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In this page: Accounting Rules | Tax Rates | Intellectual Property | Legal Framework | Standards | Business Practices

 

Accounting Rules

Tax Year
The tax year begins on 1 July and ends on 30 June.
Accounting Standards
The accounting standards in Pakistan are based on the International Accounting Standards Committee (IASC). While Pakistan adheres to 38 of 41 international accounting standards it does not yet apply IAS 15, IAS 29, and IAS 41 .
Accounting Regulation Bodies
PIPFA
SECP
ICAP
ICMAP
Accounting Reports
The Pakistani companies have to publish annually their own accounts, financials and audit reports.
Publication Requirements
The Pakistani companies have to publish annually their own accounts, financials and audit reports.
Professional Accountancy Bodies
ICAP , Institute of Chartered Accountants of Pakistan
ICMAP , Institute of Cost and Management Accountants of Pakistan
PIPFA , Pakistan Institute of Public Finance Accounts
Certification and Auditing
A public company, a private company which is subsidiary of  public company, and certain private companies (with capital of at least 3 million PKR) have to be audited by a chartered accountant.
You can contact an external auditor: Deloitte, KPMG, Ernst & Young, PricewaterhouseCoopers.
Accounting News

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Tax Rates

Consumption Taxes

Nature of the Tax
Sales Tax
Tax Rate
17% for goods and for telecommunication services under the federal law.
For services, 16% for Islamabad and Punjab, 15% for KPK and Balochistan and 13% for Sindh
Reduced Tax Rate
The sales tax reduced rates for goods are: 1%, 1.5%, 2%, 5%, 6%, 7%, 8%, 10%, 12%.
The sales tax reduced rates for services are: 0%, 2%, 3%, 5%, 8%, 10%, 15%, 17% and 19.5%.

Zero-rated items include export of goods, supplies to diplomatic missions and diplomats, supplies of stores and provisions for consumption aboard a conveyance proceeding to a destination outside Pakistan; certain stationery goods such as erasers and exercise books, subject to certain conditions and limits, petroleum crude oil (from 2022)
Exempt items include agricultural products, including eggs, meat of bovine animals, sheep and goat, and fresh vegetables (except ware potato and onions); raw materials for the basic manufacture of pharmaceutical active ingredients and for manufacture of pharmaceutical products; newspapers and books; educational and scientific materials; import of oxygen cylinder for medical purpose; supplies (excluding electricity and natural gas) made to hospitals run by the federal or provincial government or charitable operating hospitals of 50 beds or more, or to teaching hospitals of statutory universities of 200 or more beds; various items of machinery and equipment for marble, granite and gemstone extraction, and processing industries.

Click here for further information.

Other Consumption Taxes
A Federal Excise Duty (FED) is levied on goods manufactured or imported into Pakistan at varying rates. The sales tax on services, which replaces federal excise duties for services, is levied at rates ranging from 13% to 16%.

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Corporate Taxes

Company Tax
29%
Tax Rate For Foreign Companies
A resident entity is taxed on its worldwide income, while non-resident entities operating in Pakistan through a branch are taxed on their Pakistan-source income attributable to the branch, at the same rates applicable to local companies. Branches can claim a deduction for head office expenses, whereas certain amounts paid to the head office or associates of the head office, such as interest, royalties, and technical service fees, are not deductible. However, a 15% tax is levied on the transfer of after-tax profits by a branch to the head office (companies engaged in the oil and gas exploration and production business are exempt).
A company is deemed resident in Pakistan if it is incorporated or formed by or under Pakistani law, or if the control and management of its affairs is situated wholly in Pakistan in that year.

Capital Gains Taxation
Capital gains are generally taxed at the standard rate of corporation tax. Capital gains on the sale of fixed assets held for more than one year are reduced by 25% for the calculation of the tax base (i.e. 75% of capital gains are taxed at 30%). Gains on the sale of listed securities acquired on or after 1 July 2013 are subject to a 15% tax; whereas capital gains on the sale of listed securities acquired before that date are exempt from tax.
Capital gains on the sale of immovable property are subject to tax depending upon the amount of gain and holding period.
Main Allowable Deductions and Tax Credits
Depreciation of property, plant and equipment is tax-deductible at rates ranging from 10% to 100%. The cost of intangible assets (intellectual property, among others) bringing in profit for more than one year is deductible over their useful life (up to ten years). The deduction of goodwill follows these same rules.
Start-up fees can be deducted over a period of five years.
Interest charges and bad debt are generally deductible. Donations to public schools and health centres, universities and non-governmental organisations are eligible for a tax credit of up to 20% of taxable income.
Fines that are not paid for breach of the law are deductible. Taxes on income are not deductible. Sales tax and excise tax are tax deductible where these are to be absorbed by the business and are not passed on to the consumer.
Scientific research expenditures incurred in Pakistan for the purpose of generating taxable income are fully deductible.
Trading losses (except those resulting from speculative business) may be offset against taxable income earned in the same year. Operating losses may be carried forward and set off against the profits of the succeeding six years of the same business (eight years for losses incurred by a resident company engaged in the hotel business in Pakistan relating to a tax year commencing on or after the first day of July 2020). The carryback of losses is not permitted.
Other Corporate Taxes
Capital duty is imposed on capital contributions (variable depending on the amount of capital). A property tax is levied at the provincial level, while property transfer is not subject to tax.
Social security contributions payable by the employer amount to 6% of salary (calculated on wages capped at PKR 600 per day or PKR 22,000 per month).
Stamp duties are levied on the issue and disposal of shares at a rate of 0.5% and 1.5% of the face value of the shares, respectively (with a minimum contribution of PKR 1).
Other Domestic Resources
Federal Board of Revenue (FBR)
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 

Country Comparison For Corporate Taxation

  Pakistan South Asia United States Germany
Number of Payments of Taxes per Year 34.0 26.7 10.6 9.0
Time Taken For Administrative Formalities (Hours) 283.0 273.5 175.0 218.0
Total Share of Taxes (% of Profit) 33.9 43.9 36.6 48.8

Source: Doing Business - Latest available data.

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Individual Taxes

Tax Rate

Personal tax rate. If more than 75% of an individual’s income is derived from employment Progressive rate from 0% to 20%
PKR 0 - 600,000 0%
PKR 600,000 - 1,200,000 5% of the amount exceeding PKR 600,000
PKR 1,200,000 - 1,800,000 PKR 30,000 + 10% of the amount exceeding PKR 1,200,000
PKR 1,800,000 - 2,500,000 PKR 90,000 + 15% of the amount exceeding PKR 1,800,000
PKR 2,500,000 - 3,500,000 PKR 195,000 + 17.5% of the amount exceeding PKR 2,500,000
PKR 3,500,000 - 5,000,000 PKR 370,000 + 20% of the amount exceeding PKR 3,500,000
PKR 5,000,000 - 8,000,000 PKR 670,000 + 22.5% of the amount exceeding PKR 5,000,000
PKR 8,000,000 - 12,000,000 PKR 1,345,000 + 25% of the amount exceeding PKR 8,000,000
PKR 12,000,000 - 30,000,000 PKR 2,345,000 + 27.5% of the amount exceeding PKR 12,000,000
PKR 30,000,000 - 50,000,000 PKR 7,295,000 + 30% of the amount exceeding PKR 30,000,000
PKR 50,000,000 - 75,000,000 PKR 13,295,000 + 32.5% of the amount exceeding PKR 50,000,000
Over PKR 75,000,000 PKR 21,420,000 + 35% of the amount exceeding PKR 75,000,000
Tax rate for individuals other than salaried
PKR 0 - 400,000 0%
PKR 400,000 - 600,000 5% of the amount exceeding PKR 400,000
PKR 600,000 - 1,200,000 PKR 10,000 + 10% of the amount exceeding PKR 600,000
PKR 1,200,000 - 2,400,000 PKR 70,000 + 15% of the amount exceeding PKR 1,200,000
PKR 2,400,000 - 3,000,000 PKR 250,000 + 20% of the amount exceeding PKR 2,400,000
PKR 3,000,000 - 4,000,000 PKR 370,000 + 25% of the amount exceeding PKR 3,000,000
PKR 4,000,000 - 6,000,000 PKR 620,000 + 30% of the amount exceeding PKR 4,000,000
Above PKR 6,000,000 PKR 1,220,000 + 35% of the amount exceeding PKR 6,000,000
Allowable Deductions and Tax Credits
Reimbursement of expenses on medical treatment or hospitalisation or both received by an employee is tax-exempt. Furthermore, a medical allowance of up to 10% of basic salary is exempt if the facility of reimbursement of medical expenses is not available to the employee.
Individuals also are allowed deductions on account of interest paid on house loans, payment of insurance premium and tuition fees paid for their children.
A straight deduction is available for Zakat. Donations made to the Supreme Court of Pakistan are eligible for a straight deduction, while a rebate at the average rate of tax is allowed on donations made to any approved non-profit organisation on the lower of donation value or 30% of the taxable income.
Special Expatriate Tax Regime
Residents are taxed on their Pakistan and foreign-source income, while non-resident individuals are taxed only on Pakistan-source income.
A person is considered resident in Pakistan for income tax purposes if present in the country for a period or periods aggregating to 183 days or more in a tax year (1 July-30 June).
A withholding tax rate of 10% is applicable on the payment of profit on debt to non-resident individuals on debt instruments issued by the Federal Government.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
See the list of the Double Taxation Agreements
Withholding Taxes
Dividends: 12.5% (non-resident corporations)/15% (residents; non-resident individuals), Interest: 15% (residents)/10% (non-residents), Royalties: 15% (residents)/10% (non-residents).

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Sources of Fiscal Information

Tax Authorities
Overview of Pakistan's tax measures in response to Covid-19
Federal Board of Revenue (FBR)
Other Domestic Resources
Ministry of Finance

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Intellectual Property

National Organisations
The Intellectual Property Organisation of Pakistan (IPO-Pakistan).
Regional Organisations
None
 

National Regulation and International Agreements

 
Type of property and law Validity International Agreements Signed
Patent
 
Patents Ordinance, 2000
20 years
Trademark
 
Trademarks Ordinance, 2001
10 years, renewable every 10 years.
Design
 
Industrial Designs
 
Copyright
 
Copyright Ordinance, 1962
50 years WIPO Copyright Treaty
Industrial Models
 
Industrial Designs
 

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Legal Framework

The Language of Justice
Urdu and English are the two judicial languages of Pakistan.
Recourse to an Interpreter
Possible
Sources of the Law and Legal Similarities
The main source of the law in the country is the constitution of 1973 which has been suspended and restored with amendments many times. The country's legal system is based on English common law with provisions to accommodate Pakistan's status as an Islamic state. Pakistan accepts compulsory ICJ jurisdiction but with reservations.
Checking National Laws Online
Lexadin, the world law guide
Pakistan Law Site

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Standards

National Standards Organisations
Pakistan Standard & Quality Control Authority, Pakistan Standards and Quality Control Authority.
Integration in the International Standards Network
The PSQCA is a member of:
- International Standards Organization (ISO)
- International Electrotechnical Commission (IEC)
- International Organization of Legal Metrology (OIML)
Classification of Standards
The Pakistan Standards are the PS.
Online Consultation of Standards
Visit the site of Pakistan Standards and Quality Control Authority (PSQCA).
Certification Organisations
PCSIR Pakistan Council of Scientific and Industrial Research
PNAC Pakistan National Accreditation Council

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Business Practices

General Information
Kwintessential, Pakistani culture and customs
Commisceo Global, Guide of Pakistan
Doing Business Guide, Doing business in Pakistan
Cultural Atlas, Business culture in Pakistan
Opening Hours and Days

Private offices: 9h to 17h30 (Monday to Friday).
Government offices: 8h to 15h (Monday to Thursday), 8h to 12h30 (Friday) – close early due to Friday prayers, 8h to 14h (Saturday).

The private banks in Pakistan work for six days a week, with shorter working hours on Fridays and Saturdays.

 

Public Holidays

Ashoura 19 Jan
Eid-e-Milad-un-Nabi (Birth of the Prophet) Varies each year
Pakistan Day 23 March
Independence Day 14 Aug
Eid al-Fitr (End of Ramadan) Varies every year
Allama Muhammad Iqbal Day 9 Nov
Eid ul-Adha (Feast of the Sacrifice) Varies every year
Quaid-e-Azam's Birthday 25 Dec
 
 

Periods When Companies Usually Close

Eid al-Fitr (End of Ramadan)

Eid ul-Azha (Feast of the Sacrifice)

Note: Muslim festivals are timed according to local sightings of various phases of the moon and the dates may change accordingly. 

These two festivals may last from two to four days, depending on the region. Most of the offices (both public and private) are closed during this period.
 

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Latest Update: May 2024