benefits of the withholding tax system include:

Promotes voluntary compliance
Ensures a steady revenue flow with minimal costs
Reduces collection efforts
Expands the tax net
Provides daily revenue generation
Prevents tax evasion and revenue loss
Enhances economic documentation
Alleviates fiscal shortfalls by providing consistent revenue throughout the year

Who is Required to Withhold Taxes?

Withholding tax, also known as payroll tax, is essential for federal revenue. The following entities are required to withhold taxes:

Individuals in business or professional practice
Non-individuals (corporations, associations, partnerships, cooperatives)
Government agencies and their instrumentalities, including National Government Agencies (NGAs), Government-Owned or Controlled Corporations (GOCCs), and Local Government Units (LGUs), including Barangays

Types of Withholding Taxes

Creditable Withholding Tax

Creditable withholding tax is collected by employers in Pakistan and can be further classified into:

Compensation: Tax withheld from income payments to individuals in an employer-employee relationship.
Expanded: Tax on income payments deducted against the income tax due for the taxable year.

Withholding Tax on GMP – Value Added Taxes (GVAT)

Tax withheld by NGAs and instrumentalities, including GOCCs and LGUs, before making payments to VAT-registered taxpayers.

Withholding Tax on Government Money Payments (GMP) – Percentage Taxes

Tax withheld by NGAs and instrumentalities, including GOCCs and LGUs, before making payments to non-VAT registered taxpayers/suppliers/payees.

Final Withholding Tax

Tax on certain income payments not creditable against the income tax due for the taxable year. The payee’s income subjected to final withholding tax is not included in regular tax rates.

Withholding Tax on Compensation

Withholding tax on compensation involves deductions from employee salaries, which can be exempted by the NIRC and relevant laws.

Kinds of Compensation

Regular Compensation:

Basic salary
Fixed allowances

Supplementary Compensation:

Commission
Profit sharing
Overtime pay
Taxable 13th-month pay and other benefits
Directors’ fees
Fringe benefits for rank-and-file employees
Hazard pay
Monetized vacation leave over ten days
Sick leave
Other income from employer-employee relationships

Quarterly Withholding Statement

Tax collectors/deductors must provide a quarterly statement to the commissioner, including:

Name, CNIC, NTN, address of the person from whom tax was collected/deducted
Amount of tax collected/deducted
Total payments made/received from which tax was collected/deducted
Additional prescribed particulars

Quarterly Compliance Deadlines:

Quarters	Due Date
Ending on 31 March	20th April
Ending on 31 June	20th July
Ending on 31 September	20th October
Ending on 31 December	20th January

Claiming Back Your Paid Withholding Tax

You can claim a refund on withholding tax if:

You pay annual tax
Your income is below the taxable threshold
You are a tax filer
You file your tax return on time every year

How to Collect Information for Withholding Tax Refunds

The tax year in Pakistan runs from July to June. To claim a refund, keep track of your receipts and bills for expenditures throughout the year. These documents will serve as evidence of the withholding tax paid and help you get a refund.

Understanding and managing withholding tax effectively can help you avoid unexpected tax bills and save money annually.

Income Tax Return Filing

Haven’t Filed Your Income Tax for 2022? Here’s What to Do

If you haven’t filed your income tax for 2022 yet, don’t worry—you still have time! The Federal Board of Revenue (FBR) has extended the deadline for filing income tax returns until October 31, 2022.

Key Steps to File Your Taxes

Review FBR’s Instructions: Familiarize yourself with the guidelines provided by FBR for filing taxes.
Register Online: Get yourself registered with FBR’s online enrollment system.
Submit Tax Documents: Ensure you have all your tax-related documents ready for submission.

Understanding the Income Tax Return

An income tax return offers a comprehensive overview of your earnings, profits, and losses for the year. If your annual income is PKR 400,000 or more, you are required to file your tax returns in Pakistan.

Given the complexities and time constraints of modern life, managing your tax data and filing your income tax return might seem daunting. This guide will simplify the process and provide you with everything you need to know to file your income tax return efficiently.

Who Needs to File an Income Tax Return?

You are required to file an income tax return if:

You own a company.
Your annual income exceeds PKR 400,000.
You manage a non-profit organization [clause (36) of section 2].
You operate a welfare institution [clause (58) of Part I of the Second Schedule].
You were charged tax in any of the two preceding tax years.
You are claiming a loss carried forward.
You own immovable property (250 square yards or more).
You own a flat within municipal limits, a Cantonment, Islamabad Capital Territory, or a rating area.
You own a motor vehicle with an engine capacity over 1000 CC.
You have a National Tax Number.
You have an electricity connection with annual bills exceeding PKR 500,000.
You are registered with any chamber of commerce, industry, trade, business association, market committee, or any professional body.
Your income falls between PKR 300,000 and PKR 400,000 from a business in a tax year.

What Is Tax Return Filing?

A tax return is a form submitted to a tax authority detailing income, expenses, and other relevant tax information. In Pakistan, this form is submitted to the Federal Board of Revenue (FBR) and includes details about the individual’s or business’s income and taxes owed for the year. Both businesses and salaried employees (government and private) must file their income tax returns and register their NTN numbers. Salaried employees are exempt from providing a wealth statement.

Sources of Income:

Salary: Income from employment.
Business and Profession: Profits and revenues.
Capital Gains & Property: Income from investments and real estate.
Other: Dividends, royalties, lottery winnings, etc.

Benefits of Being a Filer in Pakistan

FBR is increasing enforcement against non-filers. Non-filers face higher tax rates:

Dividend Income: 30% for non-filers vs. 15% for filers.
Bank Profit: 30% for non-filers vs. 15% for filers.
Property Transactions: 2% deduction for non-filers vs. 1% for filers.
Vehicle Registration: Lower rates for filers.

Required Documents for Becoming a Filer

To register as a filer and e-file your income tax return, you need the following documents:

Phone Number: With a SIM registered against your CNIC.
Email Address.
Tax Deduction Certificate: From your employer.
Business Ownership Proof: If applicable.
List of Personal Assets: Along with their purchase value.
Recent Utility Bill: For business premises, if applicable (not older than 3 months).

How to File Income Tax in Pakistan: Step-by-Step

Login to the Iris Portal: Access FBR’s online portal for tax filing.
- Enter Username and Password: If you forget your password, use the ‘Forgot Password’ option to recover it.
Access the Declaration Menu: Click on ‘Declaration’ and choose the form for filing voluntarily.
Enter Tax Year: Specify the tax year in the Period tab.
Employment Section:
- Enter Annual Salary: Input your total annual income in the designated field.
Calculate and Submit:
- Click Calculate: Compute the tax based on entered details.
- Adjustable Tax: Fill in fields for deductible allowances, such as Zakat or donations.
Tax Deductions:
- Adjustable Tax Details: Enter taxes already charged during the tax year.
- Federal/Provincial/Corporate Sector Employees: Use respective codes for tax amounts.
- Banking Transactions: Input details for cash withdrawals and savings under specified codes.
Vehicle Details:
- Enter Vehicle Information: Provide E&TD Registration No., make, model, and engine capacity.
Personal Assets:
- Net Assets Information: Enter amounts for previous and current year’s net assets.
- Annual Income: Input details in inflows and outflows fields.
- Reconciled Amount: Ensure the ‘Unreconciled Amount’ is zero before submission.
Payment for Demanded Tax:
- Payment Details: Enter the amount paid and save the information.
Verify and Submit:
- Identity Verification: Input the verification pin provided at registration.
- Final Submission: Click on the ‘Submit’ tab to file your tax return.

Final Date for Filing Income Tax Returns for 2022

The FBR has set October 31 as the deadline for filing income tax returns for the year 2022. All non-corporate taxpayers, including salaried individuals, business owners, and AOPs, must file by this date. Companies with financial years ending on June 30 must file by December 31. Late filers will incur penalties and are required to pay ATL Surcharge Challan to update their Active Taxpayers List status.

Penalties:
- Individuals: Rs 1,000.
- AOPs: Rs 10,000.
- Companies: Rs 20,000.

Don’t delay! If you haven’t yet filed your income tax returns, seize this opportunity to do so with ease. We hope this guide helps you navigate the process of filing your income tax return in Pakistan. For further assistance or questions, feel free to contact us.

For more detailed information, visit Khan & Co for FAQs, registration guidance, and income tax return filing tips.