Corporate - Corporate residence

Last reviewed - 17 January 2023

A company is resident in Pakistan if it is incorporated or formed by or under the law of Pakistan or if the control and management of its affairs is situated wholly in Pakistan in that year.

The term ‘company’ includes a trust, a cooperative society, a finance society, or any other society established or constituted by or under any law; a corporate body incorporated outside Pakistan; and any foreign association, incorporated or unincorporated, that the Federal Revenue authorities may declare to be a company.

Permanent establishment (PE)

As per the local tax law, PE in relation to a person means a fixed place of business through which the business of the person is wholly or partly carried on, and includes the following:

  • A place of management, branch, office, factory or workshop, premises for soliciting orders, warehouse, permanent sales exhibition, or sales outlet, other than a liaison office, except where the office engages in the negotiation of contracts (other than contracts of purchase).
  • A mine, oil or gas well, quarry, or any other place of extraction of natural resources.
  • An agricultural, pastoral, or forestry property.
  • A building site; a construction, assembly, or installation project; or supervisory activities connected with such site or project but only where such site, project, and its connected supervisory activities continue for a period of or periods aggregating more than 90 days within any 12-months period.
  • The furnishing of services, including consultancy services, by any person through employees or other personnel engaged by the person for such purpose.
  • A person acting in Pakistan on behalf of the person (hereinafter referred to as the 'agent'), other than an agent of independent status acting in the ordinary course of business as such, if the agent:
    • has and habitually exercises an authority to conclude contracts on behalf of the other person or habitually concludes contracts or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the person and these contracts are:
      • in the name of the person
      • for the transfer of the ownership of or for the granting of the right to use property owned by that enterprise or that the enterprise has the right to use, or
      • for the provision of services by that person, or
    • has no such authority but habitually maintains a stock-in-trade or other merchandise from which the agent regularly delivers goods or merchandise on behalf of the other person

    For removal of doubt, it is clarified that an agent of independent status acting in the ordinary course of business does not include a person acting exclusively or almost exclusively on behalf of the person to which it is an associate.

  • Any substantial equipment installed, or other asset or property capable of activity giving rise to income.
  • A fixed place of business that is used or maintained by a person if the person or an associate of a person carries on business at that place or at another place in Pakistan and:
    • that place or other place constitutes a PE of the person or an associate of the person under this sub-clause, or
    • the business carried on by the person or an associate of the person at the same place or at more than one place constitute complementary functions that are part of a 'cohesive business operation'.

    For the removal of doubt, it is clarified that:

    • the term 'cohesive business operation' includes an overall arrangement for the supply of goods, installation, construction, assembly, commission, guarantees, or supervisory activities, and all or principal activities are undertaken or performed either by the person or the associates of the person, and
    • supply of goods include the goods imported in the name of the associate or any other person, whether or not the title to the goods passes outside Pakistan.

The definition of a PE provided in a double tax treaty (DTT) will prevail in cases where a DTT is executed by Pakistan with the related country of origin of the PE.