Are There Any Restrictions On Foreign Currency Accounts For Registered Companies?

Company Registration In Pakistan—particularly those engaged in import, export, or foreign investment—often require foreign currency accounts to manage international transactions. While it is legally permissible for companies to open and operate foreign currency accounts, certain restrictions and regulatory conditions apply under the framework provided by the State Bank of Pakistan (SBP) and commercial banking regulations. These rules aim to regulate foreign exchange flows and ensure financial transparency in line with Pakistan’s foreign exchange policy.

Legal Framework for Foreign Currency Accounts

The operation of foreign currency accounts in Pakistan is governed by the Foreign Exchange Regulation Act (FERA), 1947, and regulations issued by the SBP. As per current SBP guidelines, companies incorporated in Pakistan are allowed to open and maintain foreign currency accounts with authorized dealers (i.e., commercial banks licensed by the SBP to deal in foreign exchange). These accounts can be held in major currencies such as US Dollars (USD), Euro (EUR), British Pound (GBP), and others.

Types of Companies Eligible

Most registered companies—whether private limited, public limited, or branches of foreign companies—are eligible to open foreign currency accounts. These accounts are especially common among export-oriented firms, multinational subsidiaries, and companies involved in receiving foreign remittances or investor funding.

However, the company must be duly registered with the Securities and Exchange Commission of Pakistan (SECP) and must possess a valid National Tax Number (NTN). Additional registrations such as those with the Pakistan Software Export Board (PSEB) or Pakistan Telecommunication Authority (PTA) may be required for IT and telecom companies, especially when dealing with cross-border payments.

Key Restrictions and Conditions

While foreign currency accounts are permitted, the SBP has imposed several important restrictions and reporting requirements,

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which include:

1. Purpose of Account Usage

Foreign currency accounts must only be used for permissible transactions, such as:

• Receiving export proceeds

• Remittances from foreign investors

• Payments for imports (after proper documentation)

• Loan repayments to foreign lenders

Use of these accounts for unauthorized transactions—such as speculative currency trading or undisclosed outward remittances—is strictly prohibited.

2. Documentation Requirements

Commercial banks require complete documentation for Company Registration In Pakistan to open and operate a foreign currency account. This includes:

• Certificate of incorporation

• NTN certificate

• Board resolution authorizing the account

• Identity documents of directors

• Proof of the purpose for which the account will be used

Some banks may also require prior SBP approval for specific foreign currency transactions.

3. Inward and Outward Remittance Controls

While inward foreign exchange (like export income or investment) can usually be credited to these accounts without prior approval, outward remittances—such as payment for services, dividends, or royalty fees—often require SBP approval. The bank handling the transaction must ensure that it is within the scope of approved foreign exchange regulations.

4. Account Funding Restrictions

Foreign currency accounts can only be funded by authorized sources such as:

• Inward remittances from abroad

• Sale proceeds of export

• Foreign currency loans

Conversion of local currency into foreign currency to fund these accounts may be restricted and require justification.

5. Audit and Reporting Obligations

Companies operating foreign currency accounts are required to maintain full records and report foreign exchange transactions as required by the SBP and the FBR. In many cases, these accounts and their transactions must be disclosed in annual audit reports and tax filings.

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Recent Policy Changes and Monitoring

The SBP occasionally updates its foreign exchange regulations in response to macroeconomic conditions. For example, during times of pressure on foreign exchange reserves, the SBP may tighten controls on outward remittances or restrict certain types of transactions. Businesses must stay informed of such changes to remain compliant.

Conclusion

In summary, registered companies in Pakistan can open and operate foreign currency accounts, but they must adhere to strict regulatory conditions with the help of Hamza & Hamza Law Associates set by the State Bank of Pakistan. These include permissible use of funds, documentation, approval for certain transactions, and ongoing reporting obligations. Companies involved in international business, especially those dealing in exports, foreign investments, or offshore services, find these accounts essential—but must manage them with diligence and compliance. Consulting with legal and financial advisors is strongly recommended to ensure adherence to evolving regulatory requirements.