Pakistan Tax Structure – Complete Guide
��️ 1. Tax Authorities in Pakistan
Federal Level
- Federal Board of Revenue (FBR)
Handles major taxes like income tax, sales tax, and customs duty.
Provincial Level
Each province collects certain taxes:
- Sindh Revenue Board (SRB)
- Punjab Revenue Authority (PRA)
- Khyber Pakhtunkhwa Revenue Authority (KPRA)
- Balochistan Revenue Authority (BRA)
�� These mainly collect sales tax on services.
�� 2. Types of Taxes in Pakistan
A. Direct Taxes
Paid directly by individuals/businesses.
1. Income Tax
- Applicable on salary, business income, rental income, etc.
- Governed under Income Tax Ordinance, 2001
Categories:
- Salaried individuals
- Non-salaried individuals (business)
- Companies
�� Rates are progressive (higher income = higher tax rate)
2. Capital Gains Tax (CGT)
- Tax on sale of:
- Property
- Shares
- Rates vary based on holding period
B. Indirect Taxes
Collected indirectly through goods/services.
1. Sales Tax (Goods)
- Standard rate: 18%
- Collected by FBR
- Governed under Sales Tax Act, 1990
2. Sales Tax on Services
- Collected by provinces (SRB, PRA, etc.)
- Rates: ~13%–16% depending on province
3. Customs Duty
- Tax on imports
- Rates vary by product
4. Federal Excise Duty (FED)
- Applied on specific goods (e.g., cigarettes, beverages)
�� 3. Income Tax Slabs (Simplified)
Salaried Individuals (Example Concept)
- Up to a certain income → 0% tax
- Higher brackets → increasing rates (5% to 35%)
�� Exact slabs change yearly with the Finance Act.
���� 4. Tax for Businesses
A. Sole Proprietor / Partnership
- Taxed as individual income
B. Company
- Registered with Securities and Exchange Commission of Pakistan
- Corporate tax rate ~29% (approx.)
�� 5. E-commerce Taxation (Important)
If you run an online business:
- Income tax applies on profits
- Sales tax applies if registered
- Platforms like Daraz Pakistan may deduct withholding tax
�� You may also face:
- Withholding tax on payments
- Advance tax deductions by courier companies
�� 6. Withholding Taxes (WHT)
These are advance taxes deducted at source:
Examples:
- Bank transactions
- Mobile loads
- Cash withdrawals
- Contracts
- Imports
�� Adjustable against final tax liability.
�� 7. Filing Tax Returns
Who should file?
- Salaried individuals above threshold
- Business owners
- Property owners
- Active taxpayers
Where to file?
- Through IRIS (FBR portal)
Key steps:
- Register for NTN
- Declare income & expenses
- Submit return annually
✅ 8. Benefits of Being a Filer
- Lower tax rates
- Avoid higher withholding taxes
- Eligible for:
- Bank loans
- Visas
- Business contracts
⚠️ 9. Penalties for Non-Compliance
- Fines for late filing
- Higher tax rates (non-filer)
- Possible legal action
�� 10. Key Concepts to Understand
- Taxable Income = Income – Allowable Expenses
- Adjustable Tax = Already paid tax (WHT, advance tax)
- Final Tax = No adjustment allowed (e.g., some contracts)
�� Practical Tips
- Keep proper records (sales, expenses)
- Separate business & personal accounts
- File returns even if income is low
- Consult a tax advisor for complex cases
�� Simple Example
If you earn:
- Salary: PKR 1,200,000/year
- Tax calculated based on slab
- Less: taxes already deducted → Final payable/refund