Cost Of Doing Business

BUSINESS FORMATION
Corporate & Business Law
Agenda

Doing Business (1 of 3)
Brief Information

Ease of Doing Business

Statistics
Current Standing Deteriorated Ranking
South Asia
Region

Lower Middle
147 Ranked
in 2016 144
Income Category
Doing Business among 190
economies of the world
147 2017

193,203,476 Objectives
Population • The presentation will unveil all procedures officially required, or commonly done in practice, for an
entrepreneur to start up and formally operate an industrial or commercial business in Pakistan.
1,510 • Along with that this will also tell the time and cost to complete these procedures and the paid-in
minimum capital requirement.
GNI Per Capita

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Agenda

Doing Business (2 of 3)
Assumptions
Pakistan Legal System Is Based On The English Common
Law. judicial hierarchy is similar to the English system.
District Court as the original trial court, High Court of the
Karachi, Lahore Province as the court of appeal and the Supreme Court of
2 Largest Business City of the Economy Pakistan is the final court of appeal.

10
Areas of Business Regulations
Factors considered in ease of doing business analysis primarily are: Starting a business, dealing with
permits, getting electricity, property registration, getting credit, protecting minority shareholder,
paying taxes, trading across borders, enforcement of contracts and resolving insolvency.

Information Gathered From

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 Agenda

Doing Business (3 of 3) Covering Five

10 Areas of Business Regulations

GETTING CREDIT
Movable collateral laws and credit information systems
GETTING ELECTRICITY
Procedures, time and cost to get connected to the electrical grid,
the reliability of the electricity supply and the transparency of PROTECTING MINTORING INVESTORS
tariffs Minority shareholders’ rights in related-party
DEALING WITH CONSTRUCTION PERMITS transactions and in corporate governance
Procedures, time and cost to complete all formalities to build a
warehouse and the quality control and permits safety mechanisms REGISTERING PROPERTY
in the construction permitting system Procedures, time and cost to transfer a property
and the quality of the land administration system
ENFORCING CONTRACTS
Time and cost to resolve a commercial dispute and the
STARTING A BUSINESS
quality of judicial processes
Procedures, time, cost and paid-in minimum capital to
start a limited liability company
PAYING TAXES
Payments, time and total tax rate for a firm to comply
with all tax regulations as well as post-filing processes
LABOR MARKET REGULATIONS
Flexibility in employment regulation and aspects of job
quality

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Karachi, Lahore

Starting A Business
Steps to form
Number of procedures, time and cost for a small- to medium-sized limited liability company to start up and formally operate
in economy’s largest business city.

No Charge
1 day 200 PKR
Time to Complete Associated Cost

1. Company Name Reservation

Same as Karachi Reserve a company name online via the
Securities and Exchange Commission of
1 day Procedure 1 & 3 Pakistan (SECP) E-services website
Time to Complete Associated Cost
2. Pay the Fees
Pay the name reservation and company
incorporation fees at any Bank.

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 1/2 day 3. Obtain PIN
a. Form 1: Declaration of compliance
Time to Complete Obtain PIN for company
b. Form 21: Identification of the location of the office incorporation submission through
c. Form 29: Particulars of directors, secretary, chief accountant, auditors, and others
d. One copy of the Memorandum and Articles of Associations with the signature of each member
100 PKR Securities and Exchange
Commission of Pakistan (SECP).
(in presence of a witness) Associated Cost

4. Complete 2 days
Online Registration Time to Complete
Complete form along with
submitting following documents to
SECP.
1000 PKR 400 PKR
Registration Fee Online Filling Fee

1 day 5. Open Bank Account

Time to Complete for Tax Registration
Bank account number in the
0 PKR name of the company is needed
in order to register for taxes.
Associated Cost
6. Apply for NTN &
Register for Income Tax
2 days
Time to Complete
At Tax facilitation center of the
Regional Tax Office (RTO) of the
FBR in Karachi.
No Charge
Registration Fee

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 1 day 7. Apply for STN
Time to Complete At the tax facilitation center of
the Regional Tax Office (RTO) of
No Charge the Federal Board of Revenue
(FBR) in Karachi
Associated Cost

Parallel
In
8. Register for 7 days
Professional Tax Time to Complete
At the Excise & Taxation
Department of the District.
No Charge
Associated Cost

Parallel
In
1 day 9. Further Register with
Time to Complete SESSI
Registration with the Sindh
No Charge Employees Social Security Institution
is governed at the provincial level by
Associated Cost

Parallel
an independent institution called the

In
Sindh ESSI.
10. Register with
EOBI
7 days
Time to Complete
According to the Amendment in
EOBI Act 1976 effective as of July
2008, every industry or a
No Charge
commercial establishment with 5 or Associated Cost
more employees must register with
the federal Employees Old Age 7
Benefits Institution.
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 7 days 11. Register Under WPS
Time to Complete Register under the West Pakistan
Shops and Establishment
1000 PKR Ordinance 11 1969 with the
Labor Department of the District.
Associated Cost

Parallel
In
12. Register appointed 1/2 day
CEO Time to Complete
Pursuant to the Companies
Ordinance 1984, articles 198 - 205,
a CEO is to be appointed within 15 400 PKR
Associated Cost (Form 29)

Parallel
days of the company's incorporation.

In
The company needs to register said
CEO within 14 days of the decision.

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Karachi

Getting Electricity
Steps to obtain
Here we explain the steps required for a business to obtain a permanent electricity connection for a newly constructed
warehouse. If a pre-build office is taken for the business on rent then electricity is already available and part of the rent.

200 PKR 30 CALENDER

SUBMIT APPLICATION TO K- DAYS
01 ELECTRIC LTD. AND AWAIT SITE
Application should be submitted to K-Electric along with the copy all
INSPECTION
necessary
0 PKR documents and photographs. 21 CALENDER
DAYS
OBTAIN SITE INSPECTION BY K-ELECTRIC LTD. AND
02 AWAIT ESTIMATE After inspection of site, assess the connection point and perform the load
testing, a cost estimation is prepared and delivered it to the applicant with
in 3 days.
10000 PKR 14 CALENDER DAYS
03 OBTAIN WIRING INSPECTION Wiring test take place on site and by inspector from Electric Inspectorate
Karachi and issued a fitness certificate to the applicant.
2701421.9 PKR 30 CALENDER
DAYS
PAYMENT MADE TO K-ELECTRIC LTD., AND SUBMIT
04 THE INTERNAL WIRING TEST REPORT The customer submits the wiring test and makes the payment of the
connection estimate. The payment has to be made by cheque at the bank
counter
0 PKR of the utility. 120 CALENDER
AWAIT EXTERNAL WORKS, METER INSTALLATION DAYS
05 AND ELECTRICITY FLOW The contractor conducts the works under the supervision of K-Electric
technicians. Once the works are completed, K-electric carries out the
installation of the meter and then the electricity turn-on. 9

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Lahore

Getting Electricity
Steps to obtain
Here we explain the steps required for a business to obtain a permanent electricity connection for a newly constructed
warehouse. If a pre-build office is taken for the business on rent then electricity is already available and part of the rent.
0 PKR 30 CALENDER DAYS
SUBMIT APPLICATION TO LESCO AND AWAIT SITE 01
Application submitted to marketing dept. of LESCO along with the copy all necessary
INSPECTION
documents and photographs. Then dept. further forward the application to the concern dept.
1480 PKR 14 CALENDER
DAYS
After getting done with site and inspection and estimation, Contractor has to collect inspection form from the OBTAIN WIRING INSPECTION 02
Punjab Energy
2701421.9 PKRDepartment. The form certifies that the internal wiring complies with
1 technical and safety norms.
CALENDER
DAYS
PAYMENT MADE TO LESCO AND SUBMIT 03
The payment has to be made by cheque at the Bank counter of the utility. The internal wiring test THE INTERNAL WIRING TEST REPORT
report form is obtained which testifying that the electrical wiring of the warehouse has been tested
0 PKR
as per the standards. 28 CALENDER
DAYS RECEIVE EXTERNAL WORKS AND AWAIT FINAL
The contractor carries out the external connection and placed an order for the material INSPECTION 04
required in connection. Then LESCO approved the material and connection has been
made.
0 PKR 14 CALENDER DAYS RECEIVE INSPECTION OF EXTERNAL WORKS, METER
INSTALLATION AND ELECTRICITY OW FROM LESCO 05
After the electrical external works are approved by LESCO, they will come and install the
meter. Electricity can then be supplied.
10

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 Karachi 7- MUTATION

Registering Property in Karachi Once the registration process is completed, and the sale deed has been
collected from the registrar office, the mutation processes is carried out at
the relevant land owning authority for transfer of ownership
3- CONDUCT TITLE SEARCH
As a part of the due diligence procedure, it is a common practice to 1000 PKR ONE
search the books and verify whether the counterpart actually owns WEEK
the property. Lawyers also look into the previous owners. The
process is completely manual and does not have cost.
4- HIRE DEED WRITER OR LAWYER TO DRAFT
SALE PURCHASE AGREEMENT
0 PKR ONE
It is common practice in Pakistan to hire a lawyer to draft the sale
WEEK purchase agreement.

5000-10000 PKR ONE WEEK

1- OBTAINING A NON-OBJECTION 5- PAYMENT OF STAMP DUTY, CAPITAL VALUE
CERTIFICATE TAX, TOWN TAX AND REGISTRATION FEE
The Revenue department, at Town and city level respectively,
issue a “No Objection Certificate” in favor of the Seller permitting (i)Conveyance stamp duty 3% of property value. (ii) The capital
the sale of the property, provided that the entire amount due and value tax (CVT) decreased from 4% to 2.5% of the property value
payable in respect of the property has been satisfied. 1% of property value for the registration fee. (iv) 1% of the
1000 PKR TWO WEEKS property value for the Town Tax Fees are paid at the Government
Treasury or National Bank of Pakistan

2- ADVERTISEMENT OF TRANSACTION IN PERCENTAGE ONE

NEWSPAPERS INVITING OBJECTIONS 6-DAY
RECEIPT OF PAYMENT IS TAKEN TO STAMP
OFFICE
A Public notice is placed in two different newspapers having circulation
of 100,000 copies, in English and in Urdu news paper, inviting The receipt of payment obtained in Procedure 4 is taken to the
objections/claims. After publication, there is a seven-day waiting time Stamp Office of the Government. The Stamp office will, upon
for arrival of objections, if any. production of receipt, issue a stamp paper of the value (money
deposited) on the Sale Deed
10000 PKR ONE WEEK
0 PKR
 7- MUTATION
Lahore
• Karachi, Lahore
Once the registration process is completed, and the sale deed has been

Registering Property in Lahore collected from the registrar office, the mutation processes is carried out at
the relevant land owning authority for transfer of ownership

500 PKR THREE DAYS

7- EXECUTION AND REGISTRATION OF A DEED
1- OBTAIN THE FARD
BEFORE THE REGISTRATION AUTHORITY
To confirm ownership and records for the property the seller obtains
the Fard. Fard is an ownership certificate. Once the registration process described above is completed, and the
sale deed has been collected from the sub-registrar once, the
mutation process is carried out by the buyer at the relevant land
150 PKR TWO DAYS authority for transfer of ownership.

2- ADVERTISEMENT OF TRANSACTION IN 500 PKR 38

NEWSPAPERS INVITING OBJECTIONS 5- RECEIPT OF PAYMENT IS TAKEN TO STAMP
DAYS
A Public notice is placed in two different newspapers having
OFFICE
circulation of 100,000 copies, in English and in Urdu news paper,
inviting objections/claims. After publication, there is a seven-day The receipt of payment obtained in Procedure 4 is taken to the
waiting time for arrival of objections, if any. Stamp Office of the Government. The Stamp office will, upon
production of receipt, issue a stamp paper of the value (money
deposited) on the Sale Deed.
10000 PKR EIGTH DAYS
0 PKR
3- HIRE DEED WRITER OR LAWYER TO DRAFT ONE DAY
SALE PURCHASE AGREEMENT 4- PAYMENT OF STAMP DUTY, CAPITAL VALUE
TAX, TOWN TAX AND REGISTRATION FEE
It is common practice in Pakistan to hire a lawyer to draft the sale
purchase agreement. People who cannot afford lawyers hire a deed (i)Conveyance stamp duty 3% of property value. (ii) The capital
writer costing around PKP 1,000. value tax (CVT) is 2% of the property value (iii) 1% of property
value for the registration fee. (iv) 1% of the property value for
8000 PKR ONE WEEK the Town Tax Fees are paid at the Government Treasury or
National Bank of Pakistan

PERCENTAGE ONE
Karachi, Lahore

Paying Taxes
By type of a medium size company
This Slide records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as
well as measures the administrative burden in paying taxes and contributions in both Karachi and Lahore.

18.3% 14.5% 1.1%

PKR PKR PKR

Profit Tax (% of profit) Labor tax and contributions (%

Other Taxes (% of profit).
of profit)
13

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Karachi, Lahore

Enforcing Contracts
Indicators with time and cost
The slide provides information about enforcing contracts indicator that measure the time and cost for resolving a commercial
dispute through a local first instance court, and the quality of judicial processes index, evaluating whether each economy has
adopted a series of good practices that promote quality and efficiency in the court system.

# Indicators Description Karachi Lahore

1 Claim Value (PKR) Disputed amount 533,051 533,051
2 Time (days) Time required to enforce a contract through the courts 1096 1025
(calendar days)
3 Cost (% of claim value) Cost required to enforce a contract through the courts (% of 18.1 25.0
claim)
4 Quality of judicial processes Court structure and proceedings (-1-5) 6.0 5.0
index (0-18) Case management (0-6)
Court automation (0-4)
Alternative dispute resolution (0-3)

14

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Who did what?

Credits
The Coach
Shahzaib Shaikh

Learning Resources
Internet World Bank Group Reports

The Team

Abdul Hadi Owais Razziuddin Muhammad Umair Ammad Asim

15

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Thank you all
We will take questions now!