The State Bank of Pakistan has introduced revisions to its Foreign Exchange Manual aimed at simplifying and modernising the framework governing the remittance of foreign payments by entities operating through commercial banks. The changes are intended to facilitate ease of doing business while aligning remittance procedures with prevailing market practices and regulatory expectations.
The updated instructions were issued through a circular dated December 19, 2025, titled “Revision in Instructions for Remittance of Royalty, Franchise and Technical Service Fees for Entities in Agriculture, Social, Infrastructure, and Service Sector Projects, including International Food Chains.” The amendments apply to entities operating outside the financial sector and are particularly relevant for businesses with foreign technical, franchise, or brand-related arrangements.
The revision specifically relates to Para 12(ii)(b) of Chapter 14 of the Foreign Exchange Manual. This section governs the remittance of royalty, franchise and technical service fees for entities engaged in agriculture, social sector initiatives, infrastructure projects, and service sector operations, including international food chains operating in Pakistan. The updated framework introduces clearer limits and conditions for both new and existing operations.
Under the revised structure, new operations in the specified sectors are permitted to remit a lump sum or upfront fee of up to USD 250,000. In addition, these entities may remit recurring royalty, franchise or technical service fees of up to eight per cent of net local sales. Net local sales are defined as sales after deducting applicable sales taxes and the cost of imported items. The maximum duration allowed for such agreements is ten years.
For existing operations, the revised instructions do not allow the remittance of any new lump sum or upfront fees. However, recurring royalty, franchise or technical service fees of up to eight per cent of net local sales remain permissible. The updated framework also clarifies that further renewal of the agreement duration is not allowed for existing operations, reinforcing a more structured approach to long-term fee arrangements.
The State Bank has further clarified that the initial one-time fee permitted for new operations must be adjusted within the overall eight per cent limit of net local sales once commercial operations commence. This requirement ensures that total outflows remain within defined thresholds over the life of the agreement, rather than creating an additional financial burden beyond the recurring fee cap.
Authorized Dealers have been instructed to ensure strict compliance with the revised instructions while processing remittances. Banks handling such transactions are expected to verify documentation, agreement terms, sector eligibility, and fee calculations in line with the updated Foreign Exchange Manual provisions. The emphasis on compliance reflects the central bank’s intention to balance facilitation with effective regulatory oversight.
The amendment is expected to bring greater clarity and predictability for businesses, particularly new entrants and international food chains operating in Pakistan. By defining clear caps on fees and agreement durations, the revised framework reduces uncertainty around foreign remittance approvals and helps businesses plan their financial and contractual arrangements more effectively.
At the same time, the changes support Pakistan’s broader objective of improving the business environment without compromising foreign exchange discipline. Royalty, franchise and technical service fee remittances are a common feature of cross-border commercial arrangements, and clearer rules are seen as essential to attracting investment while managing external payment obligations.
Market participants view the revision as a practical step toward aligning regulatory instructions with current business models, especially in the services and consumer-facing sectors. By streamlining procedures and providing explicit guidance to banks and businesses, the State Bank aims to reduce processing delays and improve consistency in remittance handling across the banking system.
Overall, the updated instructions are expected to enhance operational flexibility for eligible entities while maintaining transparency and control over foreign exchange outflows. As businesses and banks adapt to the revised framework, the changes are likely to contribute to smoother cross-border transactions and a more predictable regulatory environment for foreign-linked commercial arrangements in Pakistan.
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