Foreign Ownership Rules in Pakistan – What’s Allowed and What’s Not

Foreign Ownership Rules in Pakistan – What’s Allowed and What’s Not
Introduction
Pakistan’s foreign investment framework is designed to attract international businesses while protecting national interests. Over the years, the government has simplified regulations, allowing 100% foreign ownership in most sectors. However, certain industries still require special approvals or have restrictions due to security, defense, or policy concerns. Whether you’re an individual investor or an international company, understanding these rules is crucial before entering the Pakistani market.

Legal Framework for Foreign Ownership
Foreign investment and ownership in Pakistan are primarily governed by the Foreign Private Investment (Promotion and Protection) Act, 1976, and the Board of Investment (BOI) regulations. Company registration and compliance are overseen by the Securities and Exchange Commission of Pakistan (SECP), while foreign exchange control is managed by the State Bank of Pakistan (SBP).
In simple terms, foreign ownership is fully legal — but it must be approved and declared through the proper channels, particularly when it involves shareholding, remittance, or repatriation of profits.

Who Can Own a Company in Pakistan?
Foreign individuals, multinational companies, and overseas Pakistanis can all own or co-own a company in Pakistan. Foreigners can:

• Register a Private Limited Company with 100% foreign shareholding.

• Establish a Branch or Liaison Office with BOI permission.

• Form Joint Ventures with local partners.
  However, all such ownership must be approved by the BOI and registered with SECP, and funds must come through legitimate banking channels as per SBP guidelines.

Sectors Open to 100% Foreign Ownership
Pakistan allows full foreign ownership in most business sectors. Some examples include:

Restricted and Sensitive Sectors
While Pakistan welcomes foreign investment, certain sectors are restricted or require special clearance due to national interest and security concerns. These include:

• Arms and ammunition manufacturing

• High-security printing (currency, passports, etc.)

• Nuclear energy and defense-related industries

• Media and broadcasting (limited foreign shareholding allowed)

• Aviation and airline ownership (requires Cabinet Division clearance)

• Land acquisition in border or strategic zones

Foreign investors entering any of these areas must first obtain special clearance from the Ministry of Interior, Ministry of Defense, and BOI.

Role of BOI in Foreign Ownership Approval
The Board of Investment (BOI) serves as the main government body facilitating and approving foreign ownership. Its approval is mandatory when:

• A company has foreign shareholders at the time of incorporation.

• Shares are being transferred to foreign investors.

• A branch or liaison office is being established in Pakistan.
  BOI ensures that investments are legitimate, compliant with law, and beneficial to Pakistan’s economy. Once approved, the company can proceed with SECP incorporation.

SECP Requirements for Foreign Shareholders
After BOI approval, the company must be incorporated with SECP, disclosing:

• Passport copies of all foreign shareholders and directors.

• Proof of remittance for share capital from an overseas account.

• Registered address in Pakistan.

• Form 29 and Form A for shareholding and directorship records.
  SECP issues a Certificate of Incorporation after verifying the details, officially recognizing the company under Pakistani law.

Foreign Exchange Rules by SBP
The State Bank of Pakistan (SBP) regulates the movement of funds for foreign-owned entities. Investors must:

• Bring in capital through official banking channels.

• Report foreign investment under Foreign Currency Accounts (FCA) regulations.

• Get SBP approval for repatriation of profits or dividends to home countries.
  This ensures transparency and compliance with anti-money laundering and exchange control laws.

Taxation Rules for Foreign-Owned Companies
Foreign-owned companies are taxed the same as local companies under the Income Tax Ordinance, 2001. However:

• They must register with FBR to obtain an NTN.

• File annual income tax returns and withholding tax statements.

• File sales tax returns (if applicable).

• Withhold taxes on payments to non-residents as per Double Taxation Treaties (DTTs) where applicable.

Ownership in Special Economic Zones (SEZs)
Pakistan’s SEZs offer special incentives for foreign investors, including:

• 10-year tax holidays on income and imports.

• 100% foreign ownership allowed.

• Simplified repatriation procedures.

• Fast-track BOI approval through SEZ facilitation centers.
  Foreign companies in SEZs can operate independently or partner with local firms while enjoying significant regulatory relief.

Joint Ventures – A Flexible Ownership Option
Many foreign investors prefer to enter Pakistan through joint ventures with local partners. This offers advantages such as:

• Local market insight and operational support.

• Easier regulatory approvals in sensitive industries.

• Shared capital and reduced risk.
  Joint ventures are usually structured under a Private Limited Company, with shareholding agreed upon in a Shareholders Agreement (SHA) filed with SECP.

Repatriation of Profits and Exit Options
Foreign shareholders can repatriate profits, dividends, or capital gains after:

1. BOI approval and SBP documentation.

2. Payment of all applicable taxes.

3. Submission of audited financial statements.
   The process is monitored by SBP to ensure compliance with investment and exchange control rules.

Penalties for Non-Compliance
Failure to comply with BOI, SECP, or SBP regulations can lead to:

• Rejection of foreign ownership registration.

• Freezing of foreign remittances.

• Tax penalties or audit investigations.

• In severe cases, suspension of company operations.

Final Thoughts
Pakistan’s foreign ownership rules are among the most open in South Asia, allowing 100% ownership in most sectors. However, investors must follow the legal path — obtaining BOI approval, registering with SECP, and complying with SBP and FBR rules. Doing so not only ensures legal protection but also builds long-term credibility with Pakistani regulators and business partners.