6.4 Dividend & Capital Repatriation

Statutory promise versus Manual procedure

Foreign Private Investment (Promotion and Protection) Act, 1976, section 6 (text opened from BOI's Investment Acts compilation) states that, subject to FERA 1947, a foreign investor in an industrial undertaking established after 1 September 1954 and approved by the Federal Government may at any time repatriate, in the currency of the country from which the investment originated:

1. foreign private investment to the extent of the original investment
2. profits earned on such investment
3. any additional amount from reinvested profits or appreciation of capital investment

A creditor of such an undertaking may repatriate Federal Government-approved foreign-currency loans and interest on the loan's own terms. Section 7 of the same Act points foreign employees to SBP/Federal Government rules for dependants' maintenance (Chapter 16 permits, not this section's dividend rail).

BOI FAQs currently repeat that foreign investors may repatriate profits, dividends or other funds in the origin currency under section 6, “subject to procedural requirements set under the Foreign Exchange Manual.” BOI also states that non-resident investors of locally incorporated companies may designate authorized dealers to repatriate dividends and disinvestment through banking channels, and that portfolio investors use a Special Convertible Rupee Account (SCRA).

The NIBAF trap is treating section 6 as if it cancelled FERA. No repatriable register, no designated AD, no Appendix V-54, no tax netting — no dividend wire, even if the 1976 Act is quoted in the Board minutes.

EPD Circular Letter No. 09 of 2025 refreshed Chapter 20 on SBP's site. FE Circular No. 02 of 2026 (25 May 2026) then amended Chapter 14 Para 16 and Chapter 20 Paras 7(v), 7(vi) and 7(vii) to delegate to ADs:

• registration of shares/units on a repatriable basis issued or transferred by local companies/funds to non-residents
• designation of ADs for remittance of dividend and disinvestment proceeds to non-resident shareholders/unitholders
• simplified documentary requirements, with SOPs in Annex-B

Those instructions became effective one month after the circular (late June 2026). An AD still waiting for a 2019-style SBP designation letter for every new company, as if FE Circular No. 02 of 2026 did not exist, is behind the current source. The substance of dividend due-diligence in Para 16 (repatriable holding, no no-repatriation undertaking, tax-net, auditor-certified Appendix V-54) remains the teaching core; the who stamps the designation is what 2026 changed.

Dividends to foreign shareholders — Chapter 14 Para 16 + Chapter 20 Para 7(I)

Chapter 20 Para 7 currently says that after shares/units are registered on a repatriation basis, the designated AD may remit:

• (I) Dividend, net of applicable taxes, as permitted under Chapter 14
• (II) Disinvestment proceeds (see below)

Chapter 14 Para 16 currently still teaches:

• each company designates one AD for non-resident dividend remittances
• the AD remits only after it is the designated bank for that company
• before paying, the AD must ensure:
  • shares are held by non-residents other than Indian nationals under SBP specific or general permission, registered at foreign addresses
  • the shares were not acquired on an undertaking not to claim dividend remittance
  • the application is net of Pakistan tax, with a certificate from a well-known firm of auditors

Documents the designated AD reviews and retains:

• Appendix V-54 in triplicate, one consolidated application for all non-resident shareholders (reservations on some names may be certified; those names wait for a supplementary application)
• two certified copies of audited financial statements for the year (or interim statements for an interim dividend)
• certified copy of the shareholders'/directors' resolution declaring the dividend
• tax-exemption certificate from competent tax authorities if any shareholder claims exemption

Report the remittance in monthly exchange returns; keep M forms, Appendix V-54, accounts and the resolution. Split currencies need separate currency statements, cross-referenced in column 10 of Appendix V-54.

Non-repatriation holdings (Para 16(vi)): ADs have general permission to pay dividends due to non-residents other than Indian nationals who hold shares of Pakistani companies on a non-repatriation basis by credit to private non-resident rupee accounts that are themselves non-repatriable. That is not a SWIFT dividend to London. Chapter 20 Para 8 is the matching issue/transfer rail: securities may be issued to non-residents on non-repatriation if registered at a Pakistan address with a clear undertaking that no repatriation of capital or profits/dividends will be claimed. Bonus/rights on those shares stay non-repatriable.

Appendix V-54A: ADs must email a monthly statement of remittances of dividends, profit and disinvestment to non-resident shareholders to fca.stat@sbp.org.pk by the 5th of the following month, and keep company-wise records for inspection.

Chapter 14 Para 17: dividend warrants of Pakistani companies may be exported to non-resident shareholders if the shares were issued with SBP approval and a statement of those shareholders has been filed.

FBR withholding on dividends to non-residents is a section 150 / First Schedule question on the live WHT card, not a number this Manual chapter reprints. The FX file still needs the auditor's net-of-tax certificate.

Disinvestment proceeds — Chapter 20 Para 7(II) (FE Circular No. 05 of 2020, still in the Chapter 20 PDF)

SCRA portfolio investors repatriate sale proceeds and dividends through the same SCRA under Chapter 20's SCRA paragraphs — still a designated-AD audit trail, not a cash suitcase.

ADs keep centralized records of non-resident securities, original FX investment proof, and must not destroy those records until SBP inspectors have audited them (Para 7(viii)).

Branch office versus liaison office — BOI plus Chapter 14 Para 15

BOI (branch/liaison page opened for this section):

• Branch office: foreign company fulfilling contractual obligations with the public or private sector in Pakistan. Activity is restricted to the signed contract. Cannot undertake commercial/trading activities. Permission 1–5 years, renewable. BOI fee currently published: USD 3,000 for an initial one-year branch (sub-office USD 1,500).
• Liaison office: promotion of products, technical advice and assistance, exploring joint collaboration, export promotion. Cannot undertake commercial/trading activities. Fee currently published: USD 2,000 for an initial one-year liaison office (sub-office USD 1,000).
• Both need embassy-attested incorporation papers, resolution, profile, designated person's CV/passport, and (branch only) the contract.

Because neither form may trade, a liaison office should not generate Pakistan-source profit to dividend out. Its FX usually arrives from the head office to meet local costs. Profit repatriation is a branch (or locally incorporated subsidiary) story. Winding-up remittance of leftover inward funds after liabilities can apply to both after closure.

Chapter 14 Para 15 currently:

1. Non-bank foreign branches apply through the intended designated AD to EPD for acknowledgement, proving either operations in Pakistan before 3 October 1963 or a BOI permission letter if established on or after that date.
2. After EPD acknowledgement, the designated AD may remit profit / head-office expenses / winding-up proceeds of the branch/liaison office against the Manual's document list (audited branch financials, HO consolidated accounts, HO-account reconciliation, tax provision and auditor sufficiency certificate, gratuity, miscellaneous income, HO-expense allocation with OECD transfer-pricing certificates from group and local auditors, section 105(2) ITO HO-expense calculation, confirmation that no loan will fund the remittance, BOI/pre-1963 evidence, and for winding-up an external-auditor asset-and-liability close-out, proof all Pakistan liabilities are met, all Pakistan-source income repatriated, no pending court block, SECP/BOI closure compliance, and a principal undertaking to settle later legitimate Pakistan liabilities).
3. Foreign banks' Pakistan branches remit profit/HO expenses to EPD on Form M with a Banking Policy & Regulations Department NOC, prudential capital/liquidity/provisioning accounts, and classified-asset provisioning not below Prudential Regulations.

Chapter 14 Para 12(iii)(l) again: branch offices are not eligible for RFT. Do not relabel a disallowed royalty as “dividend.”

Pakistani companies' offices abroad are the opposite direction: Chapter 14 Para 23 and Chapter 20 Para 13 (marketing/liaison/representative outward expense thresholds). That is not inward dividend repatriation.

Designated AD reporting — what the inspection team asks for

• Appendix V-54 dividend applications and V-54A monthly electronic statements to fca.stat@sbp.org.pk by the 5th
• Appendix V-95A / V-96A monthly statements of shares/units registered and bonus issues to non-residents, same mailbox, same deadline (Chapter 20 Para 7(viii))
• Centralized MIS of repatriable registers, original inward FX, dividend and disinvestment history (FE Circular No. 02 of 2026 SOPs build on this)
• Proof the buyer of a disinvestment is CDD'd for AML/CFT
• For branches: EPD acknowledgement letter before the first profit remittance

Pakistani AD scenarios

Scenario A — repatriable dividend. A Karachi listed company has a Dutch shareholder whose shares were issued against inward FX and sit on the repatriable register at a Rotterdam address. After FE Circular No. 02 of 2026 designation, the designated AD checks Appendix V-54 (auditor-certified, tax-net), the accounts, and the dividend resolution, then remits. An Indian-national holding is outside this general permission.

Scenario B — non-repatriable shares. A foreign individual bought shares against an undertaking not to repatriate dividends, registered at a Lahore address. The AD may credit a non-repatriable non-resident rupee account. It does not sell dollars.

Scenario C — unlisted sale above break-up. A non-resident sells private-company shares at a price above QCR break-up value. Band A is not enough. The AD takes the buyer's valuation memo and methodology; if six-month disinvestment remittances would exceed USD 50 million, it also takes the independent QCR review.

Scenario D — liaison “profit.” A liaison office that only hosted visiting engineers asks to remit “profit” to Tokyo. BOI forbids commercial/trading activity; there is no distributable Pakistan profit. The AD looks at Para 15 winding-up (if the office is closing) or at inward HO funding of expenses — not Chapter 14 Para 16 dividends.

Scenario E — branch profit. A foreign contractor's Pakistan branch finished a power-plant contract, holds BOI permission dated after 1963, and has EPD acknowledgement of a designated AD. The AD remits net profit only on the full Para 15 auditor pack, including OECD transfer-pricing certificates and confirmation that the wire is not loan-funded.

Traps

• Quoting the 1976 Act as if it replaced FERA, the repatriable register, and tax-netting
• Ignoring FE Circular No. 02 of 2026 and teaching that SBP must still personally designate every AD as in the unamended Para 16 sentence
• Remitting dividends on shares taken with a no-repatriation undertaking
• Treating liaison leftover rupees as dividends
• Remitting disinvestment above market/break-up/NAV on Band A papers only
• Destroying non-resident share files before SBP inspection
• Paying RFT from a branch and calling it dividend