Date de publication : 06-10-1907
The following information are for the sole purpose of providing a general overview of the local taxation of the Corporate tax aspects of the country. In any case, it can not replace a tax advice, or be considered as an official information.
Yes we tax in Pakistan
New tax reform: No specific information
New tax treaties:
- Protocol to tax treaty between Pakistan and Uzbekistan enters into force.
- Tax treaty between Pakistan and Switzerland is signed.
Local tax advisors
No specific information on the local tax advisors.
Local tax administration
Website Tax administration: Click here
The definition of Permanent Establishment follows the wording of article 5 of the OECD Model:
- Dependent agent who habitually concludes contracts in the name of a non-resident company (except is the activity is limited to purchase of goods);
- Fixed place of business, building site, construction, assembly or installation and any related supervisory activity, for 90 days within a period of 12 months.
Resident companies are taxed on their worldwide income. However, non-resident companies are only taxed on their revenues derived from Pakistan sources.
Entities are considered to be resident for tax purposes in Pakistan if their place of management & control is in Pakistan or if they are incorporated in Pakistan.
Note: the definitions of permanent establishment and place of residence are subject to the relevant provisions of any applicable double tax treaty, if any.
Corporate Income Tax
The general CIT tax rate is 30% starting 2018.
Note: there is a minimum CIT on the annual turnover of the company. The tax rate depends of the activity (i.e. pharmaceutical 0.2%; Oil marketing companies 0.5%, …).
Non-taxable income includes the following:
No specific information, dividends, capital gains, …
Non-deductible expenses includes the following:
- Late interest penalties related to payment of taxes
Carry forward: Yes 6 years, but some restrictions may apply.
Carry back: No
No specific informaiton
Whithholding Taxes (payment to foreign companies)
The local tax rates in Pakistan are the following, subject to the provisions of an applicable double tax treaty, if any.
There is no WHT on the profits paid from a branch to its foreign head office.
The general rate of WHT on dividends is 12.5% of the gross amount.
The general rate of WHT on interest is 10%.
The general rate of WHT on Royalties is 15%.
The general rate of WHT on management fees is 20%.
The general rate of WHT on technical services is 15%.
Capital gains are taxed separately.
Note: capital gains deriving from qualifying participations are exempt under the participation exemption.
Standard SALES TAX rate is 17% + 1% in case where the recipient of the services is not registered.
Zero-rated supplies include, subject to certain conditions:
- exports of goods;
- Supply of services used outside of Pakistan;
Exempt supplies include, subject to certain conditions:
- Petroleum products;
- Medicinal products;
Note: exempt transactions differ from zero-rated transactions in that the input SALES TAX associated with exempt transactions is not deductible.
In case where for a tax period, Input SALES TAX exceeds Output SALES TAX, certain non-resident companies (which are not required to register and incur Pakistan-SALES TAX in the course of their business activities in Pakistan) may apply for a refund under the same conditions than resident companies.
No other specific information of SALES TAX in Pakistan.
No specific information on the statute of limitation.
There is foreign exchange control in Pakistan. Bank of Pakistan controls Income and capital repatriated abroad.
There are thin capitalization rules in Pakistan. The interest derived from loans between related parties may not be deductible in case where interest exceeds some ratios (3 to 1).
Do not hesitate to share your experience in Pakistan with us in the comments below. Any comments are welcome !