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Tax Guide Pakistan

Tax Guide Pakistan

Personal Income Taxation in Pakistan

Pakistan follows a worldwide system of taxation for residents. For non-residents, income tax is only levied on income that is earned within Pakistan, or is sourced within Pakistan. In other words, for non-residents, all income is included that is deemed to be received within Pakistan.

Personal Income Tax Rates in Pakistan

For individuals that have salaried income more than 75% of the overall taxable income, the following tax rates are applicable:

  • For an annual income between 0 PKR (Pakistani Rupee) and 600,000 PKR (Pakistani Rupee): Tax is levied at a rate of 0%.
  • For an annual income between 600,000 PKR (Pakistani Rupee) and 1,200,000 PKR (Pakistani Rupee): Tax is levied at a rate of 5%.
  • For an annual income between 1,200,000 PKR (Pakistani Rupee) and 1,800,000 PKR (Pakistani Rupee): The basic tax for this income slab is PKR 30,000. Additionally, tax is levied on excess at a rate of 10%.
  • For an annual income between 1,800,000 PKR (Pakistani Rupee) and 2,500,000 PKR (Pakistani Rupee): The basic tax for this income slab is PKR 90,000. Additionally, tax is levied on excess at a rate of 15%.
  • For an annual income between 2,500,000 PKR (Pakistani Rupee) and 3,500,000 PKR (Pakistani Rupee): The basic tax for this income slab is PKR 195,000. Additionally, tax is levied on excess at a rate of 17.5%.
  • For an annual income between 3,500,000 PKR (Pakistani Rupee) and 5,000,000 PKR (Pakistani Rupee): The basic tax for this income slab is PKR 370,000. Additionally, tax is levied on excess at a rate of 20%.
  • For an annual income between 5,000,000 PKR (Pakistani Rupee) and 8,000,000 PKR (Pakistani Rupee): The basic tax for this income slab is PKR 670,000. Additionally, tax is levied on excess at a rate of 22.5%.
  • For an annual income between 8,000,000 PKR (Pakistani Rupee) and 12,000,000 PKR (Pakistani Rupee): The basic tax for this income slab is PKR 1,345,000. Additionally, tax is levied on excess at a rate of 25%.
  • For an annual income between 12,000,000 PKR (Pakistani Rupee) and 30,000,000 PKR (Pakistani Rupee): The basic tax for this income slab is PKR 2,345,000. Additionally, tax is levied on excess at a rate of 27.5%.
  • For an annual income between 30,000,000 PKR (Pakistani Rupee) and 50,000,000 PKR (Pakistani Rupee): The basic tax for this income slab is PKR 7,295,000. Additionally, tax is levied on excess at a rate of 30%.
  • For an annual income between 50,000,000 PKR (Pakistani Rupee) and 75,000,000 PKR (Pakistani Rupee): The basic tax for this income slab is PKR 13,295,000. Additionally, tax is levied on excess at a rate of 32.5%.
  • For an annual income higher than 75,000,000 PKR (Pakistani Rupee): The basic tax for this income slab is PKR 21,420,000. Additionally, tax is levied on excess at a rate of 35%.

On the other hand, the following tax rates are applicable for individuals, as well as other association of persons:

  • For an income between 0 PKR (Pakistani Rupee) and 400,000 (Pakistani Rupee): Tax rate is levied at a rate of 0%.
  • For an income between 400,000 PKR (Pakistani Rupee) and 600,000 (Pakistani Rupee): Tax rate is levied at a rate of 5%.
  • For an income between 600,000 PKR (Pakistani Rupee) and 1,200,000 (Pakistani Rupee): The basic tax for this income slab is PKR 10000. Additionally, tax is levied on excess at a rate of 10%.
  • For an income between 1,200,000 PKR (Pakistani Rupee) and 2,400,000 (Pakistani Rupee): The basic tax for this income slab is PKR 70,000. Additionally, tax is levied on excess at a rate of 15%.
  • For an income between 2,400,000 PKR (Pakistani Rupee) and 3,000,000 (Pakistani Rupee): The basic tax for this income slab is PKR 250,000. Additionally, tax is levied on excess at a rate of 20%.
  • For an income between 3,000,000 PKR (Pakistani Rupee) and 4,000,000 (Pakistani Rupee): The basic tax for this income slab is PKR 370,000. Additionally, tax is levied on excess at a rate of 25%.
  • For an income between 4,000,000 PKR (Pakistani Rupee) and 6,000,000 (Pakistani Rupee): The basic tax for this income slab is PKR 620,000. Additionally, tax is levied on excess at a rate of 30%.

Corporate Income Taxation in Pakistan

Resident companies in Pakistan are taxed on their worldwide income. On the other hand, non-resident companies are taxed only on the profits that are earned from branches located within Pakistan. This implies that all income that has been sourced from within Pakistan is computing corporate income tax.

Corporate Income Tax Rates in Pakistan

Corporate Income is taxed at the following rates in Pakistan:

  • For banking companies: CIT is levied at a rate of 35%.
  • For public companies other than banking companies: CIT is levied at a rate of 29%.
  • For any other companies: CIT is levied at a rate of 29%.
  • For small companies: CIT at a rate of 21%.

Minimum Turnover Tax: In the case where tax payable by companies is lesser than 1.25 of the given turnover, the company is mostly required to bear a CIT liability equivalent to 1.25% of the turnover.

Alternate Corporate Tax: Under the corporate income tax regime, minimum tax liability is calculated as the highest of 17% of the accounting income that is declared, or the corporate tax liability that is determined of the ordinance including the minimum tax declared on turnover.

Super Tax: Super Tax is levied on banking companies at a rate of 4% for the tax year 2021 and onwards.

Other Taxation in Pakistan

  • Value Added Tax: VAT is applied as a consumption tax at a rate of 17% on the value of goods. Alternatively, sales tax is also levied at a rate where VAT is not applicable. Sales Tax is levied at a rate of 16% across all provincial territories in Pakistan, except for Gilgit-Balistan.
  • Custom Duties: Custom and other duties are levied across all imported goods and services under the HS Code.

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