Business Facilitation

Many people who want to start a new business in Pakistan on Solar or other renewable energies face difficulties in importing renewable energy equipment and have to pay hefty amounts in taxes despite there being a tax exemption on such imports. In order to avoid these obstacles in imports without hassle, you have to be on your toes until you know the whole procedure on your finger tips after successful landing of a couple of consignments.

Following is the summary of how you can get your first consignment from Customs without getting into any issues:

  1. The first step to enter into solar business, which includes imports, is to get your company registered. Get an Incorporation Certificate (from the District Administration in case of a firm, and from Securities & Exchange Commission of Pakistan (SECP) in case of a company). The details for getting a company registered with SECP can be found at https://www.secp.gov.pk/company-formation/starting-a-company/start-your-company/.
  2. After successful registration of the company, apply for an NTN (National Tax Number) for income tax registration of your company. The guidelines for NTN registration can be found at http://www.fbr.gov.pk/ShowArticle.aspx?view=Article&ActionID=952&ArticleID=.
  3. After successfully registering with the FBR (Federal Board of Revenue) for NTN, submit documents for STN (Sales Tax Number), which have to be submitted in person. The guidelines are available in the link above for NTN registration.
  4. Your company has to be in the Active Taxpayers’ List for all the custom laws to be applicable on it. Inclusion in the Active Taxpayers’ List requires you to submit annual income tax returns, and monthly sales tax returns to the FBR. The list is accessible at http://www.fbr.gov.pk/ActiveTaxpayersList.aspx, and is updated every two weeks.
  5. Once you fulfill the basic requirements for your firm / company to be an importer, hire a reliable Clearing Agent, who can smoothly get your consignment released. Sometimes, a good clearing agent might be more important than having done everything right.
  6. Get your WeBOC (Web Based One Customs) account activated through your clearing agent, or register yourself by fulfilling all the requirements, which can be found at http://www.pakistancustoms.net/2014/04/how-to-get-weboc-id.html. An SOP for getting the account up and running can also be found in 'Renewables - Overall' under the 'Knowledge base' section of the website.
  7. After getting a WeBOC account, get into a ‘Purchase Agreement’ with your vendor.
  8. Thoroughly go through the latest versions of Schedule 5 of the Customs Act, 1969 and Schedule 6 of the Sales Tax Act, 1990 to verify product codes that you are importing, and corresponding applicable taxes and conditions. The updated versions of these acts are available at http://www.fbr.gov.pk/Downloads.aspx#Acts. FBR takes some time, however, to upload the very latest versions of the acts, amended to date. A little browsing can be helpful in this regard.
  9. Once you are done reading, as per clause (i) of the Fifth Schedule of the Customs Act, 1969, you would have to check if the equipment that you intend to import is in the CGO (Customs General Order), the list of equipment that is manufactured locally and is not exempt from import taxes. The list is available at http://www.engineeringpakistan.com/EngPak1/2007CGO11.pdf (official website of Engineering Development Board), and any changes are updated regularly on the FBR website at http://www.fbr.gov.pk/CategoryLayoutCirculars.aspx?view=Circulars/GeneralOrders&ActionID=131&ArticleID=.
  10. If the equipment is listed in CGO, you would need a certification letter from EDB (Engineering Development Board), stating that equipment of the specification that you are importing is not manufactured locally. Another way to do that would be to get a letter from AEDB (Alternate Energy Development Board), saying the same with a subsequent approval from FBR. It takes time to do either of these, however, the former is comparatively easier. If you don’t get any of these letters, you will have to pay taxes at the normal rate.
  11. If the equipment is not listed in CGO, ignore point 10.
  12. Once you have the letters in your hand, you can place your order to the vendor outside Pakistan.
  13. After you’ve put the order, get the following documents in place:
    1. Packing List
    2. Bill of Lading
    3. Commercial Invoice
    4. Free Trade Agreement (if importing from China)
  14. Upload all of the documents on the WeBOC account, including the letter from EDB / AEDB (concurred to by the FBR), and place them against the specific product codes, as mentioned in the tax acts.
  15. From there onwards, the clearing agent shall be able to get the shipment cleared for you with all tax exemptions.

Disclaimer: PGREF or its team is not responsible for any updates / changes / modifications to this process at any point in time.

 

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