Differences between a local and foreign company registration in Pakistan

Registering a company in Pakistan offers both local and foreign investors the opportunity to legally conduct business within the country. However, the process, legal framework, documentation, and regulatory requirements differ significantly between local and foreign companies. A clear understanding of these differences is crucial for entrepreneurs, multinational corporations, and overseas investors looking to establish a presence in Pakistan.

This article provides a detailed comparison of local and foreign company registration in Pakistan, highlighting the legal procedures, compliance requirements, taxation, and operational constraints applicable to each type.

Definition of Local Company vs Foreign Company

Local Company

A local company in Pakistan is any entity incorporated under the Companies Act, 2017 by resident Pakistani nationals or locally based entities. It includes:

• Private Limited Companies

• Single Member Companies (SMC)

• Public Limited Companies (Listed or Unlisted)

• Limited Liability Partnerships (LLP)

These companies are fully domiciled in Pakistan and operate as independent legal entities.

Foreign Company

A foreign company is defined under Section 435 of the Companies Act, 2017 as a body corporate incorporated outside Pakistan which:

• Establishes a place of business in Pakistan

• Opens a branch or liaison office

• Is controlled by foreign shareholding or parent companies

These entities operate in Pakistan as an extension of their foreign parent organization.

Registration Authorities

Local Company Registration

• Securities and Exchange Commission of Pakistan (SECP) is the central authority

• Incorporation is completed through the SECP eServices portal

• FBR registration, PRA/SRB, Chamber of Commerce are subsequent steps

Foreign Company Registration

• SECP is involved for legal registration

• Board of Investment (BOI) approval is mandatory before registration

• Ministry of Interior may be involved for security clearance

• Branch or liaison offices must also register with State Bank of Pakistan (SBP) in certain cases

Legal Framework

Local Companies

• Governed by the Companies Act, 2017

• Must follow local compliance rules and filing requirements

• Full rights to operate in all economic sectors unless restricted by law

Foreign Companies

• Governed by Companies Act, 2017, Foreign Exchange Regulations, and BOI Guidelines

• Limited to sectors allowed under the Foreign Investment Policy

• Cannot engage in retail trade, real estate development, or other restricted sectors unless granted special permission

Types of Entities Registered

Local Company Structures

• Private Limited Company (minimum 2 members)

• Single Member Company (1 shareholder and nominee)

• Public Limited Company (at least 3 directors)

• LLP (Registered under SECP)

Foreign Company Structures

• Branch Office – commercial operations allowed, revenue-generating

• Liaison Office – only promotional and coordination activities allowed

• Subsidiary – registered as a local company but fully owned by foreign parent

• Joint Venture – foreign and local partners share ownership

Process of Registration

Local Company Registration Steps

1. Name Reservation via SECP eServices

2. Filing Incorporation Documents

3. Digital Signature & Payment of Fee

4. Certificate of Incorporation Issued

5. Apply for NTN from FBR

6. Register for Sales Tax, PRA/SRB if required

7. Open Bank Account

8. Apply for Chamber of Commerce Membership

Total time: 3 to 7 working days (can be reduced to 4 hours under FTRS)

Foreign Company Registration Steps

1. Submit Application to BOI for branch/liaison approval

2. Provide Foreign Parent Details and Business Plan

3. Get Security Clearance from Ministry of Interior (if required)

4. After BOI approval, register with SECP as foreign company

5. Deposit capital remittance from parent company

6. File Form 44 and other SECP documents

7. Get approval from SBP (if funds are to be repatriated)

Total time: 6 to 8 weeks, depending on clearance and sector

Documentation Requirements

Local Company

• CNICs of shareholders and directors

• Memorandum & Articles of Association

• Form 1, 21, 29

• Digital Signature Certificate

• Paid SECP fee receipt

Foreign Company

• Certified copy of foreign company’s charter or memorandum

• Board resolution for establishing presence in Pakistan

• Details of directors, principal office

• Verified power of attorney

• Business plan, security clearance forms

• Letter from BOI approving business activity

• Remittance proof from parent company

All foreign documents must be notarized and attested by the Pakistani embassy.

Taxation and Banking

Local Company

• Subject to corporate tax (currently 29%)

• Eligible for tax credits and exemptions under various schemes

• Can open bank accounts in PKR and foreign currency

• NTN and STRN registration is mandatory

Foreign Company

• Taxed on Pakistan-sourced income only

• May be subject to withholding tax on remittances

• Branch profits may be taxed at special rates

• Must open foreign currency bank account for capital remittance

• Repatriation of profits requires approval from SBP

Operational Flexibility

Local Company

• Can engage in full commercial activity

• No sectoral restrictions except regulated industries

• Eligible for PSEB, SMEDA, and SEZ incentives

• Can apply for government tenders, contracts, and loans

Foreign Company

• Branch office is sector-specific – must operate only in approved activities

• Liaison office cannot earn revenue – restricted to marketing and communication

• Annual reports must be submitted to BOI

• Requires annual renewal of permission

Compliance and Reporting

Local Company

• Annual return filings (Form A, Form 29)

• Audit report and tax return filing with FBR

• Filing with PRA/SRB and labor departments if applicable

• Financial statements (for certain company sizes)

Foreign Company

• Must file Annual Account and Return (Form 45)

• Audited financial statements required by SECP

• Activity reports submitted annually to BOI

• Must maintain a local office and authorized representative

Repatriation of Profits

Local Company

• No restriction on withdrawal of profits by local shareholders

• Dividends subject to standard withholding tax

Foreign Company

• Must obtain SBP permission to remit profits to parent company

• Must show proper tax clearance and audited statements

• Liaison offices are not allowed to remit profits, as they cannot generate income

Regulatory Oversight

Local Company

• SECP is the sole primary regulator

• FBR for taxation

• PRA/SRB for provincial sales tax

• No additional ministry involvement

Foreign Company

• SECP

• FBR

• BOI

• SBP

• Ministry of Interior (for security and sensitive sectors)

Multiple departments are involved, making it more regulated and documentation-heavy.

Cost Comparison

Exit and Closure

Local Company

• Can voluntarily wind up

• Apply for strike-off or liquidation through SECP

• Settle liabilities and cancel NTN

Foreign Company

• Submit closure application to BOI

• Obtain clearance from FBR, SBP, and Ministry of Interior

• File Form 46 for SECP removal

• Closure can take 3 to 6 months

Role of Sterling.pk in Foreign and Local Company Registration

At Sterling.pk, we specialize in both local and foreign company setups, offering:

• Name reservation and SECP incorporation

• BOI and SBP application handling

• Translation, notarization, and legalization of foreign documents

• Shareholder and director compliance

• Tax registration and audit filing support

• Post-registration services (bank accounts, employee registrations, licenses)

We streamline the entire process, whether you’re a local startup or a foreign investor entering Pakistan.

Conclusion

The process of registering a local company in Pakistan is relatively straightforward and quick. Foreign company registration, while legally allowed and welcomed under Pakistan’s foreign investment regime, is more complex and involves multiple regulatory authorities, additional documentation, and longer timelines. Choosing the right registration path depends on your business goals, level of control desired, and legal obligations.

Engaging a professional corporate consultancy like Sterling.pk ensures that all procedures are managed correctly and in compliance with applicable laws, allowing you to focus on building your business in Pakistan.