KARACHI: In order to enhance IT exports, the State Bank of Pakistan (SBP) on Thursday allowed export-oriented IT companies to acquire shareholding in entities abroad and establish marketing, liaison and representative offices abroad.
For this purpose, Authorized Dealers may allow remittance to the extent of funds available in Exporter’s Special Foreign Currency Accounts (ESFCAs) maintained in terms of applicable Foreign Exchange Regulations, without following the procedure designation mentioned in Para 13(IV) of foreign exchange manual.
In order to facilitate the companies operating in the IT sector in increasing exports by expanding their businesses offshore, Authorized Dealers are granted general permission to allow the equity investment abroad for establishment and acquisition of subsidiary(ies) and additional capital injection in subsidiary(ies) in an entity.
IT exports: Practical steps should be taken on priority basis: PM
The banks have also been granted permission of equity investment abroad for establishment or acquisition of marketing, liaison and representative offices abroad and remittance of their annual budgeted operational expenses.
The SBP has amended the Para 13, Chapter 20 of Foreign Exchange Manual, which contains the framework for Equity Investment Abroad (EIA) by residents.
In order to further facilitate export-oriented companies, particularly those operating in the IT sector, in expanding their footprints abroad and increasing the exports of the country, the provisions of Para 13 (II) A of Chapter 20 of Foreign Exchange Manual (FEM) have been revised.
With these major revisions, a new EIA category for export-oriented companies operating in the IT sector and requirement of prior designation of bank for exporters utilizing funds for EIA from Exporters Special Foreign Currency Accounts (ESFCAs) has been removed.
The SBP has also granted permission for export-oriented companies in the IT sector to acquire an interest percentage of shareholding in entities abroad, besides relaxing the restriction of establishing or acquiring one entity per jurisdiction for export-oriented companies in the IT sector.
Accordingly, the SBP has incorporated all the relevant amendments in Para 13, Chapter 20 of FEM.
The SBP has advised Authorized Dealers to bring this development to the notice of all their constituents and ensure meticulous compliance.
As per term and conditions, for the equity investment abroad by IT companies not yet in the exports business or IT companies not having sufficient balances in their ESFCAs or SFCAs, Authorized Dealers may allow remittance to the extent of average net profit earned by an IT company during last three financial years or USD 100,000, whichever is higher for equity investment abroad transactions, after obtaining prior designation.
According to the SBP, at any point in time, investment abroad of the applicant should not exceed 80 percent of its equity (after adjusting for investments in subsidiaries/ associates, goodwill, Deferred Tax Assets, receivables from related entities etc) in case of a non-listed company and enterprise value for a listed company.
In case the company intends to establish/ acquire more than one entity/ marketing/ liaison/ representative office abroad in a specific jurisdiction, it will provide sufficient justification to the satisfaction of the Authorized Dealer, it added.
Authorized Dealer or designated Authorized Dealer allowing remittances under these provisions will be required to submit requisite information to the SBP, within three working days of the transaction.
Copyright Business Recorder, 2024
Comments
Comments are closed for this article.