What Is The Process For Repatriation Of Profits For Foreign-Registered Companies In Pakistan?

Company Registration In Pakistan in Pakistan are legally allowed to repatriate profits and dividends to their home countries, subject to compliance with Pakistan’s foreign exchange laws and regulatory framework. The process is governed primarily by the State Bank of Pakistan (SBP) and relevant tax laws, ensuring that all profit remittances are transparent, documented, and within the country’s economic regulations.

Legal Framework

The key legal instruments that guide profit repatriation in Pakistan include:

• Foreign Exchange Regulation Act, 1947

• SBP’s Foreign Exchange Manual

• Companies Act, 2017

• Income Tax Ordinance, 2001

Under these laws, foreign investors, including branch and liaison offices of foreign companies, are permitted to remit profits and dividends to their parent companies abroad, provided certain conditions are met.

Step-by-Step Process for Repatriation

1. Company Registration and Operational Status: A foreign company must be legally registered with the Securities and Exchange Commission of Pakistan (SECP), either as a branch office, liaison office, or incorporated local entity with foreign shareholding. The company must also be fully compliant with local tax obligations and have a valid National Tax Number (NTN) issued by the Federal Board of Revenue (FBR).

Company Registration In Pakistan

1. Earning and Declaration of Profits: The foreign company must generate profits through its lawful business activities in Pakistan. The profit amount must be calculated and audited by a registered chartered accountant firm in Pakistan. These profits should be declared in the annual financial statements and filed with the SECP and FBR.

2. Tax Clearance Certificate: Before profits can be repatriated, the Company Registration In Pakistan must pay all applicable taxes, such as withholding tax on dividends (generally 15% for foreign shareholders, subject to tax treaties). Once taxes are cleared, a tax clearance certificate is obtained from the FBR confirming that all dues have been paid.

3. Submission of Remittance Request to the Bank: The company submits a remittance request to its authorized dealer bank (a commercial bank authorized by SBP to deal in foreign exchange). The request must include:

   • Audited financial statements

   • Tax clearance certificate

   • Board resolution approving the remittance

   • Form ‘M’ (Application for Foreign Exchange)

   • Purpose of remittance and beneficiary details

4. Verification and Approval by the Bank: The authorized bank reviews all documentation to ensure compliance with SBP regulations and verifies that the remittance is from post-tax profits. If satisfied, the bank forwards the request to the State Bank of Pakistan for final approval, where required (especially for large amounts or sensitive sectors).

5. Remittance Execution: Upon approval, the bank processes the remittance in foreign currency to the designated offshore account of the parent company. The entire transaction is reported to SBP for record-keeping and balance of payment purposes.

Timeframe and Compliance Considerations

The repatriation process can take anywhere from 2 to 6 weeks, depending on the efficiency of documentation, tax compliance, and bank coordination. Any delay in tax filings, incorrect documents, or pending SECP compliance issues may prolong the process.

To avoid complications, foreign companies are encouraged to:

• Maintain clear financial records

• Engage professional auditors and tax consultants

• Use authorized banks familiar with cross-border remittances

Company Registration In Pakistan

Restrictions and Exceptions

There are generally no restrictions on repatriation for lawful business profits. However, SBP may impose temporary controls under exceptional economic circumstances. Moreover, repatriation of capital (as opposed to profits) may require additional approvals.

Conclusion

Repatriating profits from Pakistan is a legally established process supported by regulatory mechanisms with the help of Hamza & Hamza Law Associates aimed at facilitating foreign investment. As long as a foreign company remains tax-compliant and provides accurate documentation, it can freely transfer its post-tax profits abroad through an authorized bank, under the oversight of SBP. This framework not only protects investor interests but also ensures Pakistan’s financial transparency.