Incentive Package for Software Houses:

• Fiscal Incentives
• Corporate Incentives
• GST Registration for Software Companies

Declaration of Computer Software Technology as Industry

Chief Executive’s directive on Software Company

Incorporation of Companies

In accordance with the recommendation of Corporate Law Commission, Section: 4(A) of Monopolies and Restrictive Trade Practices (Control & Prevention) Ordinance, 1970 shall be deleted / repealed. There will be no ceiling of total value of assets of an undertaking/company for retaining 100% ownership by the investors.

There are three main forms of business:

• Sole Proprietorship
• Partnership
• Company

Sole Proprietorship

In Sole Proprietorship, a business or a profession is carried out by an individual on his own account. No formal procedure or formality is required to be followed for setting up a sole proprietary concern.

Partnership

A Partnership is a business relationship entered into by a formal agreement between two or more persons or corporations carrying on a business in common. The capital for a partnership is provided by the partners who are liable for the total debts of the firms and share profit and loss of a business concern according to the terms of the partnership agreement. Partnerships (other than banking companies) are generally limited in size to twenty partners. The interest of a partner is transferable only with the prior consent of the other partner(s). However, a partner's right to a share of the partnership income may be received on trust for another person.

For taxation purposes, partnerships are classified into:

• Registered and`
• Unregistered Firms

The income of the registered firm is subject to super tax, before distribution to the partners. Also the individual income of the partners is subject to income tax at the usual rates. For unregistered firms, income tax is levied on the income and the partners are not liable to pay tax on the share of profit received from the unregistered firm(s).

Company

A Company as a legal entity can be formed under the companies’ ordinance, 1984, and can have share capital or can be formed without share capital. A company having share capital may be formed as:

• Company Limited by Share
• Company Limited by Guarantee
• Unlimited Company

Company Limited by Share

Liability of its members is limited up to the extent of their share to paid up to capital of the company. These companies may further be classified as public limited and private limited companies. Public limited companies can be formed by at least seven persons by subscribing their names to the 'memorandum & articles of association' of the company. The word 'limited' must be used as the last word of its name. Private limited companies may be formed by at least two persons by subscribing their names to the 'memorandum and articles of association' of the company. A private limited company, by its 'article of association' is restricted to:-

• The right to transfer shares
• The number of its members is limited to fifty
• Any invitation to the public to subscribe for share is prohibited

Private Limited Company is required to use the words "(Private) Limited" as the last words of its name.

Company Limited by Guarantee

Means a company having the liability of its members limited by Memorandum to such amount as the members may respectively undertake to contribute to the share capital of the company in the event to its winding up. The company limited by guarantee is usually formed on a 'no profit basis'. Guarantee limited companies must use the words "(guarantee) limited" as the last words of their name.

Unlimited Company

Means a company having the liability of its members unlimited.

The promoters of any proposed company have to obtain confirmation from the company registration office that the proposed name of the company intended to be set up is available and is not identical with the name of any existing company or the proposed name is not deceptive, inappropriate etc.

Seven or more persons associated for any lawful purpose may subscribe their names to a Memorandum and Articles of Association of the Company and, complying with the requirements of the Companies Ordinance, 1984, in respect of the registration, form a public company, and any two or more persons, so associated may in like manner, form a private company .The promoters of the following types of companies having special businesses are required to obtain the letter of intent permission from ministries departments indicated below against each category:

• Banking Company - Ministry of Finance (Investment Wing)/State Bank of Pakistan
• Insurance Company - Ministry of Commerce
• A Provident Society - Corporate Law Authority
• Incorporated As a Company
• An Investment Company - Ministry of Finance/Corporate Law Authority
• A Leasing Company - Corporate Law Authority

The Following Documents Are Required To Be Submitted With the Concerned Registrar:

Private Limited Company

• Memorandum and Article of Association
• Declaration on form I regarding compliance with the requirements of the Companies Ordinance, 1984, signed by one of the directors/officers of the company or an advocate or chartered accountant or cost and management accountant
• Address of the registered office of the company on form 21; and 4 particulars of directors and officers, including the Chief Executive, Secretary, and Chief Accountant, Auditor, and Legal Advisor On form 29.

Public Limited Company

In Addition To the Documents Required for A Private Limited Company, the Following Documents Are To Be Filed:

• List of persons consenting to act as Directors/Chief Executive on form 27; and
• Consents to act as Directors or Chief Executive on form 29. No formal approval from any government agency is required for setting up any industry or business, except for the following:
  • Arms and Ammunition;
  • High Explosives;
  • Radio-Active, Substances; and
  • Security Printing, Currency and Mint.
  • Manufacture of Alcohol (Except Industrial Alcohol) Is Banned.

For Setting Up An Industry, Not Falling Under the Above Categories, the Sponsors Can Directly Apply To Any Commercial Bank Or Development Finance Institution for Loan, If they So Desire.

Provincial governments have already notified negative areas where industries cannot be established for security, defense and environmental reasons. If an entrepreneur is interested to establish an industry in these areas, he would have to obtain location clearance from the concerned Provincial Government.

After purchase of the land and completion of other formalities, the sponsoring body should apply for necessary access to utilities to the concerned authorities:

Power - WAPDA or Local Electric Supply Company
Gas - SUI Southern Gas Companies
Telephone & Fax - Pakistan Telecommunication Corporation
Water - Local Government

All manufacturing concerns, employing more than 10 persons, are required to register with the Respective Provincial Chief Inspector of Industries under the Factories Act, 1984.

Companies are required to register with the concerned Income Tax Department and obtain a National Tax Number (NTN).

No import license is required for importing plant/machinery/raw material; instead the company may open a Letter of Credit (LC) for the importation of plant/machinery/raw material with any Commercial Bank or Authorized foreign Exchange Dealers.

• Foreign companies which intend to undertake export activities in Pakistan will be allowed to be register without any formality.
• Permission to companies engaged in contractual obligations of contracts will be granted on production of valid documents without any formality.
• The activities of the foreign airline companies, Pakistani general sales agents and courier companies do not come under the industrial category and therefore to monitor their operation, the government may continue to grant permission for their Liaison office in consultation with the concerned agencies.

Permission for opening a Liaison office will be granted by the Board of Investment in consultation with the concerned agencies.