Taxation in Pakistan

Taxation in Pakistan is governed by the Federal Board of Revenue (FBR) and the provincial tax authorities. Here are the key aspects of taxation in Pakistan:

Income Tax: Individuals, companies, and other entities are subject to income tax on their taxable income. Income tax rates vary based on income brackets and taxpayer types. Employers deduct income tax from employees' salaries through the Pay As You Earn (PAYE) system.

Sales Tax: Sales tax is levied on the sale of goods and services at various stages of the supply chain. The standard sales tax rate is currently 18%, with reduced rates for specific sectors. Certain goods and services may be exempted from sales tax.

Federal Excise Duty (FED): FED is imposed on specific goods and services, such as petroleum products, cigarettes, beverages, and luxury items. The rates and applicability vary depending on the nature of the goods or services.

Customs Duties: Customs duties are imposed on imports and exports of goods. These duties are levied based on the customs value of the goods and the applicable tariff rates determined by the Pakistan Customs Tariff.

Withholding Tax: Withholding tax is a mechanism to collect tax at the source. It is deducted or collected by withholding agents, such as employers, on specific payments made to taxpayers. Common types of withholding tax include tax on salaries, dividends, interest, rent, and professional services.

Property Tax: Property tax is levied by local government authorities on the ownership or possession of property. The rates and assessment methods may vary across different cities and provinces.


Capital Gains Tax: Capital gains tax is applicable on the sale of capital assets, such as real estate, stocks, and other investments. The tax rates and exemptions depend on the holding period and type of asset.

Provincial Taxes: Provinces in Pakistan have the authority to levy certain taxes, such as professional taxes, agricultural income tax, and motor vehicle taxes. The rates and applicability vary across provinces.

Tax Returns: Taxpayers are required to file annual tax returns and comply with tax laws and regulations. The tax year in Pakistan is from July 1st to June 30th. The FBR has introduced an online system called Iris for electronic filing of tax returns.

Tax Treaties: Pakistan has tax treaties with several countries to avoid double taxation and promote international trade and investment. These treaties provide guidelines for determining the tax liability of residents and non-residents.






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