KARACHI: The State Bank of Pakistan (SBP) has allowed local businesses to make instant payments to globally recognized digital service provider companies against acquisition of digital services.
In an effort to further enhance ease of doing business in Pakistan, the State Bank has introduced a new mechanism to enable the companies in Pakistan to make instant payments for acquiring digital services from globally recognized digital service provider companies, without any hassle.
Now local companies can access various services including advertising, hosting, database access, accounting management, skill development and customer support etc., from these global companies instantaneously without any regulatory approval process.
This facilitation will increase their outreach to wider customer base locally and abroad, which would help them increase their footprint, productivity and achieve greater efficiency.
In November 2019, State Bank introduced a framework for acquisition of services from abroad allowing companies to acquire services after registration of its contract with the SBP.
However, some businesses reported facing difficulty under this mechanism for making payments to Digital Service provider companies. After an extensive consultative process with all the relevant stakeholders, a much simplified process on 'payment vs receipt basis' has been introduced with annual limits, in addition to the existing framework mentioned above.
Now, banks have general permission to release foreign exchange up to a maximum of USD 200,000 per year for each local company on account of digital services, primarily in favor of 62 digital service provider companies including their affiliates or associated entities.
A list of these companies has also issued by the SBP. However, authorized dealers can release foreign exchange up to a maximum of $25,000 per annum to digital service providers not included in the list.
According to a circular issued on Thursday, a new Para as 14A is added in Chapter 14 of Foreign Exchange Manual, which granted general permission to release foreign exchange up to a maximum of $ 200,000/-, or equivalent in other currencies, per year, for each company/firm/sole proprietorship incorporated/established in Pakistan on account of commercial payments, pertaining to digital services, in favor of digital service provider companies.
However, the ultimate beneficiary of remittances should only be the company as per the SBP's list. However, up to a maximum amount of $25,000/-, out of the total annual limit of $200,000/-, can be remitted to those digital service provider companies which are not listed.
The remittances should only be made by an Authorized Dealer designated by the remitter for this purpose under acknowledgement to Foreign Exchange Operations Department (FEOD) SBP-BSC.
Authorized Dealer will ensure that it has satisfied itself with the genuineness and bona fides of the applicant, through appropriate CDD and customer risk profiling, specifically in light of AML/CFT regulations.
Authorized Dealer will forward the requests regarding designation of Authorized Dealer to the Director, FEOD, SBP - BSC for acknowledgment along with the applicant's request letter and business profile.
Once acknowledged by FEOD, the designated Authorized Dealer may affect remittances after deduction of applicable taxes (if any) while ensuring that payments are within the prescribed limit.
The entity is required to submit the payment receipts (digitally or otherwise), showing the details of payment made and services received or to be received, to the designated Authorized Dealer within 7 working days, from date of receipt of amount by the beneficiary.
The SBP has advised Authorized Dealers to monitor these limits on real time basis and hold all future remittances of its customer, in case the customer could not submit the payment receipts within the defined timeline. The Authorized Dealer may resume affecting remittances of the customer upon submission of payment receipt along with plausible justification for delay. However, such resumption is only allowed twice in a year.
In case of change in the designated Authorized Dealer by an entity, previous Authorized Dealer is required to communicate the details of the limits utilized by the entity during the year to the new Authorized Dealer, within three working days from the date of request received from the entity through the new Authorized Dealer.
The new Authorized Dealer will approach FEOD for acknowledgment of its designation, along with the customer's request and communication issued by the previous designated Authorized Dealer regarding the limits utilized by the applicant during the year.
The applicant entity should be on FBR's active tax payer list. In case exemption from taxes is claimed, the exemption certificate may be kept in lieu thereof.
In case the entity is in its first year of establishment and not required to submit the tax returns as yet, the Authorized dealer will capture the relevant details, ie, proof of establishment date, NTN, etc. Authorized dealers may offer the digital channels to their clients, for making these payments, within the prescribed parameters.
Copyright Business Recorder, 2020
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