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Taxes in Pakistan

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Below are the different types of taxes in Pakistan.

  • Personal Tax: All individuals, unregistered firms, associations of persons, etc., are liable to tax, at the rates randing from 10 to 35 per cent.
  • Business Tax: Tax on the dividends received by a public company from a Pakistan company is payable at the rate of 5% and at the rate of 15% in case dividends are received by a foreign company. Inter-corporate dividends declared or distributed by power generation companies is subject to reduced rate of tax i.e, 7.5%. Other companies are taxed at the rate of 20%. Dividends paid to all non-company shareholders by the companies are subject to with holding tax of 10% which is treated as a full and final discharge of tax liability in respect of this source of income.
  • Inter-Corporate Dividend Tax: Tax on the dividends received by a public company from a Pakistan company is payable at the rate of 5% and at the rate of 15% in case dividends are received by a foreign company. Inetr-corporate dividends declared or distributed by power generation companies is subject to reduced rate of tax i.e., 7.5%. Other companies are taxed at the rate of 20%.
  • Treatment of Dividend Income: Dividend income received as below enjoys tax exemption, provided it does not exceed Rs. 10,000:
    • dividend received by non-resident from the state enterprises Mutual Fund set by the Investment Corporation of Pakistan;
    • dividends received from a domestic company out of income earned abroad provided it is engaged abroad exclusively in rendering technical services in accordance with an agreement approved by the Central Board of Revenue.
  • 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.
  • Customs: Goods imported and exported from Pakistan are liable to rates of Customs duties as prescribed in Pakistan Customs Tariff. Customs duties in the form of import duties and export duties constitute about 37% of the total tax receipts. The rate structure of customs duty is determined by a large number of socio-economic factors.
  • Excise: Excise duties are leviable on a limited number of goods produced or manufactured, and services provided or rendered in Pakistan. On most of the items Central Excise duty is charged on the basis of value or retail price. Some items are, however, chargeable to duty on the basis of weight or quantity.
  • Sales Tax: Sales Tax is levied at various stages of economic activity at the rate of 15% on:
    • all goods imported into Pakistan, payable by the importers;
    • all supplies made in Pakistan by a registered person in the course of furtherance of any business carried on by him;