CORPORATE FINANCE

Group Project Report: Types of Businesses, Tax Rates

applied & Tax Exemptions
Instructor Name: Ms. Faiza Murtaza

Group Members:

Ali Imran
Fatima Shahid
Hina Mall
M.Mohsin
Syed Qambar Ali
Usman Bashir
 Table of Contents
I. Three Forms of Businesses and How to form or register for each of them: ........................... 1

a) Sole Proprietorship............................................................................................................... 1

i. Documents Required for Sole Proprietor Registration: ................................................... 1

ii. How to Register Sole Proprietorship in Pakistan:- ....................................................... 2

Filing Annual Income Tax Return: ......................................................................................... 4

iii. Example of Sole Proprietorship in Pakistan ................................................................. 4

b) Partnership ........................................................................................................................ 5

i. Types of Partnerships in Pakistan .................................................................................... 5

ii. Format of a Partnership Deed in Pakistan .................................................................... 5

iii. Application for Partnership Registration ...................................................................... 6

iv. Advantages of Registration of Partnership Agreement ................................................ 7

c) Incorporation of a Company ................................................................................................ 8

a. Availability of Name ...................................................................................................... 10

b. Documents for registration of a limited company ...................................................... 10

c. Additional Requirements for the Incorporation of a public Company........................... 11

d. Additional Requirements for Incorporation of a Company having Objects of

providing Security Services .................................................................................................. 11

e. Documents for incorporation of an association not for profit ........................................ 11

STEP WISE PROCEDURE FOR ONLINE DOCUMENTATION FOR THE

INCORPROATION OF THE COMPANY .......................................................................... 12

Specialized Business Licensing Requirements in Pakistan ...................................................... 16

Certificate of Environment Protection .................................................................................. 16

Council Permits and Certificates from Concerning Professional Body................................ 16

II. Documents and Requirements to Open Bank Account for all types: ................................... 17

a) Sole Proprietorship............................................................................................................. 17
 b) Partnership ...................................................................................................................... 17

c) Corporation ........................................................................................................................ 17

III. Taxes Rates Applied to These Forms of Business ............................................................. 18

a) Sole Proprietor ................................................................................................................... 18

b) Partnership:..................................................................................................................... 18

c) Private Limited Companies................................................................................................ 19

IV. Tax Exempted Business of Pakistan .................................................................................. 20

Clause (39A) Special allowances to Armed Forces person .................................................. 20

Clause (57) Income of Fund ................................................................................................. 20

Clause (66) Non-profit charitable institutions ...................................................................... 20

Clause (90A) Profit on debt on Pakistan Mortgage Refinance Company (PMRC) bonds ... 21

Clause (110C) Gain on transfer of assets being PMRC bonds ............................................. 21

Clause (126BA) Profits and gains derived by oil refineries ................................................. 21

Tax Exemptions on Particular Projects: ................................................................................ 21

Sales Tax Exemptions: .......................................................................................................... 22

References: .................................................................................................................................... 24

APPENDIX ................................................................................................................................... 24
 I. Three Forms of Businesses and How to form or
register for each of them:
a) Sole Proprietorship
Sole proprietorship or one-man business is the easiest way to start a business in Pakistan. This
post is typically for those who don’t know that how to register sole proprietorship in Pakistan.
An individual will become the manager, proprietor and responsible for all transaction. Solely
accountable for all liabilities and debts. Business duration is entirely depending on the owner and
sell the products or services when he or she feels it’s feasible. Owner is the king of his or her
business, uses their own intelligence and creative skills in managing affairs of the business.
Majority who wants to start a business in Pakistan goes for sole proprietorship. Excellent way of
giving corporate looks to a small business.

Individual business owner is not answerable for any business tax. But income tax must be paid
by the owner. In the beginning there is no such investment required for starting a business. In
Pakistan the liability of sole proprietor is not limited to business, creditor can claim the personal
asset of the debtor. In short business owner is solely responsible for all kind off risk and results
of its business operation.

i. Documents Required for Sole Proprietor Registration:

1. CNIC and NTN of the Person Applying for Sole Proprietor Registration.

2. Name of the Business.

3. Address of the Business and utility bill for address verification (also require property
documents or rental agreement in case property in on rent)

4. Letter Head and round stamp of the Business.

5. Electricity Bill of the Address.

6. Bank Account Number, Bank Name and Branch, bank account maintenance certificate.

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The main steps to start a sole proprietorship business:

This is quite easy however, instead of doing it yourself, get a tax consultant or lawyer to do it for
you, it is not expensive. The following steps need to be taken

1. Initially we have to finalize the name of the company.

2. Prepared the list of basic stationary company letter head, visiting cards.

3. Preparing business stamp

4. Bank account opening with account title of sole proprietor business. Sole proprietor
signature and stamp will be required on the letterhead by the bank manager.

5. Acquire the bank statement of newly bank account.

6. After that Apply for National Tax Number (NTN) certificate. For applying NTN Bank
account number and bank statement will be required with computerize ID card of sole proprietor.
If you are on a job, you already have a NTN (National Tax Number). No need to get a new NTN
number if you already have.

ii. How to Register Sole Proprietorship in Pakistan:-

Making Proprietor business legal, owner has to obtained NTN number to fulfill the lawful
agreement as per tax laws. Following steps are to be followed for Obtaining National Tax
Number – NTN:

Step 1:
Federal board of revenue (FBR) is the organization which provides National tax number (TAX).
Two ways of getting NTN number are:

1. Online Applying at FBR Website by visiting e.fbr.gov.pk. Complete procedure is

mentioned on the website.

2. Select “New e-registration” from the dropdown of “e-Registration menu”

3. Tax payer facilitation center provides facility for Applying on Paper.

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Step 2:
1. Select the taxpayer type (Individual)
2. Enter the data in front of following captions appearing on the screen:
3. Enter the CNIC/NTN/Reg. Inc, according to the selected taxpayer type
4. Enter Name of taxpayer
5. Enter “Image character”
6. Click “Ok”

Step 3:
After completing all the details save the form with available information and continue at alter
stage if it required so. Besides the details some information will also require to complete form.

1. For all business concern bank account with business name title must be provided.

2. Detail of the owner, premises proof and reference number of utility will be provided.

Step 4:
After completion of the online registration form, verify the form by clicking the “Verify” button.

Step 5:
Finally submit the form by clicking “Submit” button. A token number will be assigned by
system. Application status can be checked either online or by calling help line 051-111-772-772.

Step 6:
After registration as taxpayer application will approved and system will send you the email for
verification within 3 days.

Step 7:
Visit any Taxpayer Facilitation Centers (TFC) and submit a duly signed copy of the online
application along with required documentation. (Copy of CNIC, Last Paid Electricity Bill, and
Letter Head).

Note: There is no fee for getting NTN certificate.

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Filing Annual Income Tax Return:
It is mandatory for a taxpayer to file Income Tax Returns annually.
Accounting Period: July 1- June 30

Filing Period: Annual Income Tax Returns are normally filed in September. However dates can
be extended as per Government directives.
Every proprietor business individual has to file Income Tax Return irrespective of date of
starting a business.
Once the status is added, you are a registered legal entity.

iii. Example of Sole Proprietorship in Pakistan

Following business are the general examples of sole proprietorship:

1. Retailer

2. Painters

3. Restaurant

4. Tourist guide

5. Barber

6. Beauty parlor

7. Doctor

8. Petrol pumps.

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 b) Partnership
The registration of partnerships is not compulsory by law. It is optional and there is no penalty
for non-registration. However, there are disadvantages for not registering. If any dispute arises
among the partners or ex-partners, they may not resolve the issue through the civil courts. An
unregistered firm cannot institute a suit to settle these disagreements. Neither can an unregistered
firm sue a third party for the enforcement of any rights arising from a contract, e.g. the recovery
of the price of goods supplied. It must be noted however, that a third party may file suit against
the partnership. Even in this case, the partnership cannot mention any monies that may be
outstanding to them in court.

Here is no protection to the partners’ liability either. As there is no formal documentation stated
that they are in partnership, if one decides to deny the existence of the partnership, there is not
much that can be done about it legally. Registering during any suit can not subsequently cure this
effect. Prior registration is necessary.

i. Types of Partnerships in Pakistan

Partnership at-will: The essence of a “partnership at-will” is that the partners do not limit the
duration of their partnership, and are free to break their relationship at any time they see fit. It is
a partnership for an indefinite period. The partnership may be dissolved at any point as long as
the partner gives notice to all the other partners.

Particular Partnership: If a partnership is entered into for a particular purpose or undertaking,

it is then referred to as a particular partnership. This type of partnership is usually formed for a
single transaction or enterprise as opposed to carrying on a general business by a partnership.

ii. Format of a Partnership Deed in Pakistan

The mutual rights and obligations of all partners must be documented in the shape of a
“partnership deed”. This needs to be signed by all the partners and subsequent copies held by
each partner. At the time of registration, a copy of the deed has to be submitted with an
application to the Registrar of Firms in the concerned area. This document may also be referred

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to as “Articles of partnership”. A partnership deed usually contains the following format and
information:

 The name of the firm

 The nature of business that is to be carried out by the firm
 The address at which the firm intends to conduct it’s business
 The amount of capital that each partner contributes. The form of capital whether that be
cash or property needs to be documented. If the capital is property, a full description of
the property and the valued amount should be given also.
 The names and addresses of each partner should be given
 The duration of the partnership if any
 The ratio of sharing profits and losses
 The amount or percentage of interest, if any, which is to be allowed on capital
 The amount of salary each partner is to receive
 The manner in which a partnership is to be dissolved, and the subsequent distribution of
property among the partners.
 In the case of insolvency the valuation and treatment of goodwill
 Provisions regarding the accounting system and the fiscal year to be used
 Rules to be followed in the case of retirement, death and admission of a partner
 The method of settling disputes if any among partners. i.e. whether or not an arbitrator is
to be appointed
 Method of calculating amount issued to a deceased partner, and whether this is to be paid
in full or in installments to his legal representative.
 In the case of breach of duty by one partner, powers of other partners to expel him from
the firm
 The keeping of proper books of accounts and periodical preparation of accounts.
 Any provisions to prevent any future misunderstanding and ill will

iii. Application for Partnership Registration

The procedure of registration is comparatively simple. An application for registration by filling

out Form No. 1 of the Partnership Act 1932 has to be submitted to the Registrar of Firms. All the

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partners must sign the application. The application or statement must contain the following
primary particulars, along with other information specified in the form.

 The name of the firm

 The place or principal place of business of the firm
 The names and addresses of other places where the firm may conduct business
 The partner’s date of joining the firm
 The duration of the firm
 The names and addresses of the partners

Once the registrar is satisfied with the application, a certificate of registration is issued to the
partners. As mentioned previously this is not required to commence business.

If at any time there are changes to the firm in relations to the partners, place of business,
insolvency etc. the registrar must be notified.

iv. Advantages of Registration of Partnership Agreement

 The registered firm can file a suit against the third party for the enforcement of rights
arising from a contract
 The registered firm attracts large capital resources from the public.
 Where there is a dispute among the partners or between the partners and the firm or
between partners and ex-partners, the partners of a registered firm can file a suit in the
court of law.
 The registered firm can claim any outstanding balances from a third party thorough a
court of law.
 In case of a registered firm, any new partners have the security of liability and may resort
to a court of law in case of a dispute.
 In the case of partners leaving the firm, they cannot be made liable for any debts incurred
after leaving. This is only seen in the case of a registered firm.

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 c) Incorporation of a Company
First step towards incorporation of a company is to submit an online or offline application for the
reservation of Company’s name and incorporation of the company. Three names are to be
proposed. The registrar would allow a name available, which will be included in the
incorporation documents. When choosing the name of the company refer to Section 10 of the
Companies Act, 2017 (the “Act”) and Regulation 4 of the Regulations for prohibitions/
restrictions on certain company names. You can conduct company name search free of cost
through the “Company Name Search Section”, available on SECP’s website.

Incorporation documents include:

 Memorandum and Articles of Association (prefer samples available on SECP’s website

for different sectors)
 Copies of CNIC/NICOP of the subscribers/ directors/ chief executive officer/ nominee
(for single member company)/authorized representative or copies of Passport in case of a
foreigner
 NOC/Letter of Intent/ License (if any) of the relevant regulatory authority in case of
specialized business
 In case the subscriber is a foreign company, the profile of the company, detail of its
directors, their nationality and country of origin, certified copy of its charter, statute or
memorandum and articles etc.
 Authorization for filing of documents by the subscribers
 Registration/ Filing Fee
 In case of a small company having nominal share capital not exceeding Rs.100,000, total
incorporation fee is Rs. 1,800 for online submission and Rs. 3,500 for offline submission.
 In case the subscriber/entrepreneur intends to obtain name availability first and then
submit the incorporation documents, separate applications can be submitted as outlined in
the Regulations.

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Incorporation Certificate
The subscriber/entrepreneur will receive a Certificate of Incorporation issued electronically or in
physical form.

Commencement of the Business

Once the certificate of incorporation is received, a private company /single member company can
start its function. A public company can start its business after a duly verified declaration (as per
the format provided in the Companies (Compliance and Reporting) Regulations, 2017) regarding
compliance with the conditions specified in Section 19(1) of the Act has been filed by the chief
executive / one of its director and the secretary and the same has been accepted and registered by
the registrar.

One of the important functions of the Securities & Exchange Commission of Pakistan (SECP) is
the incorporation/registration of companies. This task has been entrusted to the Corporatization
& Compliance Department, Company Law Division which has its field offices known as
Company Registration Offices (CROs) for the purpose of incorporation / registration of different
types of companies.

Any three or more persons associated for lawful purpose may, by subscribing their names to the
Memorandum of Association and complying with the requirements of the Ordinance form a
public company and any one or more persons so associated may, in like manner, form a private
company. If only one member forms a private company, it is called a single member company.

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Prior approval of the Ministries/Departments etc. noted against each category of the following
companies is required to be obtained before incorporation of companies: -

Ministry of Finance
Sr. No A banking Company
State Bank of Pakistan
A non-Banking finance Company
1 SECP
(NBFC)
A company providing security service
2 Ministry of Interior

Stock Exchange (for transfer of membership

3 A corporate brokerage house
card in favour of proposed company)
A money exchange company
4 State Bank of Pakistan

An association not for profit u/s 42 of the

5 License from SECP.
Companies Ordinance, 1984
6 A trade organization License from Ministry of Commerce

Following are the requirements for registration of a new company under the Companies
Ordinance, 1984:-

a. Availability of Name
The first step with regard to incorporation of a company is to seek the availability of the
proposed name for the company from the registrar. For this purpose, an application is to be made
and Rs.200/- for online application and Rs.500/- for offline application is required to be paid
seeking availability certificate for each name. To facilitate the promoters, a list of
prohibited/sensitive names has also been provided at the link:
https://www.secp.gov.pk/prohibitedwords/.

b. Documents for registration of a limited company

The following documents are required to be filed with the registrar concerned for registration of
a private limited company: -

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 i. Copy of national identity card or passport, in case of foreigner, of each subscriber and
witness to the memorandum and article of association,
ii. Memorandum and articles of association:
iii. Four printed copies of Memorandum of Association in case of offline submission and one
copy for online submission, duly signed by each subscriber in the presence of one
witness. In order to facilitate general public, the standardized specimen of Memorandum
of Association of various sectors has been provided on the Commission’s website.
iv. Form – 1: Declaration of applicant for compliance
v. Form – 21: Notice of situation of registered office of the company
vi. Form – 29: Particulars of first directors of the company
vii. Registration/filing fee: Original paid challan evidencing the payment of fee as prescribed
in Table - II, in any of the authorized branches of MCB Bank Limited.

c. Additional Requirements for the Incorporation of a public Company

In addition to the requirements for incorporation of a private limited company as stated above,
the public companies are required to file the following documents at the time of incorporation:

i. Form 27 (List of persons consenting to act as director)

ii. Form 28 (Consent of Directors)

d. Additional Requirements for Incorporation of a Company having Objects of

providing Security Services
In case of company intending to provide the services of security guard, nine additional sets of
each of the documents at I and II above along with the bio-data, four attested photographs of
each subscriber and financial position/bank statement of the subscribers are also required to be
provided. Ministry of Interior grants NOC for a security object company.

e. Documents for incorporation of an association not for profit

All the documents meant for incorporation of a limited company along with a license issued by
the SECP. In case of a trade body, a license issued by Ministry of Commerce would also be
submitted to the registrar concerned.

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 STEP WISE PROCEDURE FOR ONLINE DOCUMENTATION
FOR THE INCORPROATION OF THE COMPANY

Log on to eServices:
The client will connect to https://eservices.secp.gov.pk/eServices to log on to his/her account or
signup, in case of a new user.

For incorporation process, please note that you will need to create separate User IDs for all
proposed Subscribers, in order to obtain their system generated PIN. After obtaining name
availability, User should use the “Manage Company Users” button available on the top right
hand side of the web page to create separate/additional User IDs.

Enter Information:
A successful logon to eServices by entering user ID and password will display a list of available
and unavailable processes. If the Company name has been reserved successfully, the Company
Incorporation facility will be available at this stage.

User will click on the company incorporation process. An input page is displayed, wherein the
following information will be entered by the user.

i. Application Details:
Check the details of the proposed company in terms of its complete name and kind to ensure that
the information is correctly displayed. In case of any issue, please contact the concerned
Company Registration Office (CRO).

Click on “Mode of Payment” and select the mode whether you want to make payment through
“Bank Challan” or “Credit Card”.

In case you choose “Bank Challan”, then click on “Locate Bank” and select the designated bank
branch from the available branches of MCB Bank Limited or United Bank Limited.

ii. Declarant:

In this section, enter the compulsory information about the declarant/company representative. A
declarant can be any person authorized to represent the proposed company by the Owners/Board

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of Directors. Any employee or even the director of the proposed company could be chosen for
this responsibility.

iii. Director/ Subscriber:

Enter detailed data regarding the Board of Directors and Subscribers in this section. “Add” and
“Remove” buttons will create and remove rows for data entry.

iv. Company information:

Enter company information e.g., registered office address, sector classification, share capital,
objects etc., in this section.

v. Signatory:
Enter details of a signatory in this section.

vi. Press Continue Link:

By pressing Continue Link, Process Document Listing Page will be displayed, containing the
following links along with Sign form option:

vii. Update Form(s) Data:

Click link if you want to update the data. After updating data, press Continue link again. Process
Document Listing Page will be displayed again.

viii. View Forms:

System automatically fills out the required forms using the data entered by you. You can view
these forms by clicking on the given link.

ix. View Company Profile Form:

To see company profile, click this link.

x. Fill New Attachment Form:

In this link, you can attach the required documents in PDF format e.g., copy of CNIC, name
availability letter, etc. Press Save Form button after attaching the required documents.

xi. Fill New Attachment Form Articles of Association:

Click this link and attach the Articles of Association in PDF format. Press Save Form button
after attaching the said file.

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 xii. Fill New Attachment Form Memorandum of Association:
Click this link and attach the Memorandum of Association in PDF format. Press Save Form
button after attaching the said file. Please note that all the above-mentioned PDF file names
should be short, without spaces, and should not contain any special characters.

xiii. Fill New Bank Challan:

Click link and bank challan will be displayed. Bank Challan is automatically populated with
prescribed fee and other information by the eServices application. Press Save Form. Do not print
and pay challan before submitting the process/form.

xiv. Sign Forms (Using PIN).

The user shall Click “Sign form”. Please note that sign form link will be activated when all
mandatory documents are attached and challan is saved.

Enter the PIN and click “Apply user PIN”, field for “PIN APPLIED” will be auto-populated and
on clicking “Submit process to SECP” button, process will be submitted to SECP. Please note
that every subscriber needs to sign the documents by logging in with his/her User ID and
password and applying their respective PIN. Click this button. All the documents will be
submitted to the SECP and a process reference number will be displayed. Please keep this
reference number for any future correspondence, if required.

xv. Make Payment:

Payment through Challan:

Click on Submitted Processes link available on the left side of the page. Documents submitted by
you along with bank challan will be displayed. Click and open challan and then press Print. Four
copies will automatically be printed as original copy, applicant copy, bank copy and branch
copy.

The fee shall be deposited in the Bank branch selected by the applicant from the designated
branches of MCB Bank Limited/United Bank Limited. The bank shall retain the branch and bank
copies and return remaining two copies (original and applicant copy) to the client.

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Payment through Credit Card:

To facilitate investors and speed up processing time of transactions in eServices, SECP has
introduced online payment of fee through Credit Cards. This facility is only available to
depositors/applicants using eServices online submission option of SECP and transact through
eServices portal. To make payment through Credit Card, click on “Online Payment” link
available on the left side of the page, then select the relevant check box under “Make Payment”
and follow procedure.

For obtaining further information regarding payment of fee through Credit Cards, please visit
SECP website and see Online Payment Guide available on the eServices page. Payment through
MCB Online Fund Transfer Facility SECP has also arranged with MCB Bank Limited to
introduce an “On-line Fund Transfer (OFT)” facility whereby its depositors can pay SECP fee
directly into SECP’s bank account in MCB through on-line fund transfer from their MCB Bank
account, without the need to visit a branch for physically depositing the amounts. This facility is
only available to depositors/applicants using eServices online submission option of SECP and
transact through eServices portal.

The process will be initiated as soon as the SECP receives the verification of deposit of fee from
the Bank.

User will receive response from the SECP via email, with any of the response, acceptance
(Incorporation Certificate Dispatched through Courier), rejection or issue resolution.

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Specialized Business Licensing Requirements in Pakistan
When a business falls under food, agriculture, entertainment, services (such as pathological
medicinal services), etc. additional licensing requirements may need to be fulfilled, some of
which are stated as below:

Certificate of Environment Protection

Some manufacturing, trading & services businesses like food, wheat and sugar production and
halal food certificate would need to have this certificate from:
 Pakistan Environmental Protection Agency (PAK-EPA)
 Provincial Environmental Protection Agencies / Department (incl. AJK and Gilgit
Baltistan)
 Departments Forest Environment & Wildlife, Sindh

Council Permits and Certificates from Concerning Professional Body

Some specialized licenses that can be obtained from:

 Pakistan Medical and Dental Council. (PMDC)

 The Pakistan Council of Architects and Town Planners
 Pakistan Engineering Council (PEC)
 National Council for Tib
 National Council for Homeopathy
 Pakistan Veterinary Medical Council
 Bar Councils

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II. Documents and Requirements to Open Bank Account
for all types:
a) Sole Proprietorship
 Documents of Sole Proprietorship
 Letter Heads
 NTN
 Rent Deed
 Visit Report
 Bill copy

b) Partnership
 Partnerships Doc
 Partnership Deed
 Form C D
 Account Opening Request
 Partnership Mandate
 NTN

c) Corporation
 Form A
 Form 29
 Article of Association
 Memorandum of Association
 Board Resolution
 Director List
 NTN
 Account Opening Request

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 III. Taxes Rates Applied to These Forms of Business
a) Sole Proprietor
A sole trader pays tax in their own right, as part of their personal income tax return at the
personal rate of income tax.

A sole proprietorship is not a corporation; it does not pay corporate taxes, but rather the person
who organized the business pays self-employment taxes on the profits made, and files his or her
tax returns under section 114 of the Income Tax Ordinance, 2001.

A sole proprietorship also does not have to be concerned with double taxation, as a corporate
entity would. Better Tax Planning before commencement of business can significantly
reduce/manage the tax burden on the business such as you may be able to deduct tax losses from
personal income.

The business individual is taxed for the profits only unless turnover exceed 10 million rupees. In
case exceed 10 million rupees, 1.25% of total turnover is payable.

Form of Taxation: Slab rates are applied.

Tax Return Filing: For this type, filing of annual income tax returns is a requirement.

b) Partnership:
The partnership firm is taxed for the profits only unless turnover exceed 10 million rupees. In
case exceed 10 million rupees, 1.25% of total turnover is payable. While partners are not taxed
separately.

Form of Taxation: Slab rates are applied.

Tax Return Filing: For this type, filing of annual income tax returns is a requirement.

FBR TAX CARD for 2019 as passed in 'mini-budget' by PTI Government on 18 September 2018

For individuals whose annual "salary income" exceeds 50% of total taxable income:

 Annual Salary up to Rs400,000: (0%)

 Rs400,001 to Rs800,000: (Rs1,000)
 Rs800,001 to Rs1,200,000: (Rs2000)
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 Rs1,200,001 to Rs 2,500,000: (5% of the amount exceeding Rs1,200,000)
 Rs2,500,001 to Rs4,000,000: (Rs65,000 + 15% of the amount exceeding Rs2,500,000)
 Rs4,000,001 to Rs8,000,000: (Rs290,000 + 20% of the amount exceeding 4,000,000)
 Rs8,000,000+ : (Rs1,090,000 + 25% of the amount exceeding Rs8,000,000)

c) Private Limited Companies

 NTN is issued in name of the Company.
 Filing of annual income tax returns is mandatory and directors and shareholders are taxed
separately. Tax returns for July 1 of the preceding year to June 30 of the current year
have to be submitted by December of every year.
 Taxed for the profits at the following rates:
a) Small Company 24% (will decrease by 1% every year to 20% by the year 2023).
b) Other than small company 29% (will decrease by 1% every year to 25% by the year
2023).
c) Minimum Turnover Tax of 1.25%.

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 IV. Tax Exempted Business of Pakistan
Corporate Tax Exempt Businesses in Pakistan in the Budget 2018-2019

Clause (39A) Special allowances to Armed Forces person

Special allowance has been given to army personnel posted at hilly and northern areas. There
will be no income tax charged on the amount paid as kit allowance, ration allowance, special
messing allowance, SSG allowance, Northern Areas compensatory allowance, special pay for
Northern Areas and height allowance.

Clause (57) Income of Fund

The following funds and institutions have been exempted from paying income tax:

(i) Khyber Pakhtunkhwa Retirement Benefits and Death Compensation Fund.

(ii) Khyber Pakhtunkhwa General Provident Investment Fund.
(iii) Khyber Pakhtunkhwa Pension Fund.

Clause (66) Non-profit charitable institutions

The following institutions have also been exempted from paying tax:

i. SAARC Energy Centre.

ii. Pakistan Bar Council.
iii. Pakistan Centre for Philanthropy.
iv. Pakistan Mortgage Refinance Company Limited.
v. Aziz Tabba Foundation.
vi. Al-Shifa Trust Eye Hospital.
vii. Saylani Welfare International Trust.
viii. Shaukat Khanum Memorial Trust.
ix. Layton Rahmatullah Benevolent Trust (LRBT).
x. The Kidney Centre Post Graduate Training Institute.
xi. Pakistan Disabled Foundation.
xii. Forman Christian College.

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Clause (90A) Profit on debt on Pakistan Mortgage Refinance Company (PMRC) bonds
The Finance Bill has planned to include an exemption on the profit on debt issued by the
Pakistan Mortgage Refinance Company (PMRC) to refinance the residential housing mortgage
market, for a period of five years with effect from the 1st day of July, 2018.

Clause (110C) Gain on transfer of assets being PMRC bonds

Any gain realized by a person on transfer of PMRC bond issued by PMRC itself to refinance the
residential housing mortgage market will also be exempted from paying any tax. The duration of
this exemption is from 1st July, 2018 till 30th June, 2023.

Clause (126BA) Profits and gains derived by oil refineries

Oil refineries that set up between the 1st day of July, 2018 and the 30th day of June, 2023 will be
exempted from paying taxes on their profits and gains. The refineries must have a production
capacity of 100,000 barrels per day for a period of twenty years beginning in the month in which
the refinery is set up or commercial production is commenced, whichever is later.

Existing refineries will also have the same exemption but must fulfill the following conditions:

i. Existing production capacity is enhanced by at least 100,000 barrels per day

ii. Separate accounts are maintained for income arising from aforesaid additional production
capacity
iii. Such refinery is a deep conversion refinery

Tax Exemptions on Particular Projects:

i. Profits and gains derived from an electric power generation project set up in Pakistan are
exempt from tax.
ii. Profits and gains derived by a company from the export of computer software, IT
services, or IT-enabled services are exempt from tax up until 30 June 2025.
iii. Profits and gains derived by refineries, which are setup between 1 July 2018 and 30 June
2023, have been granted exemption from tax for a period of 20 years, upon fulfilment of
certain conditions.
iv. Low-cost housing projects have been incentivized by allowing a reduction in tax liability
(arising on profits and gains) by 50%, subject to fulfilment of certain conditions.

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 v. Profits and gains from new manufacturing units set up in Khyber Pakhtunkhwa and
Baluchistan are exempt from tax for five years if set up between 1 July 2015 and 30 June
2018.
vi. Profits and gains from electricity transmission projects are exempt from tax for ten years
if set up between 1 July 2015 and 30 June 2018.
vii. Income derived by an enterprise set up in ‘special economic zones’ is exempt from tax
for a period of ten years, starting from commencement of commercial
operations/production, subject to certain conditions. These ‘special economic zones’ have
been established in different territories of the country.
viii. Profits and gains derived by liquefied natural gas terminal operators and terminal owners
are exempt from tax for a period of five years beginning from the date of commercial
production.

Sales Tax Exemptions:

i. Import and supply of promotional advertising material has also been proposed to be
exempted.
ii. Liquefied Natural Gas imports to be used by fertilizer manufacturers has also been
proposed to be exempted.
iii. Imports of plant, machinery and equipment including Dumpers and SPMVs by certain
Chinese Construction entities for construction of Karachi- Peshawar Motorway and
Karakoram Highway, is proposed to be exempted subject to certain conditions.
iv. Imports of equipment by China Railway Corporation for furnishing and installation in
Lahore Orange Line Metro Train Project, is to be exempted, subject to certain conditions.
v. Import of certain computer parts and accessories is proposed to be exempted if imported
by certified registered manufacturers and assemblers of computers and laptops from
Engineering Development Board.
vi. Import of plant and machinery (excluding items listed in Chapter 87 of the Pakistan
Customs Tariff) for setting up Special Economic Zone (SEZ), is proposed to be exempted
on one time basis subject to the conditions and limitations as may be specified by the
Board.

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vii. Sales tax on supply of fans to dairy Farms, preparations for animal feed etc. is proposed
to be exempted. Also, fish feed which is currently taxable at reduced rate of 10% is to be
exempted.
viii. Import of machinery, equipment, raw material etc. by Karachi Shipyard Engineering
Works Limited is to be exempted.
ix. Exemptions for all sorts of Hearing Aids and Hearing assessment equipment.

Customs Duty Exemption:

i. Exemption is allowed on import of papers weighing 60 g/m2 for printing and

preservation of Holy Quran by Federal or Provincial Governments or Nashir-e-Quran
registered with the government.
ii. Exemption of 3% Customs Duty is proposed on tanned hides in wet state.
iii. The Bill proposes to exempt 3% of Customs Duty on Micro Feeder Equipment used for
food fortification and 5% of Customs Duty on Tasigna, an anti-cancer medicine.
iv. The Bill proposes to exempt 16% of Customs Duty on charging stations for electric
vehicles.
v. The Bill proposes to allow exemption of 5% Customs Duty on import of specified LED
parts and components for manufacturer of LED lights.
vi. The Bill proposes to withdraw Customs Duty on Hydrogen Bromide (11%) and
Palladium-on-carbon (3%) used by PTA industry.
vii. Import of solar panels to enjoy duty exemption till June 30, 2019 even when not meeting
requirement of ‘local manufacturing’.

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References:
o Tax Exemptions on Particular Projects, http://taxsummaries.pwc.com/ID/Pakistan-
Corporate-Tax-credits-and-incentives
o Corporate Tax Exempt Businesses in Pakistan in the Budget 2018-2019,
https://www2.deloitte.com/pk/en/pages/tax/articles/budget-2018-19-
comments.html
o Taxes Rates Applied to These Forms of Business,
https://clarity.pk/knowledgebase/business/annual-tax-payable-companies-
pakistan/
o Documents and Requirements to Open Bank Account for all types,
https://www.mcb.com.pk/business/requirements
o Three Forms of Businesses and How to form or register for each of them,
https://www.linkedin.com/pulse/how-register-sole-proprietorship-pakistan-noman-jamil

APPENDIX
Registration of Partnership/Firm in Pakistan—Sample Partnership
Deed-Courtesy byRehan Aziz Shervaniof RAK LawAssociates (Advocate
High Court)-0333-4324961-for Registration process see 99 Lectures on
Business Law

________________________________________________________

“Partnership Deed”

This Deed of Partnership is Made on This July 13th , 2010, By & Between: -

1. Fahim Sher khan S/O Sheikh Mehiuddin, aged 31 Years, CNIC # 420001-
37970989897778-9000000, presently residing at United Arab Emirates; permanent
address in Pakistan: A-10009935, Block-D, North Nazimabad, Karachi, hereinafter
referred to as, ‘ the Psarty of the FIRST PART’.

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 2. Skeeema Saforee W/O tipu khan pathan Shaikh, aged 33 years, CNIC # 42065652-
40987000008700-0, presently residing at United Arab Emirates; permanent address in
Pakistan: A-130989875, Block-D, North Nazimabad, Karachi, hereinafter referred to as, ‘
the Party of the SECOND PART’

WHEREAS, the above-mentioned parties are fervent to initiate business of engineering,

supplies and manufacturing of flanges and valves, commissioning, civil, electrical, mechanical
work etc. including any other business incidental thereto & any other business as may be agreed
upon, time to time, by the partners under the name and style “ENGINEERING & OILFILELD
SUPPLIES COMPANY”.

WHEREAS, it is expedient to reduce the ‘terms’ and ‘conditions’ of the partnership relationship
in writing.

Now This Deed Witnesseth as Under:

1. That the partnership business shall come into effect from July 13th, 2010.
2. That the business shall be carried on under the name and style: “ENGINEERING &
OILFIELD SUPPLIES COMPANY”.
3. The head office of the firm shall be situated at 6909098776-KNnm, Commercial, 2nd
Floor, Phase I, DHA, Lahore or at any other place (s) as may be decided by the partners
from time to time.
4. The firm’s business shall be: -
(a) to carry on manufacturing & supplying of engineering provisions;
equipments; materials; goods; stores including flanges and valves.
(b) to execute civil, electrical, mechanical, engineering projects.
(c) to carry on any other business as may be mutually agreed upon, time
to time, by the partners.
5. The duration of the partnership shall be ‘at will’.
6. The ‘Profit & Loss Ratio’ between the partners shall be as under:

Party of the First Part: 95%

Party of the Second Part: 5%

7. The party of the first part shall be the ‘Managing Partner’ of the firm; will exercise
complete authority to manage all the affairs of the firm.
8. The party of the second part shall be a ‘Sleeping Partner’.
9. The Managing Partner on behalf of the firm is authorized to borrow or raise money from
any bank or financial institution(s) as the case may be.
10. Neither partner can assign his interest in the firm to any person without the consent of the
other.

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 11. No any new partner can be admitted in the firm unless the partners mutually agreed
thereupon.
12. Required ‘Books of Accounts’ shall be kept and maintained by the firm at the head
office.
13. ‘Firm’s bank Account (s)’ shall be operated solely by the party of the first part.
14. The ‘Good Will’ of the firm will belong to the partners.
15. The ‘Statement of Assets and Liabilities’, after making final adjustments, shall be
prepared at the end of every financial year.
16. The Accounts of the firm shall be closed at the end of every Financial Year id-est on
3oth June.
17. Any term of this deed, without executing a fresh partnership deed, may be varied,
altered or amended mutually by the partners.
18. Any dispute arising between the partners shall be referred to arbitration under The
Arbitration Act.
19. Subject to the provisions mentioned as above, the partnership relation shall lope
inconformity with the provisions of the Partnership Act 1932, or any other law enforced
for the time being in Pakistan.

IN WITNESS WHEREOF, the partners on the date mentioned as above have agreed to set their
respective hands on this partnership deed as under:

Particulars, Signatures & Thumb Signatures & Thumb Impressions of the

Impressions of Witnesses: Partners:
1. Muneer khan pathan Ahmed
Awan S/O Kareen Awan khan
peshawar, CNIC# 35989876200-
1575498765460, R/O House #
311987654,Mohallah Block-G-486. Party of the First Part
M.A Johar Town, Lahore.

2. Amiutn Butt S/O Hangrdfeez-ur-

Rehman, CNIC# 359876202-
3918876543045-9, R/O House #
9902, Street # 096, Mohallah
Muslim Colony, Bastamee Road, Party of the Second Part
Samman-abad, Lahore.

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