When Pakistan`s Tehreek-i-Insaf government announced the budget for the 2020-21 fiscal year in June 2020, it had left income taxes unchanged from the previous year to avoid an additional burden on salaried taxpayers. In other cases (for individuals and associations of persons), the following tax rates apply: For “corporations” and “small businesses”, the following tax rates will apply in the future: The federal tax rates on taxable income (for the 2022 tax year) are as follows: If the tax payable by a company is less than 1.25% of turnover, the company is required to 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). For non-employees earning more than 400,000 rupees, eight taxable income brackets with tax rates ranging from 5% to 35% are introduced as follows: 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 rate according to the normal tax system: For tax purposes, SMEs are divided into the following two categories, and taxable income tax must be calculated at the rates indicated below: The following tax rates apply if the person`s wage income exceeds 75% of taxable income: The income tax brackets for 2020-21 are therefore as follows: Pakistani companies registered for VAT must present a tax invoice. Simplified invoices are allowed for retail sales. Invoices must contain the following information: 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 import tax is due at the time of customs clearance in Pakistan. Effective July 1, 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. 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. 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. When calculating the taxable income of a PE, the following principles apply: To find out what tax rate is applicable to you, multiply your gross monthly salary by 12 and match it to the appropriate plate. The WHT rate for some transactions will be increased by 100% for people who do not appear on the ATL. The main benefits for builders and developers who meet certain conditions mentioned in Article 100D are as follows: In general, payments due to dividends, interest, royalties and fees on Pakistani service income are subject to a withholding tax (WHT) of 15%, the tax of which must be withheld/deducted from the gross amount paid 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.
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. The super tax can only be levied on banking companies at 4% for the 2021 tax year and above. 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%). Taxation of small and medium-sized manufacturing enterprises (`SMEs` – (with the exception of small enterprises) Calculated at 20% of the VAT withholding tax scheme, there is an anti-fraud measure which may be applied to certain customers, usually public bodies which pay 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. 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.
. The last tax filing date for 2020 is December 8, 2020, according to a statement from RBF. 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. The only major payroll tax is the federal income tax. Category 1: 7,5 % of taxable income if the annual turnover of the enterprise does not exceed PKR 100 million; SMEs must register with RBF on the IRIS web portal or with the Small and Medium Enterprises Development Authority (SMEDA) on their SME registration portal. .