Consultancy Agreement (Pakistan)

A Consultancy Agreement in Pakistan sets out the mutual obligations the parties accept and the terms that govern their dealings.

The distinction between a consultant and an employee is legally significant in Pakistan. An employee is subject to the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, which requires appointment letters, notice periods of at least 30 days, gratuity after 5 years' service, and protection against summary dismissal without inquiry. A consultant engaged under a Consultancy Agreement Pakistan, by contrast, is an independent contractor not entitled to statutory employment protections, EOBI pension contributions under the Employees Old-Age Benefits Act 1976, or provincial social security benefits under the West Pakistan Employees Social Security Ordinance 1965 (PESSI in Punjab; SESSI in Sindh). Pakistani courts, including the Lahore High Court, have consistently held that the economic reality of the relationship — not the label applied in the contract — determines whether a person is an employee or a contractor. Misclassification of employees as consultants exposes the client to back-payment of statutory benefits and prosecution for non-registration with the Employees Old-Age Benefits Institution (EOBI).

Tax treatment of consultancy fees is a central element of a Consultancy Agreement Pakistan. Under Section 153(1)(b) of the Income Tax Ordinance 2001, a prescribed person — including every company registered under the Companies Act 2017, banking companies, and certain specified entities — must deduct withholding tax at source on every payment for services. For Tax Year 2025-26, the withholding tax rate is 3% for consultants who appear on the FBR Active Taxpayers List (ATL) and hold a valid National Tax Number (NTN) issued by the Federal Board of Revenue (FBR), and 6% for non-filers not on the ATL. The withheld amount is deposited with FBR against the consultant's NTN. Separately, consultants whose annual turnover exceeds the prescribed threshold must register with the relevant provincial revenue authority — the Sindh Revenue Board (SRB) under the Sindh Sales Tax on Services Act 2011, the Punjab Revenue Authority (PRA) under the Punjab Sales Tax on Services Act 2012, or the Khyber Pakhtunkhwa Revenue Authority (KPRA) — and charge provincial service tax at the applicable rate.

Where the consultant is a company or limited liability partnership, the Consultancy Agreement Pakistan should reference the consultant's SECP registration number, its registered office address, and the name of the authorised signatory under the company's articles of association. Under the Companies Act 2017, a company executes contracts through its authorised officers, and a contract signed by an unauthorised person may be challenged. The Pakistan Software Export Board (PSEB) registration is relevant for IT consultancy firms that benefit from income tax exemptions on IT services exports under SRO 1222(I)/2021.

Intellectual property created during a consultancy engagement requires express contractual treatment. Under the Copyright Ordinance 1962, copyright in original works vests in the creator — which for an independent consultant is the consultant, not the client — unless expressly assigned in writing. Section 57 of the Copyright Ordinance 1962 requires assignments to be in writing and signed by the assignor to be valid. Trade secrets and confidential business information shared with the consultant are not automatically protected after the engagement ends; contractual confidentiality obligations and, where appropriate, post-engagement non-disclosure and non-compete provisions are therefore essential elements of a Consultancy Agreement Pakistan.

Stamp duty on a Consultancy Agreement Pakistan is governed by the Stamp Act 1899 as administered provincially. The amount of duty depends on the contract value and the classification of the instrument under the applicable provincial stamp schedule. Unstamped instruments are inadmissible in evidence before any Civil Court in Pakistan under Section 35 of the Stamp Act 1899 unless the deficiency is cured by paying penalty duty. For high-value consultancy retainers in Karachi, Lahore, or Islamabad, stamping at the Sub-Registrar office at execution preserves the document's evidentiary value in any subsequent proceedings before the Sindh High Court, the Lahore High Court, or the Islamabad High Court.

A Consultancy Agreement in Pakistan is required whenever a business engages an independent expert, adviser, or specialist for a defined scope and the parties want written terms before the engagement begins.

When a company registered with the SECP under the Companies Act 2017 retains a management consultant, strategy adviser, or financial restructuring expert, a Consultancy Agreement Pakistan is essential to document the agreed scope, the PKR fee, and the withholding tax arrangement under Section 153 of the Income Tax Ordinance 2001. Without a written agreement, disputes over the scope of advice rendered and fees owed are adjudicated by Civil Courts applying the Contract Act 1872, with oral evidence given limited weight compared to a written contract.

When a manufacturing or trading business engages a tax or legal consultant to assist with FBR compliance, income tax return preparation, or SECP filings, a Consultancy Agreement Pakistan should define the specific deliverables — for example, preparation of annual accounts, filing of income tax returns for Tax Year 2025-26, or representation before the Commissioner Inland Revenue — to avoid disputes about the scope of the retainer.

When a corporate client engages a technical expert registered with a professional body — such as an engineer registered with the Pakistan Engineering Council (PEC), a chartered accountant enrolled with the Institute of Chartered Accountants of Pakistan (ICAP), or a cost accountant enrolled with the Institute of Cost and Management Accountants of Pakistan (ICMAP) — the Consultancy Agreement should record the consultant's professional registration number and confirm that professional indemnity insurance is maintained.

When a business in the IT sector registered with the Pakistan Software Export Board (PSEB) engages a foreign or domestic technology consultant, the Consultancy Agreement Pakistan must address State Bank of Pakistan (SBP) foreign exchange regulations for cross-border fee remittances, including the requirement to obtain SBP approval or use designated banking channels for offshore payments.

When an employer is concerned about a departing senior employee joining a competitor or soliciting clients, a Consultancy Agreement that includes a post-engagement non-compete clause provides contractual protection. Non-compete covenants in Pakistan are enforceable under Section 27 of the Contract Act 1872 only to the extent they are reasonable in duration, geographic scope, and the activities restricted — courts will not enforce covenants that amount to a blanket restraint of trade.

When a project requires access to the client's confidential information, customer data, or proprietary processes, a Consultancy Agreement Pakistan with strong confidentiality provisions prevents disclosure after the engagement. Without contractual protections, the client's only remedy is the general law of confidence, which provides narrower protection than express contractual terms enforced by the Lahore High Court, Sindh High Court, or Islamabad High Court.

A thorough and enforceable Consultancy Agreement in Pakistan under the Contract Act 1872 must contain the following key elements to protect both the client and the consultant.

Parties and Identification: Full legal names of the client and the consultant, their National Tax Numbers (NTN) issued by the Federal Board of Revenue (FBR), SECP registration numbers for companies, Computerised National Identity Card (CNIC) numbers for individual consultants, professional registration numbers (PEC, ICAP, ICMAP, Pakistan Bar Council, or other regulatory body enrolment numbers where applicable), and complete business addresses in Pakistan.

Appointment and Scope of Consultancy: The exact nature of the consultancy — whether strategic, financial, technical, legal, IT, or another specialist function — and the specific deliverables, reports, recommendations, or advisory services to be provided. The scope should specify whether the consultant is to attend client premises in Karachi, Lahore, Islamabad, or elsewhere, the frequency of meetings, and whether remote advisory services are included.

Consultant Qualifications and Independence: A representation by the consultant confirming relevant qualifications, professional registrations, and professional indemnity insurance coverage. The agreement should expressly state that the consultant is an independent contractor and not an employee, partner, or agent of the client, and that no employment relationship governed by the Standing Orders Ordinance 1968 is created.

Fees, Expenses, and Retainer: The consultancy fee in Pakistani Rupees (PKR) — whether a fixed project fee, a daily or hourly rate, or a monthly retainer — and the invoicing and payment process. Expense reimbursement (travel, accommodation, printing) should be specified, including whether economy or business class travel applies and any per-diem allowances. Late payment interest at an agreed rate per month should be included to incentivise timely payment.

Withholding Tax and Service Tax: The withholding tax rate under Section 153(1)(b) of the Income Tax Ordinance 2001 — 3% for ATL filers, 6% for non-filers — and the obligation on the client (if a prescribed person) to deduct, deposit with FBR, and issue a withholding tax certificate to the consultant. Provincial service tax obligations under the Sindh Sales Tax on Services Act 2011 (SRB) or the Punjab Sales Tax on Services Act 2012 (PRA) should be addressed, specifying whether fees are inclusive or exclusive of service tax and which Party bears the service tax liability.

Deliverables and Acceptance: A clear list of deliverables with target delivery dates, and a defined acceptance procedure — including the client's right to request revisions within a specified period and the criteria for acceptance. Deemed acceptance provisions (if no objection is raised within X days) protect the consultant from indefinite revision cycles.

Intellectual Property Assignment: Under Section 57 of the Copyright Ordinance 1962, an express written assignment signed by the consultant is required to transfer copyright in all reports, analyses, software, or creative work to the client. The assignment should cover all rights administered by IPO-Pakistan, including copyright under the Copyright Ordinance 1962 and any patentable inventions under the Patents Ordinance 2000. Pre-existing IP belonging to the consultant should be carved out.

Confidentiality and Data Protection: An obligation on the consultant to keep confidential all client information, trade secrets, customer data, financial information, and unpublished business plans received during the engagement. The obligation should survive termination for a defined period — typically 3 to 5 years — and should cover oral as well as written disclosures.

Non-Compete and Non-Solicitation: Post-engagement restrictions on the consultant's ability to perform similar services for direct competitors of the client, or to solicit the client's employees or customers, for a defined period and geographic area. Under Section 27 of the Contract Act 1872, restraints of trade are void unless reasonable in scope — restrictions exceeding 12 months and covering all of Pakistan are at risk of being held unenforceable by Pakistani courts.

Termination and Consequences: Rights to terminate for convenience on agreed notice (typically 30 days), and for material breach on shorter notice after a cure period. Provisions addressing payment for work completed to the termination date, return of confidential materials, and survival of IP assignment and confidentiality obligations post-termination.

Governing Law and Dispute Resolution: Pakistan's Contract Act 1872 as governing law, with the applicable High Court (Lahore High Court for Punjab, Sindh High Court for Sindh, Islamabad High Court for ICT) or domestic arbitration under the Arbitration Act 1940 as the dispute resolution mechanism. For corporate clients, including the client's SECP-registered company details at the signature block confirms the authority of the signatory.

Forms-legal.com provides this Pakistan Consultancy Agreement template as a professionally structured starting point. Both parties should retain a signed original, and the agreement should be stamped under the applicable provincial Stamp Act 1899 schedule before use in any legal proceedings.