Expanding to Pakistan

Pakistan, a nation rich in history, culture, and economic opportunities, presents a compelling destination for businesses seeking to expand their reach.

With a rapidly growing population, a strategic location, and a government actively promoting foreign investment, Pakistan offers a fertile ground for businesses of all sizes to flourish.

In this blog series, we'll delve into the compelling reasons to expand into Pakistan, explore the intricacies of the market,and highlight the unique advantages that Innovare brings to your expansion strategy.

So, join us as we embark on a journey to discover the boundless possibilities that await in this dynamic South Asian nation.

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How to Set Up a Business in Country

Starting a business in Pakistan involves several key steps that ensure compliance with local regulations and set a strong foundation for success. First, conducting thorough market research is essential.
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This involves understanding the local consumer preferences, purchasing power, and cultural influences. Identifying your target audience and analysing competitors will help tailor your business strategy to meet market demands effectively.
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 Next, choosing the right business structure is crucial. In Pakistan, common structures include sole proprietorship, partnership, and private limited company.
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 A sole proprietorship is simple and cost-effective but comes with personal liability. Partnerships involve shared responsibilities and profits, requiring a clear agreement to avoid conflicts.
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 A private limited company offers more legal protection and flexibility but requires registration with the Securities and Exchange Commission of Pakistan (SECP) and adherence to additional compliance requirements.
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 Registering your business involves several steps. You need to reserve your company name, file incorporation documents, and obtain a National Tax Number (NTN) from the Federal Board of Revenue (FBR).
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 Additionally, you must submit mandatory paperwork to the SECP, including the Memorandum of Association, Articles of Association, and scanned copies of directors' CNICs.
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 Finally, understanding the legal and regulatory framework is vital. This includes complying with tax regulations, labour laws, and industry-specific requirements.

 Hiring and managing employees effectively, navigating taxes, and maintaining accurate financial records are essential for long-term success.

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How to Set Up a Company in Pakistan

Setting up a company in Pakistan involves several critical steps to ensure compliance with local laws and to establish a strong foundation for your business. Here’s a detailed guide to help you navigate the process:

1. Choose a Business Structure

Selecting the appropriate business structure is the first step in setting up your company. In Pakistan, the common business structures include:

●       Sole Proprietorship: This is the simplest form of business, owned and operated by one person. It’s easy to set up but comes with unlimited personal liability.

●       Partnership: This involves two or more individuals sharing ownership. Partnerships require a clear agreement to outline the roles, responsibilities, and profit-sharing arrangements.

●       Private Limited Company: This structure offers limited liability protection to its shareholders. It requires registration with the Securities and Exchange Commission of Pakistan (SECP) and adherence to more stringent regulatory requirements.

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2. Register Your Company

Once you’ve chosen your business structure, the next step is to register your company. The registration process includes:

●       Name Reservation: Reserve your company name through the SECP’s online portal.

●       Incorporation Documents: Prepare and submit the Memorandum of Association and Articles of Association.

●       National Tax Number (NTN): Obtain an NTN from the Federal Board of Revenue (FBR) for tax purposes.

●       Registration with SECP: Complete the registration process by submitting the required documents, including scanned copies of directors' CNICs.

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3. Understand Local Regulations

Compliance with local regulations is crucial for operating a business in Pakistan. This includes:

●       Labour Laws: Adhering to employment laws regarding wages, working hours, and employee benefits.

●       Industry-Specific Regulations: Depending on your business sector, you may need to comply with additional regulations and obtain specific licences or permits.

●       Environmental Regulations: Ensuring your business practices are environmentally sustainable and comply with local environmental laws.

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4. Taxation

Understanding the tax framework is essential for financial planning and compliance. Key aspects include:

●       Income Tax: Businesses must file annual income tax returns and pay taxes based on their income.

●       Sales Tax: If your business involves the sale of goods or services, you need to register for sales tax and file monthly returns.

●       Withholding Tax: Certain payments, such as salaries and dividends, are subject to withholding tax, which must be deducted and deposited with the FBR.

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5. Banking and Finance

Efficient financial management is vital for business success. Key considerations include:

●       Opening a Business Bank Account: Choose a reputable bank and open a business account to manage your finances.

●       Funding Options: Explore various financing options, including bank loans, venture capital, and government grants. A well-prepared business plan can help attract investors.

●       Financial Management: Implement robust accounting practices to maintain accurate financial records, manage cash flow, and ensure compliance with tax regulations.


How Do I Go About Manpower and Human Resourcing?

Expanding your business in Pakistan requires a strategic approach to manpower and human resourcing. Here’s a comprehensive guide to help you navigate this process:

1. Visas and Work Permits

When hiring foreign employees, securing the appropriate visas and work permits is essential. Pakistan offers several types of visas for foreign workers, including employment visas and business visas.

 Employment visas are typically issued for a period of one year and can be extended based on the employment contract and the nature of the job.

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2. Work Permit Requirements

To obtain a work permit, employers must meet specific requirements. These include:

●       Job Offer: A formal job offer from a Pakistani company.

●       Qualifications: Proof of the employee’s qualifications and experience relevant to the job.

●       Health Clearance: Medical clearance certificates to ensure the employee is fit to work.

●       Security Clearance: Security clearance from relevant authorities to ensure the employee poses no threat to national security.

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3. The Visa Application Process

The visa application process involves several steps:

●       Application Submission: Submit the visa application along with required documents, including the job offer letter, proof of qualifications, and health and security clearances.

●       Processing Time: The processing time for employment visas can vary, but it generally takes a few weeks.

●       Approval and Issuance: Once approved, the visa is issued, allowing the employee to enter and work in Pakistan.

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4. Additional Considerations

When managing manpower and human resources, consider the following:

●       Cultural Integration: Provide cultural orientation and training to help foreign employees adapt to the local work environment and culture.

●       Legal Compliance: Ensure compliance with local labour laws, including working hours, wages, and employee benefits.

●       Employee Retention: Implement strategies to retain talent, such as offering competitive salaries, career development opportunities, and a positive work environment.

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5. Social Security Management

Managing social security for employees is crucial for their well-being and legal compliance. Key aspects include:

●       Employees’ Old-Age Benefits Institution (EOBI): Register employees with the EOBI to provide them with old-age benefits, including pensions and survivor benefits.

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Employment Contracts

When expanding your business in Pakistan, understanding and drafting comprehensive employment contracts is crucial.

These contracts outline the terms and conditions of employment, ensuring clarity and legal compliance for both employers and employees.
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Onboarding

Onboarding is the process of integrating new employees into your company. A well-structured onboarding program helps new hires understand their roles, company culture, and expectations.

Key steps include:

●       Orientation Sessions: Introduce new employees to the company’s mission, values, and policies.

●       Training Programs: Provide necessary training to equip employees with the skills required for their roles.

●       Mentorship: Assign mentors to guide new hires through their initial period, helping them acclimate to the work environment.

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Salary Payment

Salary payment terms should be clearly defined in the employment contract. This includes:

●       Payment Frequency: Specify whether salaries are paid monthly, bi-weekly, or weekly.

●       Payment Method: Indicate the method of payment, such as direct bank transfer or cheque.

●       Deductions: Outline any deductions for taxes, social security, or other contributions.


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Leave Entitlements

Leave entitlements are an essential part of employment contracts. In Pakistan, employees are entitled to various types of leave, including:

●       Annual Leave: Typically, employees are entitled to 14 days of paid annual leave.

●       Sick Leave: Employees can avail up to 16 days of paid sick leave per year.

●       Maternity and Paternity Leave: Female employees are entitled to 12 weeks of maternity leave, while male employees may receive paternity leave as per company policy.

●       Public Holidays: Employees are entitled to paid leave on public holidays as declared by the government.

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Termination

The termination clause in an employment contract should clearly outline the conditions under which employment can be terminated. This includes:

●       Notice Period: Specify the notice period required for termination by either party, typically ranging from one to three months.

●       Grounds for Termination: Define the grounds for termination, such as misconduct, poor performance, or redundancy.

●       Severance Pay: Detail any severance pay or benefits due to the employee upon termination.

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Working Hours

Working hours should be clearly stated in the employment contract to ensure compliance with labour laws. In Pakistan, the standard working hours are:

●       Daily Working Hours: Typically, 8 hours per day.

●       Weekly Working Hours: Generally, 48 hours per week.

●       Overtime: Specify the conditions under which overtime is paid and the rate of overtime pay.

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Employment Contract Considerations

When drafting employment contracts, consider the following:

●       Legal Compliance: Ensure the contract complies with local labour laws and regulations.

●       Clarity and Precision: Use clear and precise language to avoid ambiguities and misunderstandings.

●       Mutual Agreement: Both parties shall mutually agree to the terms and conditions, and the contract should be signed by both the employer and the employee.

● Review and Update: Regularly review and update employment contracts to reflect any changes in laws or company policies.

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Should I Set Up My Own Entity or Outsource to a Local Expert in Pakistan?

To make an informed decision, it's essential to weigh the advantages and disadvantages of setting up your own entity versus outsourcing to a local expert.

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Setting Up Your Own Entity:

●   Advantages:

○   Full control over business operations and decision-making.

○   Potentially lower long-term costs with in-house management.

○   Deeper understanding of local business practices and culture.

●   Disadvantages:

○   Complex and time-consuming setup process.

○   Requires in-depth knowledge of Pakistani legal and regulatory frameworks.

○   Potential for higher initial investment costs.

○   Increased risk of non-compliance and operational challenges.

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Outsourcing to a Local Expert:

●   Advantages:

○   Faster and more efficient market entry.

○   Expertise in navigating Pakistani regulations and cultural nuances.

○   Access to established networks and potential cost savings.

○   Reduced initial investment and ongoing operational costs.

●   Disadvantages:

○   Less control over day-to-day operations and decision-making.

○   Potential for profit-sharing arrangements with the local partner.

○   Reliance on the expertise and communication of the outsourcing partner.

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Choosing the Right Path

The optimal approach depends on your specific business goals, resources, and risk tolerance. Here's a table summarising key considerations to aid your decision:

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Innovare: Your Trusted Expansion Partner in Pakistan

Let Innovare be your strategic partner throughout your Pakistani expansion journey. Our team of experts possesses unparalleled knowledge of the Pakistani market, legal landscape, and business culture

Innovare's comprehensive solutions and local expertise empower you to navigate the Pakistani market with confidence. Contact us today to discuss your expansion plans and unlock the full potential of this dynamic business landscape!

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