OICCI Proposes Amendments to SBP Forex Manual

The Overseas Investors Chamber of Commerce and Industry (OICCI) has proposed significant amendments to Paragraph 11, Chapter 14 of the State Bank of Pakistan’s (SBP) Foreign Exchange Manual, specifically concerning royalty, franchise, and technical fees (RFT) in the services sector. In a letter addressed to Power Minister Sardar Awais Khan Leghari, OICCI Secretary General and CEO Abdul Aleem referred to a meeting held on August 25, 2025, where the chamber highlighted the need to align Pakistan’s regulatory framework with comparable emerging markets to attract sustainable foreign direct investment (FDI). OICCI emphasized that the remittance of dividends, royalties, and technical fees, key components of return on investment, are critical for foreign investors. The chamber argued that streamlining these regulations would not only enhance investor confidence but also increase tax revenues, as remittances are subject to income tax withholding under double taxation treaties. It also noted that improved regulations would reduce the risk of remittances being routed through informal banking channels. OICCI pointed out that under the current SBP regulations, recurring RFT payments are capped at a percentage of net sales. However, market trends indicate that agreements are increasingly referencing gross revenue as the base for calculating RFT rates. To remain competitive and attract foreign investors, OICCI proposed increasing the RFT rate, currently capped at 5 percent, to a higher percentage. For the telecommunications sector, OICCI recommended adopting globally recognized best practices, including: OICCI urged the SBP to publish sector-specific guidance for telecom operators, enabling recurring sales-based or services-based RFT fees. It argued that this approach would reflect the continuous support provided by headquarters in areas such as research, digital transformation, fintech enablement, HR optimization, and market-specific strategies, which collectively enhance local operational efficiency and revenue growth. The chamber also proposed allowing fixed or variable management fees in cases where quantification of services is complex, justified by internal allocation policies. Additionally, it recommended easing audit intensity and granular justification requirements for RFT approvals, citing the bundled nature of support services provided by headquarters, which cannot always be quantified line-by-line. OICCI suggested increasing the lump sum upfront fee threshold from USD 100,000 to USD 300,000, citing the expansion of business verticals and the need to accommodate higher service fees and recurring RFT payments. It also proposed raising the cap on recurring royalty payments from 5 percent to 10 percent of net sales (excluding taxes and imports). The chamber further recommended extending the tenure of RFT arrangements to align with long-term business agreements, such as the 15-year validity of telecom licenses issued by the Pakistan Telecommunication Authority (PTA). OICCI highlighted the challenges faced by its members due to overlapping regulatory requirements. It urged the Federal Board of Revenue (FBR) to accept expenses certified by the SBP to avoid double jeopardy during audit proceedings. The chamber argued that once the SBP has approved an expense, it should not be subject to further scrutiny by the FBR.