Tax structure of

Pakistan
(A bird eye view)

Presented By:
Abdul Basit Sultani
basit554@hotmail.c
om

Ta
To tax (from the Latin taxo; "I estimate") is to impose a
financial charge or other
xlevy upon a taxpayer (an
individual or legal entity) by a state or the functional
equivalent of a state such that failure to pay is
punishable by law.
Direct tax

In the general sense, a

direct tax is one paid
Indirect tax
directly to the
an indirect tax or
government by the
"collected" tax (such
persons (juristic or
as sales
tax orcommentators
value
Some
have
natural) on whom it is
added tax (VAT)); a
argued
that
tax is
one
imposed
(often
"collected" tax
is one"a direct
accompanied by a tax
which
is collected
by be shifted
that
cannot
by
the
return filed by the
intermediaries who
taxpayer
taxpayer).else,
Examples
turn over the to someone
include some income
proceeds to thean indirect
whereas
tax
can
taxes, some corporate
government and file

A income tax is a tax

levied on the income of
individuals or businesses
(corporations or other
legal entities). When the
tax is levied on the
income of companies, it is
often called a corporate
tax, corporate income
tax, or profit tax.
Individual income taxes
often tax the total income
of the individual (with
some deductions
permitted), while
corporate income taxes
often tax net income (the

Asales taxis
aconsumption
taxcharged at thepoint
of purchasefor certain
goods and services. The
tax amount is usually
calculated by applying
apercentagerate to the
taxable price of a sale.
Most sales taxes are
collected from the buyer
by the seller, who remits
the tax to a government
agency. Sales taxes are
commonly charged on
sales of goods, but many
sales taxes are also
charged on sales of

Income tax
Pakistan
Law concerning
taxation of income in
Pakistan is stated in
the Income Tax
Ordinance, 2001 (the
Ordinance) and the
rules framed there
under viz. Income
Tax Rules, 2002 (the
Rules). The
Ordinance is a
Central statute and
is, therefore,
applicable to the
whole of Pakistan
.Under section 4 of
the Ordinance,
income tax is
imposed for each tax
year at specified
rates on every

Tax Year in Pakistan

Tax year is a period of
twelve months ending
on 30th June and shall
be denoted by the
calendar year in which
the said date falls.

Total Income
it is the sum of a person's
income under each of the
heads of income for the
year.
Heads of Income in
Pakistan
Under the Ordinance
income is classified into
Taxable Income in
the following five heads:
Pakistan
It is the total income of Salary, Income from
property, Income from
a person for a tax year
business, Capital gains
reduced by the total of
and Income from other
any deductible
sources.
allowances, under the
The income of a person
Ordinance, for the
under a head of income
year. A person is
entitled to a deductible shall be the total of the
amount derived by the
allowance for the
person in a tax year that
amount of any Zakat
paid by the person in a are chargeable to tax
under the head as
tax year under the
reduced by the total
Zakat & Ushr

Residence
An individual is
considered resident
for a tax year if
he/she is in Pakistan
for more than 182
days in that tax
year.

Tax Filing
status
Joint tax returns
are not permitted;
each individual
must file a
separate tax
return.

Tax Deductions
and tax
Penalties
allowances
The penalty for
Deductions and
failure to file a
allowances are
available for the non tax return is
0.1% of the
salaried class, but
not for the salaried
amount of the
class.
tax payable for
each day of
default. The
Real property
minimum
tax
penalty is PKR
A 6% tax is
500 and the
imposed on the
maximum is
value of real
property
25% of the
amount of tax
payable.

Tax credits
Payroll tax generally
are allowed under Chapter 3
refers to two different
Part 10 of the Ordinance:
kinds of similar taxes.
Charitable donations,
investment in shares,
The first kind is a tax
retirement annuity scheme
that employers are
and profit on debt.
required to withhold
Tax rates
from employees'
Tax rates for the salaried class in
wages, also known as
Pakistan are 0.5% to 20%, and for
withholding tax, payother taxpayers, 0.5% to 25%.
as-you-earn tax (PAYE),
Basis Income tax is payable by
salaried male individuals if
or pay-as-you-go tax
taxable income exceeds PKR
(PAYG). The second
200,000 and by female
kind is a tax that is
individuals if taxable income
paid from the
exceeds PKR 260,000. Income tax
is payable by non-salaried
employer's own funds
individuals if taxable income
and that is directly
exceeds PKR 100,000. These
related to employing a
thresholds are effective from 1
worker,
which
can
2009.
The limit not chargeable to tax July
for Tax
Year 2010 is: Rs.
consist
of a fixed
200,000.
The limit
charge
or benot chargeable to tax for salaried women is: Rs.

S.N
o

Taxable income

Rate

S.

Taxable income

Rate

N
o
.

1.

Where taxable income

does not exceed Rs.200,000

0%

11.

Where the taxable income exceeds

Rs.10,50,000
but does not exceed Rs.12,00,000,

10.00%

2.

Where the taxable income exceeds

Rs.200,000 but does not
exceed Rs.250,000

0.50%

12.

Where the taxable income exceeds

Rs.12,00,000
but does not exceed Rs.1450,000,

11.00%

3.

Where the taxable income exceeds

Rs.250,000 but does not
exceed Rs.350,000

0.75%

13.

Where the taxable income exceeds

Rs.1,450,000 but does not exceed
Rs.1,700,000,

12.50%

4.

Where the taxable income exceeds

Rs.350,000 but does not
exceed Rs.400,000

1.50%

14.

Where the taxable income exceeds

Rs.1,700,000 but does not exceed
Rs.1,950,000,

14.00%

5.

Where the taxable income exceeds

Rs.400,000 but does not
exceed Rs.450,000

2.50%

15.

Where the taxable income exceeds

Rs.1,950,000 but does not exceed
Rs.2,250,000,

15.00%

6.

Where the taxable income exceeds

Rs.450,000 but does not
exceed Rs.550,000

3.50%

16.

Where the taxable income exceeds

Rs.2,250,000 but does not exceed
Rs.2,850,000,

16.00%

7.

Where the taxable income

exceedsMRs.550,000 but does
not exceed Rs.650,000

4.50%

17.

Where the taxable income exceeds

Rs.2,850,000 but does not exceed
Rs.3,550,000,

17.50%

8.

Where the taxable income exceeds

Rs.650,000 but does not
exceed Rs.750,000,

6.00%

18.

Where the taxable income exceeds

Rs.3,550,000 but does not exceed
Rs.4,550,000,

18.50%

9.

Where the taxable income exceeds

Rs.750,000 but does not
exceed Rs.900,000,

7.50%

19.

Where the taxable income exceeds

Rs.4,550,000 but does not exceed
Rs.8,650,000,

19.00%

Non salaried person

Taxable Income

Rate of Tax

Up to Rs. 100,000

Nil

Rs. 100,000 - 110,000

0.50

Rs. 110,000 - 125,000

1.00

Rs. 125,000 - 150,000

2.00

Rs. 150,000 - 175,000

3.00

Rs. 175,000 - 200,000

4.00

Rs. 200,000 - 300,000

5.00

Rs. 300,000 - 400,000

7.50

Rs. 400,000 - 500,000

10.00

Rs. 500,000 - 600,000

12.50

Rs. 600,000 - 800,000

15.00

Rs. 800,000 - 1,000,000

17.50

Rs. 1,000,000 - 1,300,000

21.00

Over Rs. 1,300,000

25.00

CORPORATE TAX
RATES
Pakistan corporate tax rate is 35% of net taxable income of a
company. For nonresidents, a 15% rate is levied on the gross
amount of royalties or technical service fees, and 30% for other
Taxable income
payments under the presumptive
tax regime.
Business income is
Residence An
Taxation of
taxed
under
the
entity is resident if it
Capital gains
is registered under
following "heads"
Capital gains are
the law of Pakistan
of income:
one of the heads
or its management
business income,
of income and are
and control is
capital gains and
taxed at the
situated wholly in
Taxation
of
other income.
Pakistan.
normal corporate
dividends
Basis Resident
rate. Gains
A
resident
entity
entities are taxed on
derived from the
pays
tax
at
a
rate
of
worldwide business
sale of capital
10%
on
dividend
income;
assets held for
nonresidents pay
income regardless
more than 1 year
tax only on Pakistanof whether the
are reduced by
source income.
dividends are
25% for tax
Pakistan or foreign
purposes and,
source. A

PAKISTAN SALES TAX

The standard rate of Sales Tax in Pakistan is 16%.

Taxable
transaction
s
Sales Tax is
levied on the
supply of goods
and services,
and the import
of goods.

Sales Tax
Registration
is mandatory for
manufacturers if
turnover exceeds PKR
5 million; for retailers,
if the value of supplies
exceeds PKR 5 million;
and for importers and
other persons if
required by another
federal or provincial
law

Filing and
sales tax
payment
Sales Tax returns
and payments must
be made on a
monthly basis.

RGST
The RGST is
actually
plain old
Value Added
Tax (VAT)
with a new
name. Since
the VAT has
already had
its fill of bad
publicity, the
government
decided it
would be a

Who is
involved?
The key
players
behind the
proposed
RGST are the
International
Monetary
Fund (IMF),
the World
Bank, United
States Mission
to the
European

Effect
Those who
will be
affected in
one way or
other are the
suppliers,
the
manufacture
rs and the
retailers who
will all have
to maintain
and disclose
proper sales

Salient
features of RGST
GST will replace the existing regimes

of sales tax and excises on

services.
GST will apply on both at import and local supply stages.
Standard rate of 15% has been proposed instead of the present rate of
17% or multiple other rates going up to 25%.
There shall be no fixed tax, reduced tax, enhanced tax, retail pricebased tax or special tax scheme under the new GST system.
A uniform enhanced annual exemption threshold of Rs.7.5 million
(which is presently Rs. 5 million) shall be applied to keep small
businesses including small traders/retailers/cottage industry out of
mandatory tax compliance.
Input tax adjustment of both direct and indirect constituents shall be
allowed on totals basis (excluding entertainment and non-business
use passenger vehicles).
Sales tax on goods and services where so authorized by the Provinces
shall be mutually adjustable so that double taxation does not occur.
No general zero-rating shall be admissible on any commercial form of
domestic supply or on any local consumption.
The GST system will work purely on self-assessment and self-policing
basis.
Cash flow of businesses shall be facilitated through expeditious
centralized (Electronic) refund payment system.
All exports shall be zero-rated.

How RGST work?

Unlike the old GST, the RGST will not be imposed just on the final
price of a product; rather, a certain amount of tax will be added at
each stage of production.
For exampleifa supplier sells raw material worth Rs100 to
amanufacturer, he would charge Rs115 instead of Rs100, and remit
the extra Rs15 as tax.
After manufacturing the product, the manufacturer, for example,
adds a profit of Rs2o. The product now costs Rs135, but instead of
sellingit to the retailer atRs135, the manufacturer willadd
another 15 per cent to the value addition of Rs20 which will bring up
the cost to Rs138. The extraRs3 will be remitted as tax.
Finally, the retailer will add his profit. Assuming that is another
Rs20, the price of the product is now up to Rs158 again. Instead of
selling it at Rs158, the retailer will add yet another 15 per cent of
the value addition and the final cost will be Rs161.The retailer will
then pay the added tax back to the treasury.

sourc
es
http://www.fbr.gov.pk/newst/
http://www.taxrates.cc/html/pakistan-tax-rates.html
http://www.pakboi.gov.pk/
http://www.tribune.com.pk
http://www.wikipedia.org