Pakistan

Financial Year – 1 July – 30 June
Currency – Pakistani Rupee (PKR)

Corporate Tax Summary

Residence – A company is considered to be resident in Pakistan if it is incorporated, formed by or under any law in force in Pakistan. Companies incorporated under foreign law are considered to be a Pakistan resident if the control and management of the affairs of the company is situated wholly in Pakistan at any time during the year. Resident companies are taxed on their worldwide income. Non-resident companies are taxed only on their Pakistan source income.

Basis of Taxation – A resident company is taxed on its worldwide income. Non-resident companies operating in Pakistan through a branch are taxed on their Pakistan source income attributable to the branch at rates applicable to a company.

Reference
Corporate Income Tax Rate (%)29%Corporate Tax Rates for the Tax Year 2021

  • Public Company 29%
  • Banking Company 35%
  • Small Company 22%

In future, the following tax rates will be applicable for ‘companies’ and ‘small companies’:

Tax Year / Public Company / Small Company

  • 2021 / 29% / 22%
  • 2022 / 29%/ 21%
  • 2023 and onwards / 29% / 20%

Minimum Tax on Turnover

Where the tax payable by a company is less than 1.5% of the turnover, the company is required to pay a minimum tax equivalent to 1.5% of the turnover. In certain cases/sectors, such turnover tax is payable at rates less than 1.5% (ranging from 0.25% to 0.75 % of turnover).

Branch Tax Rate (%)–
Withholding Tax Rate:
Dividends – Franked15%Non-Residents:

  • Withholding Tax (WHT) on dividends is currently 15%, or the lower rate provided in the country-specific treaty for the avoidance of double taxation subject to fulfilling qualifying conditions.

Residents:

  • WHT on dividends is determined on the basis of Active Taxpayer or Non-active Taxpayer. The Federal Board of Revenue publishes the Active Taxpayers List (ATL) on a weekly basis.
  • WHT is 15% if a name appears on ATL, otherwise it is 30%.
  • WHT on power generation sector dividend is 7.5%, subject to qualifying conditions (also for non-residents).
  • If Employee Retirement Funds and Mutual Funds have an exemption certificate from the Federal Board of Revenue, then they are exempted from WHT. Otherwise the above rules apply.
Dividends – Unfranked–
Dividends – Conduit Foreign Income–
InterestUp to PKR 500,000 – 10%
Exceeding PKR 500,000 – 15%
The above rules apply to both corporate entities and individuals if they are ATL taxpayers. In the case of non-ATL taxpayers, the rate would be double.
Royalties from Intellectual Property15% (on royalty income) for non-residents appearing on the ATL, otherwise 30%
Fund Payments from Managed Investment Trusts
Branch Remittance Tax
Net Operating Losses (Years)
Carry Back
Carry Forward

Individual Tax Summary

Residence – A person is resident in Pakistan for income tax purposes if any of the following apply:

  • Present in Pakistan for 183 days or more in a tax year
  • Present in Pakistan for 120 days or more in a tax year plus a total of 365 days in last 4 tax years
  • Is an employee of the government, whether physically in Pakistan or not

Basis of Taxation – Pakistan levies tax on its residents on their worldwide income. A non-resident individual is taxed only on Pakistan source income, including income received or deemed to be received in Pakistan, or deemed to accrue or arise in Pakistan.

Filing Status – Self Assessment System – Individuals are required to file their own returns through the online portal.

Personal Income Tax Rates

 

Taxable IncomeTax Payable – ResidentsTax Payable – Non Residents
Up to PKR 400,0000%
Where the taxable income exceeds PKR 400,000 but does not exceed PKR 600,0005% of the amount exceeding PKR 400,000
Where taxable income exceeds PKR 600,000 but does not exceed PKR 1,200,000PKR 10,000 plus 10% of the amount exceeding PKR 600,000
Where taxable income exceeds PKR 1,200,000 but does not exceed PKR 2,400,000PKR 70,000 plus 15% of the amount exceeding PKR 1,200,000
Where taxable income exceeds PKR 2,400,000 but does not exceed PKR 3,000,000PKR 250,000 plus 20% of the amount exceeding PKR 2,400,000
Where taxable income exceeds PKR 3,000,000 but does not exceed PKR 4,000,000PKR 370,000 plus 25% of the amount exceeding PKR 3,000,000
Where taxable income exceeds PKR 4,000,000 but does not exceed PKR 6,000,000PKR 620,000 plus 30% of the amount exceeding PKR 4,000,000
Where taxable income exceeds PKR 6,000,000PKR 1,220,000 plus 35% of the amount exceeding PKR 6,000,000

Goods and Services Tax (GST)

Rate17%
Taxable TransactionsThe standard rate of sales tax on goods is 17 percent. However, this may vary (up, down or zero) in specific cases. Certain goods are exempt from sales tax.

Sales tax on services is levied and administered separately by each province. The rates vary depending on the province.

Registration
Filing and Payment

Other Taxes Payable

TaxReference
Payroll TaxThe only significant tax on salaries is federal income tax.
Stamp DutyStamp duty is imposed on instruments and documents as mentioned in the Schedule appended to the Stamp Act, 1899. Stamp duty is a provincial levy, which is payable on every instrument executed, drawn or presented in Pakistan as listed in the Schedule at the rates given against each item. For instruments executed outside Pakistan liable to stamp duty under the Act, the instrument must be stamped with stamp duty within 3 months after it is first received in Pakistan
Land TaxThere is a provincial tax levied on the value of property, with the rates varying between provinces.
  • Customs Duty
  • Excise Duty
  • Capital Value Tax
  • Professional Tax

Last updated: 17.11.2020

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