E-commerce Business Registration and Taxation in Pakistan

E-COMMERCE BUSINESS
REGISTRATION AND TAXATION

Sayyid Mansoob Hasan
• FCMA, ACIS, Accredited Mediator & Arbitrator, Certified Lead Assessor
• Managing Partner MANSOOB & CO.
Cost & Management Accountants
Management Consultants
Mediators & Arbitrators
• PNC of Int’l Chambers of Commerce
• Chairman Taxation Commission
• Member Arbitration Commission –
• Member Mediation Commission – ICC Pakistan
• Chairman – Small Dispute Resolution Committee, Karachi (Sindh &
Baluchistan) formed under Insurance Ordinance, 2000
• Member – Permanent Panel of Arbitrators Pakistan Stock Exchange
• Chairman – Circle of Voice Dispute Resolution Center
• Chairman Audit Committee – Pakistan Institute of Public Finance
Accountants
• Have over 27 years of professional experience
Contact: mansoob@mncglobal.com
Website: www.mncglobal.com
Cell: 0333-3291290

SAYYID MANSOOB HASAN
MANSOOB & CO.E-COMMERCCE REGISTRATION AND TAXATION
Talking points
• Why register your e-commerce business?
• Which form of registration is suitable for your business?
• What are the implications of income tax and sales tax as per the form
of registration?
• What is the difference in taxation of e-commerce marketplace and e-
commerce store?
• What is the implication of taxation on direct exports and exports via
off-shore company?

Why register your e-commerce business?

Why are you in this business in the first place?
• For fun
• Boarding the band wagon
• Just trying luck
• Seriously focusing
• Is there a business plan?
• What is the scale you are looking at?
Answer to these questions are vital to select the appropriate form of
business registration.

Question: What is meant by “Going Concern”?

A going concern is an organization which continues to run
regardless of the change in the ownership or management,
subject to solvency.

• IBM since 1911
• Microsoft 1975
• Apple 1976
• Sony 1946
• Unilever 1929
• P&G 1837
• Nestle 1866
• Johnson & Johnson 1886
• Adamjee Group 1947
• Attock Cement 1922
• Atlas Group 1962
• CA Sports 1958
• Dawood Group 1948
• Gul Ahmed 1953
• Servis Shoes 1928
• Bata Pakistan 1942 (Swiss 1894)
Standing of some enterprises
on the left international on the right Pakistani

Which form of registration is suitable for your
business?

For profit organizations
• Sole proprietor – 1 person
• Partnership(AOP) – 2 to 20 persons
• Limited liability partnership (AOP) –
2 to 20 persons
• Limited liability companies
• Single member company – 1 person
• Private limited company – 2 to 50
persons
• Public unlisted company – 3 to n
• Public listed company – 7 at the time
of registration to n
Not for profit organizations
• Trusts
• Voluntary social welfare
organizations (NGOs)
• Societies
• Companies licensed u/s 42 of
Companies Act, 2017 (Section 42
companies)
Legal forms of businesses

Suitable forms of business registration
• Sole proprietorship
• For beginners
• For testing of the concept and platform
• LLP for long term business operations until needed to be converted to
a public company

What are the implications of income tax and sales
tax as per the form of registration?

Taxation on businesses
• Income tax
• General sales tax (for sale of goods)
• Sales tax on services (for rendering services)
• Excise duty (on manufacturing of certain products)
• Customs duty/import duty

Legal forms of businesses
For profit organizations
• Sole proprietor
• Partnership(AOP)
• Limited liability partnership (AOP)
• Limited liability companies
• Single member company
• Private limited company
• Public unlisted company
• Public listed company

Proprietorships
• Income tax at rates for
individuals
• SRB tax if taxable services are
rendered
• GST if conditions for mandatory
GST registration are met
AOPs
• Income tax at rates of AOPs
• SRB tax if taxable services are
rendered
Implication of taxation

Income Tax
• Withholding income tax on salaries
and other payments (filer, non-
filer)
• Income tax on total income
• Small companies 25%
• Other companies 29%
• Income tax on dividend of
companies 15%
• Turnover tax/minimum
tax/minimum corporate tax
• Minimum tax (turnover tax) 1.25%
• Minimum corporate tax 17%
Sales Tax
• Mandatory registration under
SST Act, 2011
Implication of taxation for companies

Withholding tax – sale of goods
(threshold Rs. 75,000/-)
By Filer Non-filer
Company 4% 8%
Individuals and AOP 4.5% 9%
FMCG
Company 2% 2%
Individuals and AOP 2.5% 2.5%

Withholding tax – rendering of services
(threshold Rs. 30,000/-)
By Filer Non-filer
Company 4% 8%
Individuals and AOP 4.5% 9%

Withholding tax
By Filer Non-filer
Transport services (Proposed 4% and 8%) 2% 2%

Sindh Revenue Board
• Applicability of services tax
• Registration
• General rate of SST is 13%

SST return – monthly
• Sales tax payments by 15th of every month
• Sales tax return filing by 18th of every month

GST registration – when mandatory
(not related to form of registration)
• All importers
• All wholesalers (including dealers) and distributors
• Manufacturers not falling in cottage industry. {Cottage industry means a manufacturer whose annual turnover from taxable supplies made in
any tax period during the last twelve months ending any tax period does not exceed [ten] million rupees or whose annual utility (electricity,
gas and telephone) bills during the last twelve months ending any tax period do not exceed [eight] hundred thousand rupees;}
• Retailers (Tier-1 retailers means:
• A retailer operating as a unit of a national or international chain of stores;
• A retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;
• A retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees six hundred
thousand; and
• A wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail
basis to the general body of the consumers;)
• A person required under any Provincial or Federal Law to be registered for purpose of any duty or tax collected or paid as if it were a levy of
sales tax, e.g. service providers like hotels, clubs, caterers, customs agents, ship chandlers, stevedores, courier services etc.
• Persons making zero-rated supplies, including commercial exporter who intends to obtain sales tax refund against his zero rated supplies.
• A person who is required to be registered by virtue of aforesaid criteria, but still avoids registration, can be compulsorily registered by the
department, after proper enquiry, under sub- rule 1 of Rule 6 of Sales Tax Rules, 2006.

GST return – monthly
• Filing of Annexure C by 10th of every month
• Sales tax payments by 15th of every month
• Sales tax return filing by 18th of every month

What is the difference in taxation of e-commerce
marketplace and e-commerce store?

E-commerce Store
TRADING
E-commerce Marketplace
SERVICE
Principal distinction

E-commerce marketplace
• Section 2 Definitions of Income Tax Ordinance 2001
• (38B) “online marketplace” means an information technology
platform run by e-commerce entity over an electronic network that
acts as a facilitator in transactions that occur between a buyer and a
seller;

Minimum tax on e-commerce marketplace
• Division X – Minimum Tax u/s 113
• 1 (e) person running an online marketplace as defined in clause (38B)
of section 2.] 0.5% of Turnover

Turnover (under ITO)
• (4) “turnover” means,-
• (a) the 6[gross sales or] gross receipts, exclusive of Sales Tax and Federal Excise
duty or any trade discounts shown on invoices, or bills, derived from the sale of
goods, and also excluding any amount taken as deemed income and is assessed
as final discharge of the tax liability for which tax is already paid or payable;
• (b) the gross fees for the rendering of services for giving benefits including
commissions; except covered by final discharge of tax liability for which tax is
separately paid or payable;
• (c) the gross receipts from the execution of contracts; except covered by final
discharge of tax liability for which tax is separately paid or payable; and
• (d) the company’s share of the amounts stated above of any association of
persons of which the company is a member.]

Withholding tax on services of marketplace = 5%
• Second Schedule, Part II, Reduction in Tax Rates
• [(28C)The rates of tax as specified in Division II of Part-IV of the First
Schedule shall be five percent in the case of a person running online
marketplace as defined in clause (38B) of section 2.]
• First Schedule, Part IV, Division II, Brokerage and Commission

Taxation of e-commerce store
• The same as any other proprietorship, AOP or company

What is the implication of taxation on direct
exports and exports via off-shore company?

Exports
Pakistan USA
Pakistan USA
UAE
Direct Exports
Indirect Exports

Tax on exports
• 154. Exports. — (1) Every authorised dealer in foreign exchange shall,
at the time of realisation of foreign exchange proceeds on account of
the export of goods by an exporter, deduct tax from the proceeds at
the rate specified in Division IV of Part III of the First Schedule. = 1%
of the proceeds.

Pakistan
• Tax on exports 1%
• Tax on total income as per form
of business
• Tax on dividend
• GST refunds
Off Shore Organization
• Tax on exports
• Corporate tax
• Tax on dividend
• VAT/VAT refunds
Taxation on indirect exports

Product pricing should be done carefully to
incorporate the costs and taxes of off-shore
organization.

Contact for more information
MANSOOB & CO
Email: info@mncglobal.com
Phone: + 92 21 35881453

E-commerce Business Registration and Taxation in Pakistan

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