The following tax rates apply in other cases (for natural and personal associations): The following tax rates apply if the income from natural compensation exceeds 75% of taxable income: A resident company is taxed on its worldwide income. Non-resident companies operating in Pakistan through a branch are taxed on their Pakistani income attributable to the branch at the rates applicable to a company. Tax rates under the normal tax system: For tax purposes, SMEs are divided into two categories, and taxable income tax must be calculated at the rates listed below: Federal agency tax rates on taxable income (for the 2022 tax year) are as follows: This year, a new concept of “women`s business” was introduced, defined as a startup founded by women as of July 1, 2021. A company whose 100% stake is owned or held by women is taxed at a reduced rate of 25% on its profits and profits from taxable transactions under the heading “Corporate income”. However, the benefit of this clause shall not be available to any company resulting from the transfer or reconstitution or the reconstruction or division of an existing company. In the future, the following tax rates will apply to “companies” and “small businesses”: If the tax due by a company is less than 1.25% of turnover, the company must pay a minimum tax of 1.25% of turnover. In some cases/sectors, this VAT is due at rates below 1.25% (between 0.25% and 0.75% of turnover). The minimum turnover-based tax provisions now also apply to permanent establishments of non-resident local authorities. The general tax rate on turnover for the 2022 tax year is 1.25% (TY 2021: 1.25%). The super tax can only be levied on banking companies at 4% for the 2021 tax year and above. Pakistani companies registered for VAT must present a tax invoice. Simplified invoices are allowed for retail sales. Invoices must contain the following information: When calculating the taxable income of a PE, the following principles apply: Exporters and certain financial service providers may request a suspension of VAT.

Imports of certain staple foods and agricultural products are exempt from import turnover tax. In general, payments due to dividends, interest, royalties and fees for income from technical services from Pakistani sources are subject to a withholding tax of 15%, the tax of which must be withheld/deducted from the gross amount to the beneficiary. The majority of these payments do not result in a 100% increase, even if the beneficiaries do not appear on the ATL. The only major payroll tax is the federal income tax. Tax-exempt income, capital gains from the sale of certain listed securities, income entitled to a 100% tax credit from equity investments, and income from not-for-profit organizations, trusts and charities are not subject to the collection of the CWB. Category 1: 7.5% of taxable income if the annual turnover of the company does not exceed PKR 100 million; The import tax is due at the time of customs clearance in Pakistan. AN SME is defined as a person engaged in the manufacturing industry and whose turnover in a tax year does not exceed Rs 250 million. If the company`s annual turnover exceeds Rs 250 million, it ceases to be an SME for this tax year and beyond. Certain withholding taxes applicable to payments to residents and non-residents are considered a minimum tax when determining their corporate tax on the basis of net income.

These transactions include, but are not limited to, the sale of goods (unless it is a company that is a manufacturer of such goods or by a company listed on a Pakistani stock exchange), the provision of services and the performance of contracts (unless payment is received by a company listed on the Pakistan Stock Exchange). The term “joint-stock company” means a company listed on a stock exchange in Pakistan or in which at least 50% of the shares are held by the federal government or a public trust. Category 2: 0.5% of gross turnover, with an annual turnover exceeding PKR 100 million, but not increasing by PKR 250 million. From 1. As of July 2020, a WHT rate of 10% applies to the payment of debt profits to non-residents on debt securities issued by the federal government under the Public Debt Act of 1944. These debt instruments must be purchased in an overseas bank account, a non-resident rapatriable rupee (NRAR) account or a foreign currency account with a banking company in Pakistan. The tax thus deducted is a final tax without the need for non-resident natural beings to file a tax return in Pakistan. Taxes paid in this case in excess of the normal tax liability may be deferred with a view to adjusting the tax payable for a subsequent tax year. However, that tax can only be compared with the tax liability of the five taxation years immediately following the taxation year for which the amount was paid. Taxation of small and medium-sized manufacturing enterprises [“SMEs”] – (excluding small enterprises) SMEs must register with the RBF on the IRIS web portal or with the Small and Medium-sized Enterprises Development Authority (SMEDA) on their SME registration portal.

A business that falls under the definition of SME is not considered a “small business”. The main advantages for builders and promoters who meet certain conditions mentioned in Article 100D are as follows: the WHT rate for certain transactions will be increased by 100% for people who do not appear on the ATL. . According to the ACT, a company`s minimum tax liability is the highest of 17% of the balance sheet income or corporate tax established in accordance with the regulation, including the minimum sales tax. This concept applies to all companies except insurance companies, companies active in the exploration and production of crude oil, banking companies and companies that benefit from a reduced tax rate. SMEs can also choose to be taxed under the FTR. This option must be exercised at the time of filing the tax return and is irrevocable for three taxation years. SMEs that opt for FTR taxation are not subject to a tax audit under Articles 177 and 214C.

The category-by-category tax rate under the FTR is given as follows: Pakistan levies taxes on its residents on their worldwide income. A non-resident natural person is taxed only on income from Pakistan, including income earned in Pakistan or considered to be received in Pakistan or accumulated or accumulated in Pakistan. Currently, the exemption of profits and profits from the sale of real estate to a developmental REIT regime and a rental REIT regime is available until June 30, 2023. Now, until June 30, 2023, this exemption will also be extended to profits and profits from the sale of real estate to other REIT systems. It was previously available until June 30, 2015. In the case of payments on transactions that are part of an overall arrangement of a contiguous business transaction, the agent (at the request of the payer) may allow the person to make the payment after deduction of the tax equal to 20% of the tax to be levied on that payment, which is normally 7%. The effective withholding rate in the present case is therefore 1.4%. This rate is 1% in the case of an offshore supply contract for an IPP in Azad Jammu & Kashmir under certain conditions.

VAT is due at the time of delivery. In the case of services, this is usually the earlier date on which the taxable delivery or payment is made. In the case of goods, this is usually the time when the invoice is settled with a payment. Calculated at the level of 20% of the VAT withholding tax regime, there is an anti-fraud measure that can be applied to some customers – usually payments covering the government to their customers. The same applies to advertising services, including non-resident providers. In such cases, the taxpayer must be a registered taxable person for withholding tax. . .

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