Pakistan has generated recent interest from foreign investors in attracting business investments. In November 2022, Pakistan’s FDI increased by 81.8 USD mn. As per the World Bank Ease of Doing Business report 2020, Pakistan ranks 109th out of 190 economies in terms of starting a business.
Pakistan generated a GDP of $376.49 billion last year and is poised to see growth and opportunities across consumer goods, energy, power, telecommunication, agricultural machinery and equipment, education, and healthcare sectors.
The country operates as per provincial laws when it comes to business. Foreign investors or proprietors are not much hassled for visa reasons. Establishing a sole proprietorship in Pakistan is the easiest way to establish a business. There are no specific rules that proprietors need to stick to, except generic ones applicable to proprietorships.
Setting up a sole proprietorship in Pakistan is an easy step to help establish a business globally. Here is the right guide that can aid to register a sole proprietorship in Pakistan.
Who can be a Sole Proprietor in Pakistan?
An individual with the right business plan and documents needed for compliance can set up a sole proprietorship in Pakistan. Such a company is owned and mostly operated by a single person engaging in the trade of goods or services. Immediate family members can be absorbed as staff in such a setup too. Hiring as a sole proprietor is also allowed.
A sole proprietorship in Pakistan is considered an extension of the individual in the context of a legal entity. There are no complex requisites or capital requirements for becoming a sole proprietor in Pakistan. The first rule to comply with is that the proprietor has the relevant visa and additional work visas if the proprietorship needs to hire employees.
Benefits of Sole Proprietorship in Pakistan
Of late, this model is a prevalent form for company formation in the country. Freelancers, content creators, independent consultants, and entrepreneurs generally establish a sole proprietorship in Pakistan. The most evident benefits of a sole proprietorship are as follows-
- Lesser documentation
- No specific capital requisites
- Quick processing
- Tax filing ease
- Access to entire profits
Documents Required for Registering Your Business in Pakistan
The documents needed to register a sole proprietorship in Pakistan are as follows:
- National tax number of NTN
- Completion of the online form for registration
- Approved business name with the letterhead
- Documents proving entrepreneur identity
- Valid work visa
- Documentation for the bank account in Pakistan
- Articles of Association
- Memorandum
Other Criteria for Establishing a Sole Proprietorship in Pakistan
Setting up a sole proprietorship in Pakistan is easier now that the entire setup has boiled down to a single online application. Here are the must-follow norms applicable to the process-
- Draft up a business plan before the application
- Maintain a local bank account for transaction purposes
- Register with Goods and Service Tax (GST) as applicable
Post-registration compliances
Once the sole proprietorship in Pakistan is in place, keep in mind to complete the following tasks on time-
- Tax registration and income tax filing
- Obtaining additional and relevant permits for business activity
- As a sole proprietor in Pakistan, you must have a stamp for business purposes.
Taxation
The list of the primary taxes for a sole proprietorship in Pakistan is-
- Corporate tax of 20% for small companies
- Sales tax at 17%
- Personal income tax at progressive rates
The annual income tax brackets for income more than PKR 600,000 are as below-
Income In PKR | Effective Rate |
600,000-12,00,000 | 2.5 % |
12, 00,000-24,00,000 | 12.5% |
24,00,000-36,00,000 | 20% |
36,00,000-60,00,000 | 25% |
60,00,000-12,00,000 | 32.5% |
Above 12,00,000 | 35% |
How to Register a Sole Proprietorship Firm in Pakistan?
To register a sole proprietorship in Pakistan, follow the steps outlined below-
Step 1- Devise a name for the business
- This can specify or signify the nature of the business too.
Step 2- Establish the business as an entity
- This comprises getting a letterhead, a business stamp, and a business card that mentions all details of the business place and contact number.
Step 3- Register the business
- Visit the website of the Pakistan Federal Board of Revenue (FBR).
- Create the account here on IRIS. This comes free of cost.
- Fill in all details under Registration for Unregistered Person.
- Keep handy all ID-related documents, home or office rental agreement/ownership deed, and the latest electricity bill.
- The final step is obtaining the NTN or National Tax Number.
Step 4- Open a bank account
Use the registered number obtained for opening the same for all future operations.
Conclusion
A sole proprietorship in Pakistan has simple registration for operational requirements. Establish a sole proprietorship in Pakistan once you have made your business plan and strategy.
Managing employees and compliances is challenging as you operate and then hire in Pakistan. This is where Multiplier can step in.
Multiplier is a global employment solution available for all sole proprietors. It offers relevant EOR solutions to ease payment management. We also help to manage freelancers spread across the globe.