Estonian Company Run from Pakistan: Tax Rules

Many people living in Pakistan form or buy an Estonian private limited company (OÜ), often as e-residents, and run it from Pakistan. The Pakistani Income Tax Ordinance treats a company as resident not only when it is incorporated in Pakistan but also when the control and management of its affairs is situated wholly in Pakistan at any time in the year. On the owner side, it has a controlled foreign company rule that adds part of a foreign company's income to the income of a Pakistani resident who holds it. And the Estonia–Pakistan tax treaty leaves a company resident in both countries to the two tax authorities to settle. This guide sets out these rules with the official texts, and what we do on the Estonian side.

The guide is general information, not tax advice. How your company and you are taxed depends on the facts of your case; ask a Pakistani tax adviser before you form or buy the company. We read the Income Tax Ordinance, 2001 in the version amended up to 30 June 2026 that the Federal Board of Revenue publishes on fbr.gov.pk, and the Estonia–Pakistan tax treaty in Riigi Teataja, on 22 October 2026.

In Estonia: an Estonian company is Estonian

A company established under Estonian law is resident in Estonia for tax purposes (Income Tax Act § 6). Its profit is taxed when it is distributed, not while it stays in the company — the guide how Estonia taxes company profit explains the rule. The company keeps its Estonian duties wherever its owners live: accounts, an annual report to the commercial register and, if its address is abroad, a contact person in Estonia.

In Pakistan: the company side

Control and management wholly in Pakistan. A company is a resident company for a tax year if it is incorporated or formed under a law in force in Pakistan, or if the control and management of its affairs is situated wholly in Pakistan at any time in the year (Income Tax Ordinance, section 83).
Resident: income from everywhere. The income of a resident person under a head of income takes into account both Pakistan-source and foreign-source amounts; a non-resident is taxed only on Pakistan-source amounts (section 11(5) and (6)).
The rate. The rate of tax on the taxable income of a company other than a banking company or a small company is 29 per cent; for a small company it is 20 per cent (First Schedule, Part I, Division II). A super tax on high earning persons, charged by income bands, comes on top for larger incomes (section 4C).

An Estonian OÜ is incorporated in Estonia, not in Pakistan. If every decision about the company is taken by you in Pakistan, whether its control and management is situated wholly in Pakistan is the question section 83 raises. Your Pakistani tax adviser answers it with the facts of your case.

In Pakistan: the owner side

Resident. An individual is resident for a tax year if present in Pakistan for 183 days or more in the tax year; a citizen of Pakistan is also resident if not present in any other country for more than 182 days in the year or not a resident taxpayer of any other country (section 82).
Controlled foreign company. A resident person's taxable income includes income attributable to a controlled foreign company (section 109A(1)). That is a non-resident company in which persons resident in Pakistan hold more than 50 per cent of the capital or voting rights, or a single resident holds more than 40 per cent; whose tax paid abroad is less than 60 per cent of the tax payable on that income under the Ordinance; which does not derive active business income; and whose shares are not traded on a recognised stock exchange (section 109A(2)).
Active income and thresholds. A company has active income when more than 80 per cent of its income is not passive income such as dividends, interest, royalties or supplies to an associate, and it principally derives business income in its country of residence (section 109A(3)). The attributable income is zero for a holder of less than 10 per cent, and the company's income is treated as zero if it is less than ten million rupees (section 109A(6) and (7)).

An Estonian OÜ pays no corporate income tax while its profit stays in the company. Whether your company meets the conditions of section 109A — and how a later dividend is credited under section 109A(11) — is a question for your Pakistani tax adviser.

The Estonia–Pakistan tax treaty

In force. The Convention was signed in Tallinn on 20 November 2023, entered into force on 30 April 2024 and applies from 1 January 2025 (Estonian Ministry of Finance treaty list).
A company resident in both countries. The competent authorities of the two countries endeavour to settle by mutual agreement where the company is resident, having regard to its place of effective management, where it is incorporated and other relevant factors; without such an agreement the company is not entitled to any relief or exemption under the treaty except as they agree (Article 4(3)).
Permanent establishment. A permanent establishment is a fixed place of business through which the business is wholly or partly carried on, and includes especially a place of management (Article 5).
Dividends. The country of the paying company may tax dividends at no more than 12.5 per cent of the gross amount when the beneficial owner is resident in the other country (Article 10(2)).
Directors' fees. Fees for a member of the board of a company resident in the other country may be taxed in that country (Article 16).

The treaty does not decide by itself which country an OÜ managed from Pakistan belongs to: Article 4(3) leaves it to the two tax authorities. We do not give that ruling.

What to decide before you form or buy the company

Where the company is controlled. Control and management wholly in Pakistan brings in section 83.
Where you live. 183 days in Pakistan in a tax year makes you resident under section 82.
What the company earns. Passive income and the size of your holding decide whether section 109A applies.
How you take money out. A dividend and a board fee fall under different articles of the treaty.

What we do on the Estonian side

online formation for an e-resident — €950 Registered address and contact person service for one year are included., or formation by power of attorney — €1,250;
a ready-made company bought remotely — €1,200 Registered address and contact person service for one year are included.;
accounting — from €150 / month and the annual report — from €450;
the registered address and contact person after the first 12 months — €350 / year.

Our accounting covers the Estonian company's Estonian obligations. Pakistani tax returns and Pakistani tax advice are not included. Owners in other countries: Estonian company run from abroad compares the rules side by side.

The two company forms side by side — founders, share transfer and the company tax: Estonian OÜ or Pakistani private company.

Prices exclude VAT. All communication takes place by email.

Ready to start? A new Estonian company — online for e-residents or by power of attorney; Pakistani tax advice is not included. Order.

Official sources

The laws this article names, by the name of their official text, as read on 9 October 2026. For the Estonian acts we read the English translation in Riigi Teataja; the legally binding text is the Estonian one.

Income Tax Act — Riigi Teataja, English translation

Sources are named in the text, without links. To see which of our services your company needs, open the Business Navigator.

Frequently asked questions

Is my Estonian company taxed in Pakistan if I run it from Pakistan?

It can be. Pakistan treats a company as resident when the control and management of its affairs is situated wholly in Pakistan at any time in the year (Income Tax Ordinance, section 83), and a resident is taxed on foreign-source income too (section 11(5)). In Estonia the company stays resident because it was established under Estonian law (Income Tax Act § 6). Under the Estonia–Pakistan tax treaty, the two tax authorities settle by mutual agreement where a company resident in both countries belongs; without that agreement it gets no treaty relief except as they agree (Article 4(3)). A Pakistani resident who holds the company can also fall under the controlled foreign company rule (section 109A). Ask a Pakistani tax adviser before you form or buy the company; we handle the Estonian side.

Estonian company run from Pakistan: what is taxed where