Branch Office vs Liaison Office of a Foreign Company
A foreign Company can set up its Branch Office(BO)/ Liaison Office (LO) in Pakistan. Branch office is established to meet its contractual obligations with private or public sector. However, the activities shall be limited to the scope of work mentioned in the agreement.
On the contrary, a liaison office can engage in marketing/promotion of company’s products, technical services & advice and discovering the avenues for shared ventures.
Both branch office and Liaison office can not undertake any sort of trading activities.
Board of investment (BOI) grants permission for opening branch and Liaison office. This permission can be renewed on payment of requisite fee and provision of required documents. In this article, we will discuss in detail the similarities and differences of BO and LO.
1. SCOPE OF ACTIVITIES
Branch Office (BO)
- Foreign Company can set up a branch office to execute the contracts awarded to it either in public or private sector
- Activity will be restricted to the work mentioned in the signed contract/ agreement
- Cannot indulge in commercial / trading activities
Liaison Office (LO)
- Foreign Company can set up a liaison office to undertake the promotion of product(s), provision of technical advise and assistance, exploring the possibility of joint collaboration and export promotion. These activities should be mentioned in the application
- Cannot undertake any commercial or trading activities
2. MEETING EXPENSES
BO
- Funds transferred through normal banking channel from abroad and converted to local currency account or from the amounts received through execution of the agreement / contract can be utilized to meet all expenses
LO
- Funds transferred through normal banking channel from abroad and converted to local currency account will be utilized to meet all expenses
3. REMITTANCE FACILITY
BO
- After submission of required information / documents in terms of Para 13 Chapter XIV of the Foreign Exchange Manual of SBP, profit can be repatriation.
LO
- No remittance facility allowed.
4. HIRING OF FOREIGN NATIONALS
BO
- Prior approval of the government is mandatory for employment of Foreign nationals
LO
- Prior approval of the government is mandatory for employment of Foreign nationals
5. IMPORT AND EXPORT OF MACHINERY
BO
- The Import/Export policies of the Government shall govern the Import/ Export of machinery and equipment and its re-export
LO
- Nil
6. REGISTRATION WITH SECP
BO
- Mandatory
LO
- Mandatory
7. FINALIZATION OF CASE
BO
- 6-8 weeks
LO
- 6-8 weeks
8. PERIOD OF PERMISSION
BO
- 3-5 years; renewable
LO
- 3-5 years; renewable
9. DOCUMENTS REQUIRED
BO
- One original+ five copies (Six sets ) of the below mentioned documents are required:
- Application form
- Foreign company registration certificate attested by Pakistan Embassy/ Mission
- Memorandum and Articles of Association
- Copy of contract / agreement
- Company Profile
- CV of Designated person authorized to act on behalf of the company + Passport copy/CNIC
- Resolution /
Company Authority letter to establish branch office in Pakistan
LO
- Six sets of the under mentioned documents are
required:- Application form
- Foreign company registration certificate attested by Pakistan
Embassy/Mission - Memorandum and Articles of
Association - Company Profile
- Resolution /
Company Authority letter to establish liaison office in Pakistan
10. RENEWAL
BO
- Following documents are required:
- Copies of valid
contracts containing contract duration - Income tax returns of 3 previous years
- Latest Audited Accounts
- Proceeds Realization
Certificates (PRCs)
- Copies of valid
LO
- Following documents are required:
- Performance report
- Statements of Receipt and Payment
- Proceeds Realization Certificates (PRCs)
11. Taxation
BO
- 29% corporate tax on the taxable income
LO
- Nil
12. CHANGE OF ADDRESS / CONTACT DETAILS
BO
- Has to be intimated to the BOI and other concerned quarters
LO
- Has to be intimated to the BOI and other concerned quarters
13. DOCUMENTS REQUIRED FOR CLOSURE
BO
- The following documents are
required:- Request letter for
closure - Activity Report
- Proceeds Realization
Certificates - Audited Accounts for the last
permitted period - Copies of press clippings about closure
published in two national dailies - Confirmation from Federal Board of Revenue confirming all assessments and dues are clear
- Request letter for
LO
- The following documents are required:
- Request letter for closure
- Activity Report
- Proceeds Realization
Certificates - Receipt and Payment
Statement for the last permitted period - Copies of press clippings regarding
closure published in two national dailies - Confirmation from FBR that all dues are clear
14. FEE
BO
- Initial Fee – $ 3000 for first year
- Renewal fee – $ 1000 per year
- Permission can be renewed for maximum five years at a time
LO
- Initial Fee – $ 2000 for first year
- Renewal fee – $ 500 per year
- Permission can be renewed for maximum five years at a time
From the above discussion, we can conclude that a foreign company can set up its branch office or liaison office in Pakistan after seeking approval from board of Investment. There are limitations imposed on the commercial activities of both branch and liaison office. Approval and renewal fee are also high in terns of scope of work. Setting up such offices may be suitable for only those companies that have interest in undertaking massive infrastructure projects in joint venture with local companies.
