- Overview: Pakistan
- Global HR Compliance
- Global PEO and payroll
- Expand without a company set up
- Contractor vs. employee: which is better?
Global PEO and Payroll in Pakistan
Getting your business up-and-running in Pakistan can be challenging, especially if you do not speak the native language. Establishing your own business entity in Pakistan is an option to be considered as you expand abroad. But before you invest valuable resources in setting up business in Pakistan, you should be fully aware of the risks involved.
Acumen’s Global PEO and Payroll solution was designed especially for companies like yours, to smooth the way for quick, easy and risk-free business operations in Pakistan, without having to establish a legal business entity.
Acumen International – Your Professional Employer Organization in Pakistan
Navigating the Pakistani legal system and adhering to regulations governing employment and taxation can be challenging for businesses, especially if you are not a native Pakistani speaker. Partnering with Acumen International as a global Professional Employer organization (PEO) provides you with the local knowledge and support you need to conduct business in Pakistan without concern for legal and compliance risks.
Whether you represent international client companies or you are taking your own business operations abroad, Acumen International’s Global PEO and payroll service allows you to hire and payroll local and expat employees in Pakistan. With Acumen in your corner, you can quickly and easily onboard and compensate your employees without risk of legal repercussions.
International Global Payroll and Taxation in Pakistan
Employment related taxes
Personal Income Tax:
- Tax resident employees
- Non-tax resident employees
Pakistan levies tax on its residents on their worldwide income. A non-resident individual is taxed only on Pakistan-source income, including income received or deemed to be received in Pakistan or deemed to accrue or arise in Pakistan.
Social Security contributions. Pakistan offers benefits to employees for death, disability, injury, medical expenses and pensions, as well as academic scholarships for workers’ children.
Taxation of Employer (just descriptions of types and possible procedures of taxation, with a link on payroll calculator): A resident company is taxed on its worldwide income. Non-resident companies operating in Pakistan through a branch are taxed on their Pakistan-source income attributable to the branch at rates applicable to a company.
Nontaxable payments. Reimbursement of expenses on medical treatment or hospitalisation or both received by an employee is tax exempt. Furthermore, medical allowance of up to 10% of basic salary is exempt if the facility of reimbursement of medical expenses is not available to the employee.
Double taxation. Under Pakistani tax law, residents are taxed on worldwide income. However, a tax credit is generally granted for income from sources outside Pakistan (from both treaty and non-treaty jurisdictions), at the lower of the average foreign tax paid or the average Pakistani tax attributable to the foreign income.
Most of these treaties exempt from Pakistani tax any profits or remuneration received for personal services performed in Pakistan in an assessment year if one or more of the following
conditions are satisfied:
- The individual is present in Pakistan for less than a specified period (usually not in excess of 183 days).
- The services are performed for, or on behalf of, a resident of the other country.
- The profits or remuneration are subject to tax in the other country.
- If self-employed, the individual has no regularly available fixed base in Pakistan.
- The remuneration is paid by, or on behalf of, an employer who is not a resident of Pakistan.
- The remuneration is not borne by a permanent establishment or a fixed base maintained by the employer in Pakistan.
Payroll Cycle in Pakistan
Wages can be paid on daily, weekly, fortnightly or monthly basis. However, a wage period can’t exceed one month.
13th salary in Pakistan
Outline whether the payments are mandatory according to the law or voluntary?
Every employer that earns a profit in any year shall pay to the workmen who have been employed during that year for a continuous period of at least 90 days, a bonus in addition to the wages due to such workmen, which shall be up to one month’s wages. Such bonus must be paid within three months of the end of that year.
Non-payroll taxes in Pakistan
VAT (locally termed as ‘sales tax’) is ordinarily levied on the value of goods, unless specifically exempt or subject to sales tax at a reduced rate, after allowing related input credits.
Sales tax paid on services, federal sales tax on goods, and federal excise duty are adjustable against each other, with a few exceptions.
Supplies made by certain specific persons/sectors are subject to specific sales tax regimes [e.g. retail price/fixed tax regime] or otherwise subject to reduced rates of sales tax.
Local supplies made by persons operating in the five export-oriented sectors (textile, leather, footwear, surgical goods, sport goods) are subject to sales tax at applicable rate of 17%, with reduced rate facility available in certain cases.
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How Acumen’s International PEO and Payroll Service can Benefit Your Business in Pakistan
Compensating your local and expat workforce in Pakistan and closely adhering to Pakistani taxation requirements can divert your attention and resources from activities that help your business grow. A reliable global employment solution like Acumen’s Global PEO and Payroll service can take a substantial burden off your shoulders so you can focus on running your company.
Outsourcing the administrative and compliance tasks involved in employee payroll is one approach, but we have a better solution. Acumen International offers a global PEO and payroll solution that goes beyond outsourcing. We hire and compensate your global workforce on your behalf, and take care of all the details of payroll while ensuring full compliance with Pakistani labor and taxation laws.
It is important to note that Acumen does not provide international global payroll services as a standalone solution, but only as a part of our global PEO and Payroll solution.
Our comprehensive global PEO and payroll services are just some of the benefits of partnering with Acumen International. We make it easy for you to achieve your business goals in Pakistan by officially employing and compensating your best selected global talent – both locals and expats – without concerns for legal and compliance risks faced by global employers.
Disclaimer: Any of the above information is subject to changes imposed by Pakistani laws. To get the latest updates on taxation in Pakistan and in 190 countries worldwide, contact Acumen’s team of global employment experts.