The State Bank of Pakistan (SBP) Wednesday announced amendment to Instructions regarding acquisition of services from abroad.
As per Para 11, Chapter 14 of the Foreign Exchange Manual, 2019 prior permission of the SBP is required by the persons or firms in Pakistan who wish to acquire the services of agents abroad, for any purpose, other than export of goods from Pakistan, whether on regular basis or otherwise.
In order to bring more clarity facilitate the stakeholders, it has been decided to amend these instructions.
As per amendment, prior permission of Foreign Exchange Operations Department (FEOD), SBP-BSC, is required from foreign exchange perspective, by the firms or companies in Pakistan, intending to acquire any type of service in Pakistan from abroad for any purpose; excluding those services for which specific foreign exchange related instructions are issued by SBP.
However, as an exception to the above para i, such services can be acquired from abroad without prior permission of FEOD, if total value, of a specific service to be acquired from abroad, does not exceed USD 10,000 (or equivalent in other currencies), OR in case of recurring payments, the underlying service agreement/letter of engagement, etc, is not more than five consecutive years and remittance(s) does not exceed USD 10,000 (or equivalent in other currencies) for each year. The ADs are allowed to effect remittance in such cases, based on the documents mentioned at v below, after fulfilling their responsibilities mentioned at xiii below, and subject to meeting all other requirements.
Moreover, acquisition of services of agents abroad for export of goods from Pakistan will not require prior permission of FEOD.
All applications, seeking prior permission, acknowledgement of service agreement/letter of engagement, etc, and designation of authorized dealer for effecting all related remittances in future, shall be submitted to the Director, FEOD, SBP-BSC, through an authorized dealer which the applicant wishes to be designated.
AD will forward all the required documents to FEOD, along with its analysis, rationale/justification and specific recommendation supporting its customer's (applicant's) request, seeking prior permission for acquiring services from abroad and acknowledgement of the underlying agreement/letter of engagement, etc.
The amount of advance payment will be repatriated, if the provision of services is not initiated, within 120 days from the date of its remittance. An undertaking by the applicant shall also be submitted with the application, in this regard.
In case the provision of services is not initiated and the amount of advance payment is not repatriated, within 120 days (from the date of remittance of advance payment), OR the services are not completely rendered within the time period as stipulated in service agreement/letter of engagement, etc; the designated AD will report all such cases to FEOD, SBP-BSC on the 10th day of following month
FEOD, SBP-BSC may initiate regulatory action against the remitter through Foreign Exchange Adjudication Department, SBP-BSC, under Foreign Exchange Regulations Act, 1947.
The designated AD will ensure that no further remittances under the acknowledged service agreement/ letter of engagement, etc. will be effected until the issue of advance payment is resolved.
In case prior permission is granted and the underlying service agreement/letter of engagement, etc, is acknowledged, FEOD, SBP-BSC will not be construed as a party thereto. Further, adherence to all laws, rules and regulations shall be responsibility of the parties to the service agreement/letter of engagement, etc.
Once prior permission is granted, the concerned AD is designated and underlying service agreement/letter of engagement, etc. is acknowledged by FEOD, the designated AD may allow remittances or establish letter of credit available for payments, on production of beneficiary's service invoices/bills duly certified by the applicant in Pakistan, in accordance with underlying acknowledged service agreement/letter of engagement, etc.
The designated AD will obtain copy of underlying acknowledged service agreement/letter of engagement, etc. duly signed and stamped, before making any payment/remittance in favor of the service provider.
In case the agreement is not executed within 60 days, from the date of its acknowledgement, the Authorized Dealer will report its status to FEOD.
Any subsequent amendment in the underlying acknowledged service agreement/letter of engagement, etc, will require prior permission of FEOD.
While processing the transaction, Authorized Dealer shall be responsible to take all possible measures to verify the bona fides of the applicant and genuineness of transaction and to exercise due diligence for all submissions of the applicant and will ensure compliance with AML/CFT laws, regulations and guidelines while effecting outward remittances, as per the service agreement/letter of engagement, etc.
According to SBP these instructions will come into force with immediate effect. However, for the service agreements/letter of engagement, etc., which have already been signed, the same will be required to be acknowledged at FEOD, SBP-BSC, within 6 months (from the date of this Circular) or before the remittance/payment becomes due, there under; whichever is earlier.
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