Income Tax Law

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Income Tax Law
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Understanding the Income Tax Law

Income Tax Law

Income tax law signifies a type of tax that governments impose on income generated by individuals and businesses within their jurisdiction. As per law, taxpayers must file an income tax return annually to determine their tax obligations. Income taxes are a source of revenue for governments as these are used to fund public services, fulfil governmental commitments and facilitate the people.

Virtually every business decision today has tax consequences. You deserve the most practical, tuned-in and well-crafted tax solutions. We provide a comprehensive range of services from the completion of tax returns under corporation tax, self assessment to complex consultancy assignments and strategic tax planning. Here you may find information about income tax law and lawyers in Pakistan. Our dedicated team of professional tax lawyers and consultants best assists their clients in understanding the domestic tax law of Pakistan.

Our ability to focus on our clients and deliver innovative tax solutions is enhanced by our knowledge of specific business environments including financial services, leisure, retail, sport, high growth companies, manufacturing and automotive, technology and communications, public sector, property and utilities. We also have a number of specialist tax groups who deal with specific complex areas of tax law. Our consultants can help you plan, grow and structure your business. We are known for our straightforward approach to solving our clients’ most complex business challenges. We work hand-in-hand with clients to improve the business performance, drive shareholder value and create the competitive advantage.

To facilitate the people in public works and services and to build and maintain the infrastructures used in a country, a government usually taxes its individual and corporate entities. The tax collected is used for the advancement of the economy and all living within it. In Pakistan and many other parts of the world, income taxes are applied to some form of money received by a taxpayer. The money could be income earned from salary, capital gains from investment, dividends or interest received as additional income, payment made for goods and services, etc.

A tax requires a percentage of the taxpayer’s earnings or money to be taken and remitted to the government. Payment of taxes at rates imposed by the government is compulsory, and tax evasion, the deliberate failure to pay one’s full tax liabilities is punishable by law. On the other hand, tax avoidance actions taken to lower your tax liability and maximize after-tax income is perfectly legal. Government usually use an authority or department to collect taxes. In Pakistan, this function is performed federally by the Federal Board of Revenue (FBR).

Tax Law Services

  • Corporate and individual tax planning along with trusts, cooperative societies and NGOs.
  • Compliance services including preparation of income tax returns and clearance.
  • Representing clients before income tax authorities and assisting in preparing appeals before Appellate Tribunals, High Courts and Supreme Court.
  • International tax consultancy based on international transactions and advising on double taxation treaties.
  • Assisting with income tax matters including registration, and assessment.
  • Obtaining advance ruling on proposed investments or business transactions.
  • Establishing gratuity funds, provident funds and other employees benefit schemes and their approval from tax authorities.
  • Providing general tax advice based on current and evolving laws and rulings.

Tax Law System in Pakistan

Federal taxes in Pakistan like most of the taxation systems in the world are classified into two broad categories, viz., direct and indirect taxes. A broad description regarding the nature of administration of these taxes is explained below:

Direct Taxes

Direct taxes primarily comprise income tax. For the purpose of the charge of tax and the computation of total income, all income is classified under the following heads:

  • Salaries
  • Income from Business or Profession
  • Interest on Securities
  • Income from Property
  • Capital Gains
  • Income from Other Sources

Personal Tax

All individuals, unregistered firms, associations of persons, etc., are liable to tax, at the rates ranging from 5% to 35% for the Tax Year 2022.

Tax on Companies

All public companies (other than banking companies) incorporated in Pakistan are assessed for tax at corporate rate of 29% for the Tax Year 2022 and onwards. However, the effective rate is likely to differ on account of allowances and exemptions related to industry, location, exports, etc.

A banking company shall continue to be taxed at the rate of 35% for the Tax Year 2022 and onwards.

Wealth Statement

Wealth Statement as per law is compulsory, where declared income is based on person’s total assets and liabilities, total assets and liabilities of the person’s spouse, minor children and other dependents, assets transferred by the person to any other person, the total expenditure incurred by the person, and the person’s spouse, minor children and other dependents along with the reconciliation statement of wealth.

Every resident taxpayer being an individual having foreign income of not less than ten thousand US dollars or having foreign assets with a value of not less than one hundred thousand US dollars shall furnish a statement, known as foreign income and assets statement.

Inter-Corporate Dividend Tax

Tax on the dividends @ 7.5%, distributed by independent power producers where such dividend is a pass-through item under an implementation agreement or power purchase agreement and is required to be reimbursed by Central Power Purchasing Agency (CPPA-G) or its predecessor or successor entity.

Tax on dividend @ 15%, received from a mutual fund, real estate investment trust and cases other than those mentioned in Sec. 1 & 3.

Tax on the dividend @ 25%, received from a company where no tax is payable by such company due to exemption of income or carry forward business losses or claim of tax credits.

Unilateral Relief

A person resident in Pakistan is entitled to a relief in tax on any income earned abroad, if such income has already been subjected to tax outside Pakistan. Proportionate relief is allowed on such income at an average rate of tax in Pakistan or abroad, whichever is lower.

Tax Rates | Tax Year 2021-2022

Withholding Tax Rates on Imports

Sec. 148, Part II, 1st Schedule | Part I-III, Twelfth Schedule

The rate of advance tax to be collected by the Collector of Customs:

Serial No

Payment / Transaction

Withholding Tax Rates

Part I of 12th Schedule

Part II of 12th Schedule

Part III of 12th Schedule

Filer

Non-Filer

Filer

Non-Filer

Filer

Non-Filer

01

Imports (Minimum Tax except manufacture and listed companies

1%

2%

2%

4%

5.50%

11%

02

Manufacturers Covered Under SRO 1125(I)/2011

1%

2%

03

Pharmaceutical Imported Finish Goods

4%

8%

04

Importers of CKD Kits of Electric Vehicles for Small Cars (SUVs with 50 kwh battery and LCVs with 150 kwh battery)

1%

2%

Table: Withholding Tax Rates on Imports

Tax Rates for Salaried Individuals

Sec. 149, Division I, Part I, 1st Schedule

Where the income of an individual chargeable under the head “salary” exceeds seventy-five percent of his taxable income, the following rates of tax will apply, which are unchanged from the previous tax year:

Serial No

Taxable Income

Rate of Tax

01

Where taxable income does not exceed Rs.600,000

0%

02

Where taxable income exceeds Rs.600,000 but does not exceed Rs.1,200,000

5% of the amount exceeding Rs.600,000

03

Where taxable income exceeds Rs.1,200,000 but does not exceed Rs.1,800,000

Rs.30,000 plus 10% of the amount exceeding Rs.1,200,000

04

Where taxable income exceeds Rs.1,800,000 but does not exceed Rs.2,500,000

Rs.90,000 plus 15% of the amount exceeding Rs.1,800,000

05

Where taxable income exceeds Rs.2,500,000 but does not exceed Rs.3,500,000

Rs.195,000 plus 17.5% of the amount exceeding Rs.2,500,000

06

Where taxable income exceeds Rs. 3,500,000 but does not exceed Rs.5,000,000

Rs.370,000 plus 20% of the amount exceeding Rs.3,500,000

07

Where taxable income exceeds Rs. 5,000,000 but does not exceed Rs.8,000,000

Rs.670,000 plus 22.5% of the amount exceeding Rs.5,000,000

08

Where taxable income exceeds Rs. 8,000,000 but does not exceed Rs.12,000,000

Rs.1,345,000 plus 25% of the amount exceeding Rs.8,000,000

09

Where taxable income exceeds Rs. 12,000,000 but does not exceed Rs.30,000,000

Rs.2,345,000 plus 27.5% of the amount exceeding Rs.12,000,000

10

Where taxable income exceeds Rs. 30,000,000 but does not exceed Rs.50,000,000

Rs.7,295,000 plus 30% of the amount exceeding Rs.30,000,000

11

Where taxable income exceeds Rs. 50,000,000 but does not exceed Rs.75,000,000

Rs.13,295,000 plus 32.5% of the amount exceeding Rs.50,000,000

12

Where taxable income exceeds Rs. 75,000,000

Rs.21,420,000 plus 35% of the amount exceeding Rs.75,000,000

Table: Tax Rates for Salaried Individuals

Tax Rates for Individuals & Association of Persons

Division I, Part I, 1st Schedule

No change in the tax rates for individuals and association of persons has been made. the tax rates applicable for the Tax Year 2022 are set out in the following table:

Serial No

Taxable Income

Rate of Tax

01

Where taxable income does not exceed Rs.400,000

0%

02

Where taxable income exceeds Rs.400,000 but does not exceed Rs.600,000

5% of the amount exceeding Rs.400,000

03

Where taxable income exceeds Rs.600,000 but does not exceed Rs.1,200,000

Rs.10,000 plus 10% of the amount exceeding Rs.600,000

04

Where taxable income exceeds Rs.1,200,000 but does not exceed Rs.2,400,000

Rs.70,000 plus 15% of the amount exceeding Rs.1,200,000

05

Where taxable income exceeds Rs.2,400,000 but does not exceed Rs.3,000,000

Rs.250,000 plus 20% of the amount exceeding Rs.2,400,000

06

Where taxable income exceeds Rs.3,000,000 but does not exceed Rs.4,000,000

Rs.370,000 plus 25% of the amount exceeding Rs.3,000,000

07

Where taxable income exceeds Rs.4,000,000 but does not exceed Rs.6,000,000

Rs.620,000 plus 30% of the amount exceeding Rs.4,000,000

08

Where taxable income exceeds Rs.6,000,000

Rs.1,220,000 plus 35% of the amount exceeding Rs.6,000,000

Table: Tax Rates for Individuals & Association of Persons

Tax Rates for Companies

Division II, Part I, 1st Schedule

Tax rates for a banking company, public & private company, small company, alternate corporate tax and modaraba are given in the following table:

Serial No

Type

Rate of Tax

01

Banking Companies

35%

02

Public / Private Companies

29%

03

Small Companies

21%

04

Alternate Corporate Tax (ACT) u/Sec. 113C

17% of accounting profit

05

Modaraba

25%

Table: Tax Rates for Companies | Where the taxpayer is a small company , tax shall be payable at the rate of 20% for the Tax Year 2023 and onward.

Super Tax

Division IIA, Part I, 1st Schedule

Serial No

Person

Rate of Super Tax [ Percentage of Income ]

Tax Year 2018

Tax Year 2019

Tax Year 2020

Tax Year 2021

01

Banking Company

4%

4%

4%

4%

02

Person other than banking company, having income equal to or exceeding Rs 500 million

3%

2%

0%

0%

Table: Super Tax

Gradual Reduction in Corporate Tax Rates

Serial No

Tax Year

Rate of Tax

01

2019

24%

02

2020

23%

03

2021

22%

04

2022

21%

05

2023 and onwards

20%

Table: Gradual Reduction in Corporate Tax Rates

Dividend Tax

Sec. 150, Division III, Part I, 1st Schedule

Person paying a dividend shall deduct tax from the gross amount of the dividend paid or collect tax from the amount of dividend in specie.

Serial No

Description

Individual / AOP

Companies

Filer

Non-Filer

Filer

Non-Filer

01

Power Generation

*Subject to the implementation and Purchase Agreements

7.5%

15%

7.5%

15%

02

Cash Dividend / Mutual Fund

15%

30%

15%

30%

03

Stock Fund

15%

30%

15%

30%

04

Money Market Fund

15%

30%

15%

30%

05

Income Fund or any other fund

15%

30%

15%

30%

06

REIT Scheme

25%

50%

25%

50%

07

Rental REIT Scheme

25%

50%

25%

50%

08

Exempted Company OR Non tax payable Companies

25%

50%

25%

50%

09

Specie Dividend

15%

30%

15%

30%

Table: Dividend Tax | As per 10th Schedule, Tax Rate shall be increased by 100% in case the person is not appearing in Active Taxpayers’ List.

Tax on Interest

Sec. 151, Division 1A & 1B, Part III, 1st Schedule

Serial No

Description

Companies / Individual / AOP

Filer

Non-Filer

01

Interest

15%

30%

02

National Saving Scheme (NSS)

03

Bank Account

04

Federal, Provincial & Local Government Bonds

05

Company Loans

06

Investment in Sukuks from a Sukuk Holder

10% < 1 million

20%

25%

50%

12.5% > 1 million

25%

Table: Interest

Tax on Non-Resident

Sec 152, Division IV, Part I, 1st Schedule

Serial No

Description

Companies / Individual / AOP

Filer

Non-Filer

01

Royalty or Fee for Technical Services

15%

30%

02

Construction Services

7%

7%

03

Advertisement by TV Satellite Channels

7%

7%

04

Media Person Advertisement Services

10%

10%

05

Fee for Offshore Digital Services

5%

5%

06

Any Other Services

20%

40%

Companies

Individual / AOP

Filer

Non-Filer

Filer

Non-Filer

07

Supply of Goods

4%

4%

4.50%

4.50%

08

Services

8%

16%

10%

20%

09

Contract

7%

14%

7%

14%

Filer

Non-Filer

10

Sportsman

10%

20%

11

Foreign Produced Commercial

20%

40%

Companies

Individual / AOP

Filer

Non-Filer

Filer

Non-Filer

12

Transport Services

3%

6%

3%

6%

13

Freight Forwarding Services

14

Air Cargo Services

15

Courier Services

16

Manpower Outsourcing Services

17

Hotel Services

18

Security Guard Services

19

Software Development Services

20

IT Services & IT Enabled Services

21

Tracking Services

22

Advertising Services (Other than Print / Electronic Media)

23

Share Registrar Services

24

Engineering Services

25

Car Rental Services

26

Building Maintenance Services

27

Services rendered by Pakistan Stock Exchange Limited and Pakistan Mercantile Exchange Limited

28

Inspection

29

Certification

30

Testing

31

Training Services

Table: Tax on Non-Resident

Tax on Goods, Services & Contracts

Sec. 153, Division III A, Part III, 1st Schedule

Serial No

Description

Companies

Individual / AOP

Filer

Non-Filer

Filer

Non-Filer

01

Rice, Cotton Seed Oil, Edible Oils (If Annual Supplies > 75K)

1.5%

3%

1.5%

3%

02

Other Goods including Toll Manufacturing (If Annual Supplies > 75K)

4%

8%

4.5%

9%

03

Distributor, Wholesaler, Retailer, Dealer and Sub-Dealer of FMCG, Fertilizer, electronics excluding mobile phones, sugar, Cement and Edible Oil

0.25%

8%

0.25%

9%

04

Traders of Yarn

0.5%

1%

0.5%

1%

05

Services (If Annual Services > 30K)

8%

16%

10%

20%

06

Transport Services

3%

6%

3%

6%

07

Freight Forwarding Services

08

Air Cargo Services

09

Courier Services

10

Manpower Outsourcing Services

11

Hotel Services

12

Security Guard Services

13

Software Development Services

14

IT Services & IT Enabled Services

15

Tracking Services

16

Advertising Services (Other than Print / Electronic Media)

17

Share Registrar Services

18

Engineering Services

19

Warehousing Services

20

Services rendered by Asset Management Companies

21

Data Services Licensed by PTA

22

Telecommunication Infrastructure (Tower) Services

23

Car Rental Services

24

Building Maintenance Services

25

Services Rendered by Pakistan Stock Exchange Limited & Pakistan Mercantile Exchange Limited

26

Inspection

27

Certification

28

Testing

29

Training Services

30

Oilfield Service

31

Telecommunication Services

32

Collateral Management Services

33

Travel & Tour Services

34

Electronic & Print Media Advertising Services

1.5%

3%

1.5%

3%

35

Contracts (If Annual Contract > 10K)

7%

14%

7.5%

15%

Filer

Non-Filer

36

Sportsman

10%

20%

Companies / Individual / AOP

Filer

Non-Filer

37

Stitching, Dying, Printing & Embroidery etc.

1%

2%

Table: Tax on Goods, Services & Contracts

Tax Rates on Exports & Export of Services

Sec. 154 & 154A, Division IV, Part III, 1st Schedule

Serial No

Description

Company / AOP / Individual

Filer / Non-Filer

01

Exports

1%

02

Export of Goods

1%

03

Export Commission

5%

04

Inland Bank to Bank Letter of Credit

1%

05

Export Processing Zone

1%

06

Indirect Exporter; SPO

1%

07

Clearing of Goods

1%

08

Export of Services

1%

Table: Tax Rates on Exports & Export of Services

Tax on Rent of Immovable Property

Sec. 155, Division V, Part III, 1st Schedule

Serial No

Gross Amount of Rent

Rate of Tax

01

Where the gross amount of rent does not exceed Rs.300,000

Nil

02

Where the gross amount of rent exceeds Rs.300,000 but does not exceed Rs.600,000

5% of the gross amount exceeding Rs.300,000

03

Where the gross amount of rent exceeds Rs.600,000 but does not exceed Rs.2,000,000

Rs.15,000 plus 10% of the gross amount exceeding Rs.600,000

04

Where the gross amount of rent exceeds Rs.2,000,000

Rs.155,000 plus 25% of the gross amount exceeding Rs.2,000,000

Table: Tax on Rent of Immovable Property | The rate of tax to be deducted u/Sec. 155, in case of company shall be 15% of the gross amount of rent.

Tax on Prizes & Winnings

Sec. 156, Division VI, Part III, 1st Schedule

Serial No

Description

Companies / Individual / AOP

Filer

Non-Filer

01

Prize Bonds

15%

30%

02

Prizes, Winning, Lottery and Raffles

20%

40%

Table: Tax on Prizes & Winnings

Tax on Petroleum Products

Sec. 156A, Division VIA, Part III, 1st Schedule

Serial No

Description

Companies / Individual / AOP

Filer

Non-Filer

01

Petrol & Petroleum Products

12%

24%

Table: Tax on Petroleum Products

Advance Tax on Purchase, Registration and Transfer of Motor Vehicles

Sec. 231B & 234, Division VII, Part IV, 1st Schedule

Serial No

Description

Engine Capacity

Filer

Non-Filer

01

At the time of Leasing of Motor Vehicle

Any Motor Vehicle

4%

02

On Registration by Excise & Taxation Dept. and On Sale by Manufacturer (Car or Jeep)

Up to 850cc

7,500

15,000

851cc to 1000cc

15,000

30,000

1001cc to 1300cc

25,000

50,000

1301cc to 1600cc

50,000

100,000

1601cc to 1800cc

75,000

150,000

1801cc to 2000cc

100,000

200,000

2000cc to 2500cc

150,000

300,000

2500cc to 3000cc

200,000

400,000

Above 3000cc

250,000

500,000

03

Transfer of Ownership (Tax rate shall be reduced by 10% each year from the date of 1st Registration)

Up to 850cc

851cc to 1000cc

5,000

10,000

1001cc to 1300cc

7,500

15,000

1301cc to 1600cc

12,500

25,000

1601cc to 1800cc

18,750

37,500

1801cc to 2000cc

25,000

50,000

2000cc 2500cc

37,500

75,000

2500cc to 3000cc

50,000

100,000

Above 3000cc

62,500

125,000

04

Sold Locally Manufactured Motor Vehicles

Up to 1000cc

50,000

100,000

1001cc to 2000cc

100,000

200,000

2001cc and above

200,000

400,000

05

Private Motor Vehicles

Up to 1000cc

800

1,600

1001cc to 1199cc

1,500

3,000

1200cc to 1299cc

1,750

3,500

1300cc to 1499cc

2,500

5,000

1500cc to 1599cc

3,750

7,500

1600cc to 1999cc

4,500

9,000

2000cc and above

10,000

20,000

Table: Advance Tax on Purchase, Registration & Transfer

Tax on Brokerage and Commission

Sec. 233, Division II, Part IV, 1st Schedule

Serial No

Description

Companies / Individual / AOP

Filer

Non-Filer

01

Advertising agents

10%

20%

02

Life insurance agents where commission received is less than Rs.0.5 million per annum

8%

16%

03

Persons not covered in 1 and 2 above

12%

24%

Table: Tax on Brokerage and Commission

Tax on Electricity Consumption

Sec. 235, Division IV, Part IV, 1st Schedule

Serial No

Gross Amount

Assessee

Companies / Individual / AOP

Filer

Non-Filer

1

Up to Rs.500

Commercial

Rs. 0

Industrial

Rs. 0

Rs. 0

2

Exceeds Rs.500 but does not exceed Rs.20,000

Commercial

10%

Industrial

10%

20%

3

Exceeds Rs.20,000

Commercial

Rs.1,950 plus 12%

Industrial

Rs.1,950 plus 5%

Rs.1,950 plus 10%

4

Less than Rs.25,000

Domestic Electricity Consumption

5

Exceeds Rs.25,000

7.5%

Table: Tax on Electricity Consumption

Tax on Telephone and Internet

Sec. 236, Division IV, Part IV, 1st Schedule

Serial No

Description

Companies / Individual / AOP

01

In case of telephone subscriber (other than the mobile phone subscriber) where the amount of monthly bill exceeds Rs.1,000

10% of the exceeding amount of bill

02

In the case of subscriber of internet, mobile telephone and pre-paid internet or telephone card

10% for tax year 2022 and 8% onwards of the amount of bill or sales price of internet pre-paid card or prepaid telephone card or sale of units through any electronic medium or whatever form.

Table: Tax on Telephone and Internet

Advance Tax at the time of sale by auction

Sec. 236A, Division VIII, Part IV, 1st Schedule

Serial No

Description

Companies / Individual / AOP

Filer

Non-Filer

01

Gross sale price of any property or goods sold by auction

10%

20%

02

Immovable property sold by auction

5%

10%

Table: Advance Tax at the time of sale by auction

Advance Tax on Sale & Purchase of Immovable Property

Sec. 236C & 236K, Division X & XVIII, Part IV, 1st Schedule

Serial No

Description

Companies / Individual / AOP

Filer

Non-Filer

01

On Sale of Property

1%

2%

02

On Purchase of Property and person responsible for collecting payments in instalment as per Fair Market Value

1%

2%

Table: Advance Tax on Sale & Purchase of Immovable Property

Advance Tax on Distributors, Dealers or Wholesalers

Sec. 236G, Division XIV, Part IV, 1st Schedule

Serial No

Category of Sale

Companies / Individual / AOP

Filer

Non-Filer

01

Fertilizers

0.25%

0.7%

02

Other than fertilizers

0.1%

0.2%

Table: Advance Tax on Distributors, Dealers or Wholesalers

Advance Tax on Sale to Retailers

Sec. 236H, Division XV, Part IV, 1st Schedule

Serial No

Gross amount of Sale

Companies / Individual / AOP

Filer

Non-Filer

01

Sale to Retailers

0.5%

1%

Table: Advance Tax on Sale to Retailers

Collection of Advance Tax by Educational Institutions

Sec. 236I, Division XVI, Part IV, 1st Schedule

Serial No

Gross amount of Fee

Companies / Individual / AOP

Filer

Non-Filer

01

Education Expenses

5%

Table: Collection of Advance Tax by Educational Institutions

Payment to a Resident Person for Right to use Machinery & Equipment

Sec. 236Q, Division XXIII, Part IV, 1st Schedule

Serial No

Description

Companies / Individual / AOP

01

Rent of Collection of Tax

10%

Table: Payment to Resident Person in using Machinery & Equipment

Tax for Profit on Debt – Other than a Company

Sec. 7B, Division III A, Part I, 1st Schedule

Serial No

Profit on Debt

Rate of Tax

01

Where profit on debt does not exceed Rs.5,000,000

15%

02

Where profit on debt exceeds Rs.5,000,000 but does not exceed Rs.25,000,000

17.5% of the amount exceeding Rs.5,000,000

03

Where profit on debt exceeds Rs.25,000,000 but does not exceed Rs.36,000,000

20% of the amount exceeding Rs.25,000,000

Table: Tax for Profit on Debt | As per 10th Schedule, Tax Rate shall be increased by 100% in case the person is not appearing in Active Taxpayers’ List.

Profit on Debt exceeding Rs.36 million shall be subject to tax under normal law.

Tax on Shipping or Air Transport Income of a Non-Resident Person

Serial No

Description

Rate of Tax

01

In the case of shipping income

8% of the gross amount received or receivable

02

In the case of air transport income

3% of the gross amount received or receivable

Table: Tax on Shipping or Air Transport Income

Tax on Return on Investment in Sukuks

Sec. 5AA, Division IB, Part III, 1st Schedule

Serial No

Sukuk-holder

Rate of Tax

01

Company

25%

02

Individual & AOP, if the return on investment is more than Rs.1,000,000

12.5%

03

Individual & AOP, if the return on investment is less than Rs.1,000,000

10%

Table: Tax on Return on Investment | As per 10th Schedule, Tax Rate shall be increased by 100% in case the person is not appearing in Active Taxpayers’ List

Tax on Certain Payments to Non-Residents

Serial No

Category

Rate of Tax

01

Royalty (Sec. 6)

15% of the gross amount

02

Fee for Technical Services (Sec. 6)

15% of the gross amount

03

Offshore digital services (Sec. 6)

5% of the gross amount

04

Shipping income (Sec. 7)

8% of the gross amount received or receivables

05

Air transport income (Sec. 7)

3% of the gross amount received or receivables

Table: Tax on Certain Payments to Non-Residents | As per 10th Schedule, Tax Rate shall be increased by 100% in case the person is not appearing in Active Taxpayers’ List

Tax on Income from Property for Individuals and Association of Persons

Sec. 15, Division V, Part I, 1st Schedule

Serial No

Gross Amount of Rent

Rate of Tax

01

Where the gross amount of rent does not exceed Rs.200,000

Nil

02

Where the gross amount of rent exceeds Rs.200,000 but does not exceed Rs.600,000

5% of the gross amount exceeding Rs.200,000

03

Where the gross amount of rent exceeds Rs.600,000 but does not exceed Rs.1,000,000

Rs.20,000 + 10% of the gross amount exceeding Rs.600,000

04

Where the gross amount of rent exceeds Rs.1,000,000 but does not exceed Rs.2,000,000

Rs.60,000 + 15% of the gross amount exceeding Rs.1,000,000

05

Where the gross amount of rent exceeds Rs.2,000,000 but does not exceed Rs.4,000,000

Rs.210,000 + 20% of the gross amount exceeding Rs.2,000,000

06

Where the gross amount of rent exceeds Rs.4,000,000 but does not exceed Rs.6,000,000

Rs.610,000 + 25% of the gross amount exceeding Rs.4,000,000

07

Where the gross amount of rent exceeds Rs.6,000,000 but does not exceed Rs.8,000,000

Rs.1,110,000 + 30% of the gross amount exceeding Rs.6,000,000

08

Where the gross amount of rent exceeds Rs.8,000,000

Rs.1,710,000 + 35% of the gross amount exceeding Rs.8,000,000

Table: Tax on Income from Property

Capital Gains on Disposal of Securities

Sec. 37A, Division VII, Part I, 1st Schedule

Serial No

Period

Tax Year 2015

Tax Year 2016

Tax Year 2017

Tax Years 2018 to 2021

Tax Year 2022 and onwards

Securities acquired prior 01.07.2016

Securities acquired after 01.07.2016

01

Where holding period of a security is less than twelve months

12.5%

15%

15%

15%

15%

12.55%

02

Where holding period of a security is twelve months or more but less than twenty-four months

10%

12.5%

12.5%

12.5%

03

Where holding period of a security is twenty-four months or more but the security was acquired on or after 1st July, 2013

0%

7.5%

7.5%

7.5%

04

Where the security was acquired before 1st July, 2013

0%

0%

0%

0%

0%

0%

05

Future commodity contracts entered into by the members of Pakistan Mercantile Exchange

0%

0%

5%

5%

5%

5%

Table: Capital Gains on Disposal of Securities | The rate of tax on cash settled derivatives traded on the stock exchange shall be 5% for the tax years 2018 to 2020.

A Mutual Fund or a Collective Investment Scheme or a REIT Scheme shall deduct Capital Gains Tax at the rates as specified below on Redemtion of Securities, as specified below:

Serial No

Category

Rate of Tax

01

Individual and Association of Persons

10% for stock funds

10% for other funds

02

Company

10% for stock funds

25% for other funds

Provided further that in case of a stock fund if dividend receipts of the fund are less than capital gains, then the rate of tax deduction shall be 12.5%. No capital gains tax shall be deducted, if the holding period of the security is more than 4 years.

Capital Gains on Disposal of Immovable Property (Capital Assets)

Sec. 37(1A), Division VIII, Part I, 1st Schedule

Serial No

Period

Rate of Tax

01

Where the gain does not exceed Rs.5 million

3.5%

02

Where the gain exceeds Rs.5 million but does not exceed Rs.10 million

7.5%

03

Where the gain exceeds Rs.10 million but does not exceed Rs.15 million

10%

04

Where the gain exceeds Rs.15 million

15%

Table: Capital Gains on Disposal of Immovable Property

Capital Gains on Disposal of Immovable Property

Sec. 37(3A)

Serial No

Holding Period

Rate of Tax

01

Where the holding period of an immovable property does not exceed one year

100%

02

Where the holding period of an immovable property exceeds one year

75%

03

Where the holding period of an immovable property exceeds two years but does not exceed three years

50%

04

Where the holding period of an immovable property exceeds three years but does not exceed four years

25%

05

Where the holding period of an immovable property exceeds four years

0%

Table: Capital Gains on Disposal of Immovable Property

Tax on Builders

Sec. 7C, Division VIII A, Part I, 1st Schedule

Karachi, Lahore and Islamabad

Abbottabad, Faisalabad, Gujranwala, Hyderabad, Mardan, Multan, Peshawar, Quetta, Rawalpindi, Sahiwal and Sukkur

Urban Areas not specified in A and B

For Commercial Buildings

Rs.210 / Sq Ft

Rs.210 / Sq Ft

Rs.210 / Sq Ft

For Residential Buildings

Area Sq. ft

Rate Sq. ft

Area Sq. ft

Rate Sq. ft

Area Sq. ft

Rate Sq. ft

Up to 750

Rs.20

Up to 750

Rs.15

Up to 750

Rs.10

751 to 1500

Rs.40

751 to 1500

Rs.35

751 to 1500

Rs.25

1501 and more

Rs.70

1501 and more

Rs.55

1501 and more

Rs.35

Table: Tax on Builders

Tax on Developers

Sec. 7D, Division VIII B, Part I, 1st Schedule

Karachi, Lahore and Islamabad

Hyderabad, Sukkur, Multan, Faisalabad, Rawalpindi, Gujranwala, Sahiwal, Peshawar, Mardan, Abbottabad and Quetta

Urban Areas not specified in A and B

For Commercial Plots

Rs.210 / Sq Yd

Rs.210 / Sq Yd

Rs.210 / Sq Yd

For Residential Plots

Area Sq. Yd

Rate Sq. Yd

Area Sq. Yd

Rate Sq. Yd

Area Sq. Yd

Rate Sq. Yd

Up to 120

Rs.20

Up to 120

Rs.15

Up to 120

Rs.10

121 to 200

Rs.40

121 to 200

Rs.35

121 to 200

Rs.25

201 and more

Rs.70

201 and more

Rs.55

201 and more

Rs.35

Table: Tax on Developers

Minimum Tax

Sec. 113, Division IX, Part I, 1st Schedule

Serial No

Person(s)

Minimum Tax as percentage of the person’s turnover for the year

01

  • Oil marketing companies, Oil refineries, Sui Southern Gas Company Limited and Sui Northern Gas Pipeline Limited (for the cases where annual turnover exceeds rupees one billion);

  • Pakistani Airlines; and

  • Poultry industry including poultry breeding, broiler production, egg production and poultry feed production.

0.75%

02

  • Oil refineries; and

  • Motorcycle dealers registered under the Sales Tax Act, 1990

0.50%

03

  • Distributors of pharmaceutical products, fast moving consumer goods and cigarettes;

  • Petroleum agents and distributors who are registered under the Sales Tax Act, 1990;

  • Rice mills and dealers;

  • Tier-1 retailers of fast moving consumer goods who are integrated with Board or its computerised system for real time reporting of sales and receipts;

  • Person’s turnover from supplies through e-commerce including from running an online marketplace as defined in clause (38B) of Sec. 2;

  • Persons engaged in the sale and purchase of used vehicles; and

  • Flour mills

0.25%

04

In all other cases

1.25%

Table: Minimum Tax

Reduction in Tax Liability for Full Time Teacher

Clause (2), Part III of 2nd Schedule

The tax payable by a fulltime teacher or a researcher, employed in a non-profit education or research institution duly recognised by HEC, a Board of Education or a University recognised by HEC including government research institution shall be reduced by an amount equal to 25% of the tax payable on his income from salary.

Provided that this clause shall not apply to teachers of medical profession who derive income from private medical practice or who receive share of consideration received from patients.

Table: Reduction in Tax Liability for Full Time Teacher

Payment of Advance Tax

Sec. 147

Installment

Quarter

Due Dates

Individuals

AOPs / Companies

01

September

15th September

25th September

02

December

15th December

25th December

03

March

15th March

25th March

04

June

15th June

25th June

Table: Payment of Advance Tax

Advance Tax

Serial No

Person(s)

Rate of Tax

01

  • Industrial undertaking importing re-meltable steel (PCT Heading 72.04) and directly reduced iron for its own use;

  • Persons importing potassic fertilizers in pursuance of Economic Coordination Committee of the cabinet’s decision No. ECC-155/12/2004 dated the 9th December, 2004;

  • Persons importing urea;

  • Manufacturers covered under Notification No. S.R.O. 1125(I)/2011 dated the 31st December, 2011 and importing items covered under S.R.O. 1125(I)/2011 dated the 31st December, 2011

  • Persons importing Gold;

  • Persons importing Cotton; and

  • Persons importing LNG

1% of the import value as increased by customs-duty, sales tax and federal excise duty

02

Persons importing pulses

2% of the import value as increased by customs-duty, sales tax and federal excise duty

03

Commercial importers covered under Notification No. S.R.O. 1125(I)/2011 dated the 31st December, 2011 and importing items covered under S.R.O 1125(I)/2011 dated the 31st December, 2011.

3% of the import value as increased by customs-duty, sales tax and federal excise duty

04

Persons importing coal

4%

05

Persons importing finished pharmaceutical products that are not manufactured otherwise in Pakistan, as certified by the Drug Regulatory Authority of Pakistan

4%

06

Ship breakers on import of ships

4.5%

07

Industrial undertakings not covered under S. Nos 01 to 06

5.5%

08

Companies not covered under S. Nos. 01 to 07

5.5%

09

Persons not covered under S. Nos. 01 to 08

6%

Table: Advance Tax

Advance Tax on Dividend

Serial No

Description

Rate of Tax

01

In case of dividends paid by Independent Power Purchasers where such dividend is a pass through item under an Implementation Agreement or Power Purchase Agreement or Energy Purchase Agreement and is required to be re-imbursed by Central Power Purchasing Agency (CPPA-G) or its predecessor or successor entoty.

7.5%

02

Other than mentioned above

15%

Table: Advance Tax on Dividend

Collection of Tax by a Registered Stock Exchange in Pakistan

Serial No

Description

Rate of Tax

01

In case of purchase of shares as per clause (a) of sub-section (1) of Section 233A.

0.02% of purchase value

02

In case of purchase of shares as per clause (b) of sub-section (1) of Section 233A.

0.02% of sale value

Table: Collection of Tax by a Stock Exchange in Pakistan

Collection of Tax on Passenger Transport Vehicles

Serial No

Capacity

Rate per seat per annum

01

Four or more persons but less than ten persons.

Rs.50

02

Ten or more persons but less than twenty persons.

Rs.100

03

Twenty persons or more.

Rs.300

Table: Collection of Tax on Passenger Transport Vehicles

Collection of Tax on Telephone Users

Serial No

Description

Rate of Tax

01

In the case of a phone subscriber (other than cell phone subscriber) where the amount of monthly bill exceeds Rs.1,000

10% of the exceeding amount of bill

02

In the case of subscriber of internet, mobile telephones and pre-paid internet or telephone card

12.5% of the amount of bill or sales price of internet pre-paid card or prepaid telephone card or sale of units through any electronic medium or whatever form.

Table: Collection of Tax on Telephone Users

Tax on Cash Withdrawal from a Bank

Serial No

Description

Rate of Tax

01

Cash amount withdrawn, for the person whose name is not appearing in the active taxpayer’s list.

0.6% of the amount withdrawn

Table: Tax on Cash Withdrawal from a Bank

Advance Tax on Transactions in Bank [Transferor]

Serial No

Description

Rate of Tax

01

The rate of tax to be deducted under Sec. 231AA for the person whose name is not appearing in the active taxpayers’ list.

0.6% of the transaction

Table: Advance Tax on Transactions in Bank

Advance Tax on Banking Transactions Otherwise Than Through Cash [Receiver]

Serial No

Description

Rate of Tax

01

Banking Transaction (other than cash) at the time of sale of instrument, including demand draft, pay order, special deposit receipt, transfer of any sum through cheque, online transfer, ATM transfers or any other mode of electronic or paper based transfers.

0.4% of the transaction amount

Table: Advance Tax on Banking Transactions Otherwise Than Through Cash

Tax on Cable Television Operator

License Category as provided in PEMRA Rules

Tax on License Fee

Tax on Renewal

H

Rs.7,500

Rs.10,000

H-1

Rs.10,000

Rs.15,000

H-2

Rs.25,000

Rs.30,000

R

Rs.5,000

Rs.12,000

B

Rs.5,000

Rs.40,000

B-1

Rs.30,000

Rs.35,000

B-2

Rs.40,000

Rs.45,000

B-3

Rs.50,000

Rs.75,000

B-4

Rs.75,000

Rs.100,000

B-5

Rs.87,500

Rs.150,000

B-6

Rs.175,000

Rs.200,000

B-7

Rs.262,500

Rs.300,000

B-8

Rs.437,500

Rs.500,000

B-9

Rs.700,000

Rs.800,000

B-10

Rs.875,500

Rs.900,000

Table: Tax on Cable Television Operator

Advance Tax on Sale to Distributors, Dealers or Wholesalers

Serial No

Category of Sales

Rate of Tax

01

Fertilizers

0.7%

02

Other than Fertilizers

0.1%

Table: Advance Tax on Sale to Distributors, Dealers or Wholesalers

Advance Tax on Dealers, Commission Agents and Arhatis, etc.

Serial No

Group

Amount of Tax

01

Group or Class A

Rs.100,000

02

Group or Class B

Rs.7,5000

03

Group or Class C

Rs.5,0000

04

Any Other Category

Rs.5,0000

Table: Advance Tax on Dealers, Commission Agents and Arhatis, etc.

Advance Tax on Purchase of Immovable Property

Serial No

Period

Rate of Tax

01

Where the value of immovable property is up to 4 million

0%

02

Where the value of immovable property is more than 4 million

2%

Table: Advance Tax on Purchase of Immovable Property | The rate of tax to be collected under Sec. 236K shall be 1% of the fair market value.

Advance Tax on Sale or Transfer of Immovable Property

Serial No

Description

Rate of Tax

01

The rate of tax to be collected under Sec 236K shall be in accordance with the fair market value.

1%

Table: Advance Tax on Sale or Transfer of Immovable Property

Advance Tax on International Air Ticket

Serial No

Type of Ticket

Rate of Tax

01

First / Executive Class

Rs.16,000 per person

02

Others excluding Economy

Rs.12,000 per person

03

Economy

0

Table: Advance Tax on International Air Ticket

Advance Tax on Functions and Gatherings

Serial No

Locations

Rate of Tax

01

For Islamabad, Lahore, Multan, Faisalabad, Rawalpindi, Gujranwala, Bahawalpur, Sargodha, Sahiwal, Sheikhupura, Dear Ghazi Khan, Karachi, Hyderabad, Sukkur, Thatta, Larkana, Mirpur Khas, Nawabshah, Peshawar, Mardan, Abbotabad, Kohat, Dera Ismail Khan, Quetta, Sibi, Loralai, Khuzdar, Dear Murad Jamali and Turbat.

5% of the bill ad valorem or Rs.20,000 per function, whichever is higher

02

For cities other than those mentioned above.

5% of the bill ad valorem or Rs.10,000 per function, whichever is higher

Table: Advance Tax on Functions and Gatherings

Advance Tax on Insurance Premium

Serial No

Type of Premium

Rate of Tax

01

General insurance premium

4%

02

Life insurance premium if exceeding Rs. 0.3 million in aggregate per annum

1%

03

Others

0%

Table: Advance Tax on Insurance Premium

Advance Tax on Extraction of Minerals

Serial No

Description

Rate of Tax

01

The rate of tax to be collected under Sec 236V as per value of the minerals.

5%

Table: Advance Tax on Extraction of Minerals

Performing a High Quality Audit

In today’s ever changing global economy, businesses need trusted advisers. Our audit specialists take the time to understand your business as well as the industry in which you operate, whether it is in Pakistan and / or abroad.

Our audit approach focuses on understanding the clients’ business and control issues from the inside out. It combines a rigorous risk assessment, diagnostic processes, and audit testing procedures as well as a continuous assessment of our clients’ service performance. Our state of the art, audit tool, Audit System supports all phases of the audit process including planning, executing, reporting.

Investment Advisory Services

All investment carries some risk and thus needs careful analysis and expert advice. The key to be a successful investor is to achieve appropriate risk/return trade off by identification of risks that exist and their proactive management.

Our Investment Advisory Service professionals specialize in identifying risks arising from regulation, competition and macro economic forces and designing strategies to manage it to your advantage. Our range of services includes:

  • Advice on analyzing investment prospects and mode of doing business in Pakistan including advising on the form of legal entity, incorporation, obtaining of necessary permissions and help in dealing with local regulators.
  • Identification of suitable business partners and conducting due diligence.
  • Feasibility studies including preparation of projected financial statements and project.
  • Appraisal through NPV, IRR, Payback and DCF analysis including cost assessment and revenue projections.
  • Sensitivity analysis
  • Tariff and pricing studies

NOTE:

The contents as narrative above are subject to change through annual amendment.

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