Tax Law & Lawyers in Pakistan

Tax Law

Here you may find information about tax law and lawyers in Pakistan. Our dedicated team of professional lawyers best assists their clients as to tax law in Pakistan. 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.

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 business performance, drive shareholder value and create competitive advantage.


Our Services include:

  • Corporate and individual tax planning including of Trusts, Cooperative Societies and NGOs.

  • Compliance services including preparation of income tax and sales tax returns and Customs clearance.

  • Representing clients before tax authorities and assisting in preparing appeals to the Tribunals, High Courts and Supreme Court.

  • International Tax Consultancy including tax on international transactions and advising on double taxation treaties.

  • Assisting with sales tax matters including registration, de-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

  • Interest on Securities

  • Income from Property

  • Income from Business or Profession

  • 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 10 to 35 per cent.

Tax on Companies

All public companies (other than banking companies) incorporated in Pakistan are assessed for tax at corporate rate of 35%. However, the effective rate is likely to differ on account of allowances and exemptions related to industry, location, exports, etc.

Wealth Statement u/Sec. 116

Wealth Statement u/Sec. 116 is compulsory, where declared income is Rs. 500,000/- or more.

Tax u/Sec. 153(8A) (omitted)

Now, where NTN/CNIC is not available, the excess tax @ 2% shall not be collected.

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. 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.

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.


Income Tax Rates

For the Tax Year 2016 and Onward


Tax for Individuals and Association of Persons [AOP]

Serial No

Taxable Income

Rate of Tax

01

Where the taxable income does not exceed Rs.400,000

0%

02

Where the taxable income exceeds Rs.400,000 but does not exceed Rs.500,000

7% of the amount exceeding Rs.400,000

03

Where the taxable income exceeds Rs.500,000 but does not exceed Rs.750,000

Rs.7,000 + 10% of the amount exceeding Rs.500,000

04

Where the taxable income exceeds Rs.750,000 but does not exceed Rs.1,500,000

Rs.32,000 + 15% of the amount exceeding Rs.750,000

05

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

Rs.144,500 + 20% of the amount exceeding Rs.1,500,000

06

Where the taxable income exceeds 2,500,000 but does not exceed Rs.4,000,000

Rs.344,000 + 25% of the amount exceeding Rs.2,500,000

07

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

Rs.719,500 + 30% of the amount exceeding Rs.4,000,000

08

Where the taxable income exceeds Rs.6,000,000

Rs.1,319,500 + 35% of the amount exceeding Rs.6,000,000 for AOP 32% for Tax Year 2016 & onward.

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Tax for Salaried Persons [50% reduction, if the age of salaried person exceeds 60 years.]

Serial No

Taxable Income

Rate of Tax

01

Where the taxable income does not exceed Rs.400,000

0%

02

Where the taxable income exceeds Rs.400,000 but does not exceed Rs.500,000

2% of the amount exceeding Rs.400,000

03

Where the taxable income exceeds Rs.500,000 but does not exceed Rs.750,000

Rs.2,000 + 5% of the amount exceeding Rs.500,000

04

Where the taxable income exceeds Rs.750,000 but does not exceed Rs.1,400,000

Rs.14,500 + 10% of the amount exceeding Rs.750,000

05

Where the taxable income exceeds Rs.1,400,000 but does not exceed Rs.1,500,000

Rs.79,500 + 12.5% of the amount exceeding Rs.1,400,000

06

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

Rs.92,000 + 15% of the amount exceeding Rs.1,500,000

07

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

Rs.137,000 + 17.5% of the amount exceeding Rs.1,800,000

08

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

Rs.259,500 + 20% of the amount exceeding Rs.2,500,000

09

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

Rs.359,500 + 22.5% of the amount exceeding Rs.3,000,000

10

Where the taxable income exceeds Rs.3,500,000 but does not exceed Rs.4,000,000

Rs.472,000 + 25% of the amount exceeding Rs.3,500,000

11

Where the taxable income exceeds Rs.4,000,000 but does not exceed Rs.7,000,000

Rs.597,500 + 27.5% of the amount exceeding Rs.4,000,000

12

Where the taxable income exceeds Rs.7,000,000

Rs.1,422,000 + 30% of the amount exceeding Rs.7,000,000

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Tax for Companies [Other than Banking Companies]

Serial No

Tax Year

Rate of Tax

01

2016

32%

02

2017

31%

03

2018

30%

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Where the taxpayer is a small company as defined in Section 2 of the income tax ordinance, 2001, tax shall be payable at the rate of 25%

Dividend Tax

Serial No

Description

Rate of Tax

01

In the case of dividends declared or distributed by purchaser of a power project privatized by WAPDA or on share of a company set up by power generation or on shares of a company, supplying coal exclusively to power generation projects.

7.5%

02

In cases other than mentioned in 01 and 03.

12.5%

03

In case of dividend received by a person from a mutual fund.

10%

04

If dividend receipts are less than capital gains.

12.5%

05

The dividend received by a company from a collective investment scheme (REIT Scheme) or a mutual fund (other than a stock fund)

25%

06

If a Developmental REIT Scheme with the object of development and construction of residential buildings is set up by 30th day of June, 2018, tax imposed on dividend received by a person from such Developmental REIT Scheme shall be reduced by fifty percent for 3 years from 30th day of June, 2018.

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Super Tax

Serial No

Person(s)

Rate of Tax

01

Banking Company

4%

02

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

3%

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Tax for Profit on Debt

Serial No

Profit on Debt

Rate of Tax

01

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

10%

02

Where profit on debt exceeds Rs.25,000,000 but does not exceed Rs.50,000,000

Rs.2,500,000 + 12.5% of the amount exceeding Rs.25,000,000

03

Where profit on debt exceeds Rs.50,000,000

Rs.5,625,000 + 15% of the amount exceeding Rs.50,000,000

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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

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Tax on Income from Property

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

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

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Tax on Prizes and Winnings

Serial No

Description

Rate of Tax

Filer

Non-filer

01

Prize on prize bond or cross-word puzzle

15% of the gross amount paid

20% of the gross amount paid

02

Winnings from a raffle, lottery, prize on winning a quiz, prize offered by a company for promotion of sale

20% of the gross amount paid

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Capital Gains on Disposal of Securities

Serial No

Period

Rate of Tax

Filer

Non-filer

01

Where holding period of a security is less than twelve months

15%

18%

02

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

12.6%

16%

03

Where holding period of a security is twenty-four months or more but the security was acquired on or after 1st July, 2012

7.5%

11%

04

Where the security was acquired before 1st July, 2012

0%

0%

05

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

5%

5%

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Capital Gains on Disposal of Immovable Property

Serial No

Period

Rate of Tax

01

Where the holding period of the property is up to five years.

10%

02

Where the holding period of the property is more than five years.

0%

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Tax on Builders

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 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

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Tax on Developers

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

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Minimum Tax

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);

  • Pakistan International Airlines Corporation;

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

  • Dealers or distributors of fertilizers.

0.5%

02

  • 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; and

  • Flour mills

0.2%

03

Motorcycle dealers registered under the Sales Tax Act, 1990

0.25%

04

In all other cases

1%

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Advance Tax

Serial No

Person(s)

Rate of Tax

Filer

Non-filer

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

  • Designated buyer of LNG on behalf of Government of Pakistan, to import LNG

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

1.5% 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

3% 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

4.5% of the import value as increased by customs-duty, sales tax and federal excise duty

04

Ship breakers on import of ships

4.5%

6.5%

05

Industrial undertakings not covered under S. Nos 01 to 04

5.5%

8%

06

Companies not covered under S. Nos. 01 to 05

5.5%

8%

07

Persons not covered under S. Nos. 01 to 06

6%

9%

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Advance Tax on Dividend

Serial No

Description

Rate of Tax

01

In the case of dividends declared or distributed by purchaser of a power project privatized by WAPDA or on share of a company set up by power generation or on shares of a company, supplying coal exclusively to power generation projects.

7.5%

02

For filers other than mentioned in (a) above.

12.5%

03

For Non-filers other than mentioned in (a) above.

20%

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Tax on Collective Investment Scheme or a Mutual Fund

Person(s)

Stock Fund

Money market fund, income fund or REIT scheme or any other fund

Filer

Non-filer

Individual

10%

10%

15%

Company

10%

25%

25%

AOP

10%

10%

15%

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Tax on Brokerage and Commission

Serial No

Person(s)

Rate applicable on the amount of payment

Filer

Non-filer

01

Advertising Agents

10%

15%

02

Life Insurance Agents where commission received is less than Rs. 0.5 million per annum

8%

16%

03

Persons not covered in 1 & 2 above

12%

15%

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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

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Collection of Tax on Passenger Transport Vehicles

Serial No

Capacity

Rate per seat per annum

Filer

Non-filer

01

Four or more persons but less than ten persons.

Rs.50

Rs.100

02

Ten or more persons but less than twenty persons.

Rs.100

Rs.200

03

Twenty persons or more.

Rs.300

Rs.500

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Yearly Collection of Tax on Private Motor Vehicles

Serial No

Engine Capacity

Rate of Tax

Filer

Non-filer

01

Up to 1000cc

Rs.800

Rs. 1,200

02

1001cc to 1199cc

Rs.1,500

Rs.4,000

03

1200cc to 1299cc

Rs.1,750

Rs.5,000

04

1300cc to 1499cc

Rs.2,500

Rs.7,500

05

1500cc to 1599cc

Rs.3,750

Rs.12,0000

06

1600cc to 1999cc

Rs.4,500

Rs.15,000

07

2000cc and above

Rs. 10,000

Rs. 30,000

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Lump sum Collection of Tax on Private Motor Vehicles

Serial No

Engine Capacity

Rate of Tax

Filer

Non-filer

01

Up to 1000cc

Rs.10,000

Rs. 10,000

02

1001cc to 1199cc

Rs.1,8000

Rs.36,000

03

1200cc to 1299cc

Rs.20,000

Rs.40,000

04

1300cc to 1499cc

Rs.30,000

Rs.60,000

05

1500cc to 1599cc

Rs.45,000

Rs.90,0000

06

1600cc to 1999cc

Rs.60,000

Rs.120,000

07

2000cc and above

Rs. 120,000

Rs. 240,000

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Collection of Tax on Electricity Consumption

Serial No

Electricity Bill

Amount in Rs.

01

Does not exceed Rs.400

0

02

Exceeds Rs.400 but does not exceed Rs.600

80

03

Exceeds Rs.600 but does not exceed Rs.800

100

04

Exceeds Rs.800 but does not exceed Rs.1,000

160

05

Exceeds Rs.1,000 but does not exceed Rs.1,500

300

06

Exceeds Rs.1,500 but does not exceed Rs.3,000

350

07

Exceeds Rs.3,000 but does not exceed Rs.4,500

450

08

Exceeds Rs.4,500 but does not exceed Rs.6,000

500

09

Exceeds Rs.6,000 but does not exceed Rs.10,000

650

10

Exceeds Rs.10,000 but does not exceed Rs.15,000

1,000

11

Exceeds Rs.15,000 but does not exceed Rs.20,000

1,500

12

Exceeds Rs.20,000

  • At the rate of 12% for commercial consumers; and

  • At the rate of 5% for industrial consumers.

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Advance Tax on Domestic Electricity Consumption

Serial No

Description

Rate of Tax

01

If the amount of monthly bill is Rs.75,000 or more

7.5%

02

If the amount of bill is less than Rs.75,000

0%

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Collection of Tax on Telephone Users

Serial No

Description

Rate of Tax

01

In the case of a telephone subscriber (other than 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 telephones and pre-paid internet or telephone card

14% 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.

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Tax on Cash Withdrawal from a Bank

Serial No

Description

Rate of Tax

Filer

Non-filer

01

Cash amount withdrawn (only if exceeding 50,000)

0.3% of the amount withdrawn

0.6% of the amount withdrawn

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Advance Tax on Transactions in Bank [Transferor]

Serial No

Description

Rate of Tax

Filer

Non-filer

01

Banking Transaction including Demand Draft, Pay order, CDR, STDR, SDR, RTC

0.3% of the amount withdrawn

0.6% of the amount withdrawn

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

Serial No

Description

Rate of Tax

Filer

Non-filer

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.

__

0.6% of the transaction amount

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Advance Tax on Purchase and Registration of Motor Vehicles

Serial No

Engine Capacity

Rate of Tax

Filer

Non-filer

01

Up to 850cc

Rs.10,000

Rs. 10,000

02

851cc to 1000cc

Rs.20,000

Rs.25,000

03

1001cc to 1300cc

Rs.30,000

Rs.40,000

04

1301cc to 1600cc

Rs.50,000

Rs.100,000

05

1601cc to 1800cc

Rs.75,000

Rs.150,0000

06

1801cc to 2000cc

Rs.100,000

Rs.200,000

07

2001cc to 2500cc

Rs.150,000

Rs.300,000

08

2501cc to 3000cc

Rs.200,000

Rs.400,000

09

Above 3000cc

Rs.250,000

Rs.450,000

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Advance Tax on Transfer of Registration or Ownership

Serial No

Engine Capacity

Rate of Tax

Filer

Non-filer

01

Up to 850cc

__

Rs.5,000

02

851cc to 1000cc

Rs.5,000

Rs.15,000

03

1001cc to 1300cc

Rs.7,000

Rs.25,000

04

1301cc to 1600cc

Rs.12,500

Rs.65,000

05

1601cc to 1800cc

Rs.18,750

Rs.100,000

06

1801cc to 2000cc

Rs.25,000

Rs.135,000

07

2001cc to 2500cc

Rs.37,500

Rs.200,000

08

2501cc to 3000cc

Rs.50,000

Rs.270,000

09

Above 3000cc

Rs.62,500

Rs.300,000

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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

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Advance Tax on Sale to Distributors, Dealers or Wholesalers

Serial No

Category of Sales

Rate of Tax

Filer

Non-filer

01

Fertilizers

0.7%

1.4%

02

Other than Fertilizers

0.1%

0.2%

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

Serial No

Group

Amount of Tax

01

Group or Class A

Rs.10,000

02

Group or Class B

Rs.7,500

03

Group or Class C

Rs.5,000

04

Any Other Category

Rs.5,000

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Advance Tax on Purchase of Immovable Property

Serial No

Period

Rate of Tax

Filer

Non-filer

01

Where the value of immovable property is up to 3 million

0%

0%

02

Where the value of immovable property is more than 3 million

2%

4%

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Advance Tax on Sale or Transfer of Immovable Property

Serial No

Description

Rate of Tax

Filer

Non-filer

01

Gross amount of the consideration received

1%

2%

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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

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Advance Tax on Functions and Gatherings

Serial No

Description

Rate of Tax

01

Total amount of the bill

5% of the total bill amount

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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. 0.2 million per annum

1%

03

Others

0%

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Advance Tax on Extraction of Minerals

Serial No

Description

Rate of Tax

Filer

Non-filer

01

On the value of the minerals

0%

5%

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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. However, the general scheme envisages higher rates on luxury items as well as on less essential goods. The import tariff has been given an industrial bias by keeping the duties on industrial plants and machinery and raw material lower than those on consumer goods.


Transportation Map Pakistan

Pakistan Customs

Federal Excise

Federal 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 Federal 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. Classification of goods is done in accordance with the Harmonized Commodity Description and Coding System which is being used all over the world. All exports are exempted from Federal Excise Duty.

Sales Tax

The following personnel shall make an application in the Form STR-1, transmitted to the CRO “Central Registration Office” electronically or through registered mail or courier services for registration under Sales Tax Rules, 2006, Chapter I “Registration, compulsory Registration and De-Registration” as per following conditions:

PERSON

CONDITION

LIABILITY
EXEMPTION

Manufacturer

Value of Taxable supplies does not exceed Rs. 5,000,000 in any period during the last twelve month or whose annual utility bills does not exceed Rs 600,000 during the last 12 months.

Supplies will be exempted under Sr. 42 of the Sixth Schedule.

Retailer

Value of supplies does not exceed Rs. 5,000,000 in any period during the last twelve month.

Supplies will be exempted under Sr. 42 of the Sixth Schedule.

Importer

Person is liable to be Registered.

Wholesaler / Supplier including Dealer and Distributor

Person is liable to be Registered.

Table: Sales Tax Liability Exemption

As per newly inserted Section 8B of the Act, a registered person is restricted to claim adjustment of input tax to the extent of ninety percent of output tax for that tax period. Further, it permits the adjustment of input charged in acquisition of fixed assets in twelve equal monthly installments after the start of production of a new unit. The Board is empowered to exclude any person from the above purview.

However, the input tax inadmissible in excess of 90% of the output tax, may be allowed on yearly basis in the second month following the end of the financial year of the registered person subject to the following condition namely:

  • In case of a registered person whose accounts are subject to audit under the Companies Ordinance, 1984 upon furnishing a statement along with annual audited accounts duly certified.

  • In other cases, adjustment may be allowed as per specific notification issued by the Board.

Time of Supply

Sales Tax was taxable at the earlier of the time of delivery of goods or when any payment is received by the supplier in respect of such supply. If has now been restricted only to the time of delivery of goods by the supplier irrespective of the actual time of payment.

Through newly inserted subsection (1A) of Section 23, the Board is empowered to restrict a registered person to use as many number of business bank accounts as may be specified.

As per amendment in Section 24 of the Act, retention of record and documents by a registered person has been enhanced from three years to five years.

A new concept of Withholding Agent has been introduced through SRO No 550(1)/2007, dated 30th June, 2007 wherein a withholding agent shall deduct as amount equal to one fifth (1/5th) of total sales tax shown in the sales tax invoice issued by the supplier and make payment of the balance amount to him.

Default Surcharge

  • For first six months 1% per month

  • For subsequent period till the final payment 1.5% per month

  • In case of tax fraud till the final payment 2% per month

Offences and Penalties

OFFENCES

PENALTIES

SECTION
REFRENCE

Non filing of returns

Five thousand rupees within fifteen days, one hundred rupees for each day of default

Sec. 26

Non issuance of invoices

Five thousand rupees of five percent of the amount which ever is higher

Sec. 23

Issuance of invoices without authority

Ten Thousand rupees or five percent of the amount which ever is higher

Sec. 3, 7 and 23

Non notification change in the particulars of registration

Five Thousand rupees

Sec. 14

Failure of deposit the amount of tax due

Ten Thousand rupees or five percent of the amount whichever is higher

Within fifteen days, give hundred rupees each day of default. No penalty for miscalculation.

Non payment and imprisonment for three year or both

Sec. 3, 6, 7 and 48

Repeation of miscalculation for less tax during the year

Ten Thousand rupees or three percent of the amount whichever is higher

Non filing of application registration

Ten Thousand rupees or five percent of the amount whichever is higher

Non filing after sixty days conviction and imprisonment for three years

Non maintenance of records

Ten Thousand rupees or five percent of the amount whichever is higher

Non compliance with Section 25

Five Thousand rupees

Sec. 25

Receipt of second notice

Ten Thousand rupees

Receipt of third notice

Fifteen Thousand rupees

Non filing of information required by the board

Ten Thousand rupees

Sec. 26

Filing of false documents

Destruction / alteration of record

Making of false statement

Twenty Five Thousand rupees or one hundred percent of the amount whichever is higher. Conviction and imprisonment of three years or with both

Sec. 2 (37) and General

Obstruction of Sales Tax Officer

Twenty Five Thousand rupees or one hundred percent of the amount whichever is higher. Conviction and imprisonment of three years or with both

Sec. 25, 38 and 38A

Abetment in commissioning of tax fraud

Twenty Five Thousand rupees or one hundred percent of the amount whichever is higher. Conviction and imprisonment of three years or with both

Sec. 2 (37)

Violation of any embargo placed or removal of goods in connection with recovery of tax

Twenty Five Thousand rupees or one hundred percent of the amount whichever is higher. Conviction and imprisonment of three years or with both

Sec. 48

Obstructions of Sales Tax Officer

Twenty Five Thousand rupees or one hundred percent or three percent of he amount whichever is higher

Sec. 31 and General

Non compliance with Section 73

Five thousand rupees or three percent of the amount whichever is higher

Sec. 73

Non fulfillment of notification issued under any of the provisions of this Act

Five Thousand Rupees of three percent of the amount whichever is higher

Sec. 71 and General

Sales Tax officer causing loss to the sales tax revenue

Convection and imprisonment for three year or five equal to tax, or with both

General

Contravention with provision of this act and no penalty has been provclassed

Five Thousand Rupees or three percent of the amount, which ever is higher

General

Non filing of the summary of sale or purchase invoices

Twenty Five Thousand Rupees

Sec. 26(5)

Table: Offences and Penalties

Sales Tax is levied at various stages of economic activity at the rate of 15 per cent 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; and

  • There is an in-built system of input tax upto 90% adjustment and a registered person can make this adjustment of tax paid at earlier stages against the tax payable by him on his supplies. The tax paid at any stage does not exceed 15% of the total sales price of the supplies.

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.


Our Core Competencies

1

Collaborative Skillset

Collaborative lawyers trust the wisdom of the group; lone wolves and isolationists do not do any good anymore.

2

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Distant, detached lawyers are relics of the 20th century, the market no longer wants a lawyer who is only half a person.

3

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If you can not effectively and efficiently use e-communications, and mobile tech, you might as well just stay home.

4

Time Management

Virtually a substantial part of lawyers difficulties in this regard lie with their inability to prioritise their time.


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