A resident corporation is taxed on its worldwide income. Non-resident companies carrying on business in Pakistan through a branch are taxed on their Pakistani income attributable to the branch at the rates applicable to a company. Certain withholding taxes applicable to payments to residents and non-residents are considered a minimum tax when determining their corporate income tax on the basis of net income. These transactions include, but are not limited to, the sale of goods (except in the case of a company that manufactures such goods or by a company listed on the Pakistan Stock Exchange), the provision of services and the performance of contracts (unless payment is received from a company listed on the Pakistan Stock Exchange). In Pakistan, the corporate tax rate for the 2017 and 2018 tax years is 30% of business income. Permanent establishments of non-residents are now subject to minimum tax rules on the basis of turnover. The general VAT rate for the fiscal year 2022 is 1.25% (TY 2021: 1.25%). The tax rate to be deducted under Section 153B is as follows: The term “public company” means a company listed on the stock exchange in Pakistan or in which at least 50% of the shares are held by the federal government or a public trust. The corporate tax rate for the 2021-2022 tax year is 29%. Future tax rates for “corporations” and “small businesses” will be as follows: When calculating the taxable income of a permanent establishment, the following principles apply: The WHT rate for certain transactions is increased by 100% for persons not listed in the ATL. In the case of a payment for transactions that are part of an overall arrangement of a related enterprise, the Commissioner may (at the request of the payer) allow the person to make the payment after deduction of tax up to 20% of the tax, which is normally 7%. The effective rate of withholding tax 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. According to the ACT, a company`s minimum tax liability is the higher of 17% of accounting revenues or corporation tax determined under the Regulation, including minimum VAT. This concept applies to all companies except insurance companies, companies engaged in oil exploration and production, banking companies and companies benefiting from a reduced tax rate. The federal corporate tax rates on taxable income (for the 2022 tax year) are as follows: The tax rate levied on a company`s dividends in accordance with Section 5 is:- the taxation of small and medium-sized manufacturing enterprises [hereinafter referred to as “SMEs”] – (other than small enterprises) category 1: 7.5% of taxable income if the annual turnover of the company does not exceed PKR 100 million; Reducing tax rates is not possible for banking companies. Financial institutions are still required to pay 35% of their revenues. For a small business, the corporate tax rate was 25%. However, by the 2019 tax year, the tax rate has been changed and will be reduced to 20% starting with the 2023 tax year. SMEs must register with RBF on the IRIS web portal or with the Small and Medium Enterprise Development Authority (SMEDA) on its SME registration portal. A business covered by the definition of SME is not considered a “small business”.
Exempt income, capital gains from the sale of certain listed securities, income from investments in shares at 100% tax credits, and income from charities, trusts and charities are not subject to collection from the CWB. This tax rate was reduced to 34% in 2014 and 33% in 2015. This year, a new concept of “women`s business” was introduced, defined as a start-up founded by women as of July 1, 2021. A company with 100% of the capital owned or owned 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 is not available to an undertaking created by the transfer, reconstitution, restructuring or division of an existing undertaking. Normal tax rate of 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: If the tax payable 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 payable at rates below 1.25% (between 0.25% and 0.75% of turnover). The taxable income tax rate of a corporation that is not a banking corporation is 32% for the 2016 tax year, 31% for the 2017 tax year and 30% for the 2018 tax year and beyond.
The Government has gradually lowered corporate income tax rates. The 35% tax rate applied to businesses from 2007 to 2014. The tax rate applied to non-resident payments under section 6 is as follows: – The Federal Board of Revenue (FBR) has published updated income tax rates that apply to businesses for the 2022 tax year. Tax rates are included in the amended Income Tax Ordinance 2001. In addition, the tax rate was reduced to 32% for the 2016 taxation year, 31% for the 2017 taxation year and 30% for the 2018 taxation year. Finally, the tax was reduced and set at 29% for the 2019 tax year and beyond. Small business is neither a generic term nor a general term, the term is only used in tax law to levy a lower tax on companies that have a turnover/turnover of less than 250 million (25 crore), less than 250 employees and a paid-up capital (paid-up capital plus retained earnings) of less than 50 million (5 crore).