Entity Setup
Entity Setup in South Asia: Best Jurisdictions for Setting Up as a Consulting or Holding Company
Choosing where to base your company in India or Pakistan has huge implications—tax treaties, local tax burden, and administrative complexity matter. This guide helps you make informed entity decisions.
By NomadicTax Research Team • 6-8 min read • September 11, 2026
## Why Jurisdiction Choice Matters
Different South Asian countries offer varying regimes on corporate tax rates, DTAAs (Double Tax Avoidance Agreements), withholding taxes, and compliance burdens. Your company’s structure can affect:
- **Dividend and royalty withholding** if you're operating cross-border.
- **Capital gain treaties** and ability to defer/reduce tax via treaty benefits.
- **Entity-level vs flow-through taxation**: Some countries tax partnerships/leaves differently.
## Comparing India vs Pakistan vs Bangladesh for Entities
| Feature | India | Pakistan | Bangladesh |
|---|---|---|---|
| Corporate Tax Rate | Typically ~25-30%; plus surcharges; 15% for some special companies. | Rates fluctuating 29-35%; various reduced rates for SMEs. | ~25% standard; extra for certain sectors or foreign-participating entities. |
| DTAA Network | Extensive network; new treaties being amended. India amended DTAA with Brazil via notification. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/latest-news?page=%2C1&utm_source=openai)) | DTAA network growing; recent budgets emphasize trans-border remittances and cards. ([fbr.gov.pk](https://www.fbr.gov.pk/Budget2026-27/SalientFeatures/Salient-Feature.pdf?utm_source=openai)) | Bangladesh treaties improving; legal behavior still evolving, cross-border VAT challenges. ([nbr.gov.bd](https://nbr.gov.bd/uploads/publications/Final_Version_of_MLTRS_NBR_0425_Report_27.04_.25_.pdf?utm_source=openai)) |
| Compliance Burden | Strong documentation; digital filings; new foreign asset disclosure. | Significant system integration (FBR, SWAPS, IRIS) but still physical regs in many areas. | Systems improving; online returns, but audits and selection creep. |
## Recent Pakistan Updates that Matter
From Budget 2026-27 (Pakistan):
- Advance tax on foreign payments via cards cut from **5% to 0.5%**, easing outbound expenses for freelancers or consultants. ([fbr.gov.pk](https://www.fbr.gov.pk/Budget2026-27/SalientFeatures/Salient-Feature.pdf?utm_source=openai))
- Sellers in e-commerce with turnover > Rs. 200 million get **adjustable** tax deduction for e-commerce transactions, helping larger platforms and sellers. ([fbr.gov.pk](https://www.fbr.gov.pk/Budget2026-27/SalientFeatures/Salient-Feature.pdf?utm_source=openai))
- Exemption of Capital Value Tax on foreign movable & immovable assets of resident Pakistanis is proposed to be abolished, affecting overseas holdings. ([fbr.gov.pk](https://www.fbr.gov.pk/Budget2026-27/SalientFeatures/Salient-Feature.pdf?utm_source=openai))
## Actionable Structuring Tips
1. **Pick a country with favorable DTAA**: If your clients are in US, UK, EU, India or Pakistan’s treaties will affect withholdings on royalties/dividends.
2. **Define resident vs non-resident directors carefully**: Local residency can trigger higher taxation. Consider where board decisions are made (POEM test in Indian law also relevant after April 2026).
3. **Use Special Entities or IFSC Units**: In India, for example, IFSC Units can claim exemptions from TDS on certain payments (see policy below). In Pakistan, special purpose vehicles exempted under asset-backed securitization rules. ([fbr.gov.pk](https://www.fbr.gov.pk/Budget2026-27/SalientFeatures/Salient-Feature.pdf?utm_source=openai))
4. **Anticipate foreign withholding and remittance taxes**: With Pakistan reducing card remittances advance tax, and India exempting IFSC receipts from TDS, structuring revenue flows through favorable jurisdictions can reduce leakage.
5. **Seek local professional guidance**: Regimes are evolving (new Indian Income Tax Act, changes in Pakistan’s Budget). Ensure forms, registrations, treaty claims are up to date.
## Example Scenario
> Tech consultant in Bangladesh works with clients in USA and India, receives royalties and fees. Setting up as a company in Pakistan might reduce tax on foreign payments (0.5% advance tax) vs being in Bangladesh where cross-border withholding may be higher unless treaty invoked. But company setup cost, compliance obligations and local labor law also matter. |
## Which Setup Suits You Best?
- **Small consultants/freelancers**: An LLP or equivalent in India or Bangladesh if primarily local clients.
- **Export/exportable service companies**: Consider Pakistan if you have large e-commerce turnover or India IFSC incentives apply.
- **Holding companies**: Choose jurisdictions with favorable treaty access and low dividend withholding (look at recent treaty amendments in India, Pakistan).
## Key Takeaways
- Jurisdiction choice isn’t just about tax rates—it’s about treaty-benefits, ease of doing business, and withholding tax.
- Recent policy changes in Pakistan and India open new opportunities around foreign income / asset disclosure, withholding exemptions, and planning.
- Be proactive: document residence, disclose foreign income/assets, use enhanced forms where applicable.