How to Register a Sole Proprietorship in Pakistan

Registering a sole proprietorship in Pakistan is an appealing option for many freelancers, solo entrepreneurs, and small business owners. The setup is relatively simple, costs are modest, and there is no requirement for share capital or complicated incorporation paperwork.

However, bureaucratic processes—especially tax registration (NTN), compliance with sales tax or provincial taxes (if applicable), and maintaining financial records—can pose challenges.

The main benefits include flexibility, low start-up costs, and ease of formalizing what might already be an informal business. The main drawbacks are unlimited liability (you are personally responsible for business debts), limited protection, and increasing regulatory obligations as your turnover grows.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Pakistan?

In Pakistan, a sole proprietorship is simply a business run by one individual. It does not create a separate legal entity, so the owner is fully responsible for business profits, losses, and liabilities. It’s sometimes called a “sole trader” in informal usage, but legal distinction is made via registration with the Pakistan Federal Board of Revenue (FBR).

There is no requirement to register with SECP (Securities and Exchange Commission of Pakistan) unless you convert into a company or other formal structure.

How does a sole proprietorship work in Pakistan?

Sole proprietorship vs other business structures in Pakistan

Step-by-step guide: How to register a sole proprietorship in Pakistan

Step 1: Check eligibility

You must be at least 18 years old, have a valid CNIC (Computerized National Identity Card), and a National Tax Number (NTN). Foreign nationals will also need a valid visa, residency status, and passport.

Step 2: Choose your business name

Decide on a business (trade) name if you prefer something other than your own name. While formal name registration is not mandatory for sole proprietorships in many cases, it’s wise to check your chosen name for duplication or trademark conflict.

Step 3: Gather required documents

Typical requirements include:

• CNIC (Computerized National Identity Card) or passport

• Proof of business address (utility bill or rent agreement)

• Description of business activity

• Contact details (email, phone number)

Step 4: Register with the FBR for a National Tax Number (NTN)

Apply via the IRIS portal of the FBR to obtain an NTN. This is essential for filing taxes, opening a business bank account, and conducting formal business transactions.

Step 5: Register for Sales Tax / Provincial Tax (if required)

If your turnover in goods or services exceeds the annual threshold set by FBR or provincial authorities (depending on your business type and location), you must register for sales tax. Otherwise, keep records so you can measure when you cross the threshold.

Step 6: Open a business bank account

Using your NTN, CNIC, proof of address, and business details, open a bank account in Pakistan tied to your business operations. Though a separate business bank account is not legally required for sole proprietors, this helps with accounting and separating personal vs business finances.

Step 7: Obtain additional permits or licenses if needed

Some businesses need trade licenses, municipal or district permissions, or health permits depending on activity. Be sure to check local rules and obtain additional licenses as needed.

Step 8: Post-registration obligations

File annual personal income tax returns by the September 30 deadline. The fiscal year in Pakistan runs from July 1 to June 30.

If registered for sales tax, file sales tax returns on a monthly basis. Sales tax payments are due by the 15th of the following month. Maintain proper records of income, expenses, invoices, receipts, and business records for at least five years.

Financial and tax obligations for sole proprietors in Pakistan

Income tax: You pay income tax on business profits under individual tax rates. The 2025 tax rates start at 0% up to PKR 600,000, then progressively increase up to 35% for highest incomes.

Sales Tax / GST / Provincial Services Tax: If your business is in manufacturing, importing, services, distribution, or wholesale and retail, you are required to register for sales tax and charge sales tax on your goods or services. Each industry has varying thresholds and exceptions. For example, manufacturers and retailers with a total annual turnover below PKR 5 million are exempt. The sales tax rate ranges from 16-21% depending on the goods or services and the province.

Withholding Tax (WHT): Payments made to or by sole proprietors may be subject to withholding tax on certain goods or services. Withholding tax is required when you pay employee salaries, pay contractors or service providers, or conduct imports, exports, and banking transactions. These withholdings can be adjusted when you file your annual tax return.

Recordkeeping: You must keep invoices, expenditure receipts, proof of sales, bank transactions, and business documents for at least five years. Good records support your income declarations and provide backup for audits or possible verification by FBR or provincial authorities.

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