A. Background (BG)

1. This refers to the related Important BFQCs in trail, blue, italic and double line (a) 83 of 17.4.21 about Revision of FE Manual related to Commercial Remittances - SBP invites feedback (b) 33 of 9.1.22 about Updated Exchange Companies Manual

2. We also refer to several Other QCs fincluding (a) 3032 of 15.2.25 about Royalty, Franchise, Other Reverse charge input allowed – SHC 2nd Interim order (b) 2906 of 21.9.24 about 6 month Input Adjustment limit will extend, if Related Parties / for Non - resident win about reverse change – post SRO 350 – SHC Interim order & KCV

B. Updated Commentary

1. Further to KQU 3715 of 23.12.25, being an important matter, we would inform you about EPD Circular Letter No. 12 of 2025 - Revision in Instructions for Remittance of Royalty, Franchise and Technical Service (RFT) Fees for the Entities Operating in Agriculture, Social, Infrastructure and Service Sector projects, including International Food Chains (Attachment 346.1) in the ensuing paragraph, with emphasis in bold & Underline for quick reading.

2. Attention of Authorized Dealers is invited to Para 12(ii)(b), Chapter 14 of the Foreign Exchange Manual (FEM), which sets out the framework for remittances of RFT fees by entities operating in Agriculture, Social, Infrastructure and Service Sector projects, including international food chains.

3. In order to promote ease of doing business and realign the relevant instructions with market dynamics, the aforesaid para has suitably been revised. The same is attached as Annexure-A (Attachment 346.1) which is reproduced below in Italics for ready reference.

Agriculture, Social, Infrastructure and Service Sector projects including international food chains (excluding financial sector)

(i) The entities belonging to the above sectors may be allowed by Authorized Dealers to remit recurring payments up to 8 percent of their net local sales (after deducting sales taxes and the cost of imported items) under their respective RFT agreements. Further, entities starting new operations may be allowed an initial lump sum or one-time fee of up to USD 250,000 payable to their foreign collaborators providing RFT services. However, such a fee shall be included within the 8% of net sales limit, rather than being over and above it, and shall be adjusted over the term of the agreement, from the recurring fee payments, once the operations commence.

Permissible RFT structure for Agriculture, Social, Infrastructure and Service Sector

* Requests exceeding USD 250,000/- shall be referred to the Board of Investment for a decision.

C. Kasbati & Co Recommendations

Authorized Dealers (AD) are advised to ensure meticulous compliance of these revised instructions in respect of Royalty, Franchise & Technical Service (RFT) Fee Remittance revised policy EPD Circular 12.

Moreover, the AD and Entities remitting any of the RFT should ensure proper Tax Withholding / Exemption certificate, Proper Reporting and the necessary changes in Agreement.  

D. Further Details & Services

Should you require any clarification or explanations in respect of the above or otherwise, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com.

Best regards for Here & Hereafter

Asif S Kasbati (FCA, FCMA & LLB

Managing Partner

Kasbati & Co (1400+ Tax, Levies, Companies, Economy, Inflation, HR, Banking, Finance, etc

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