Federal income levies are administered by the Federal Board of revenue. The period from July 1st to June 30th is considered a normal levy time for Pakistan duty law purposes.
Commercial Income duty rates presently, the Corporate Income duty rate is 29 percent for the levy year 2019 and onwards whereas the corporate levy rate is 35 percent for Banking Industry for the tax year 2019.
Additionally, to corporate duty, there are other applicable income levies including Super Tax, Minimum Tax, and duty on Undistributed reserves. Generally, manufacturing business is taxable at a Commercial duty rate whereas trading business and commercial export business is taxable as” minimal levy”. Now Pakistani taxpayer’s individuals or businesses can use online income duty returns filing websites like TAX App to submit their returns swiftly and securely. Sales duty becomes due at the time of supply. For services, this is generally the earlier of when the taxable supply is handed, or payment made. For goods, it’s generally the point when the invoice is settled with a payment. Levy on exports is due at the time of customs clearance into Pakistan.
Indirect levies
Indirect levies or generally known as sales levies are also applicable to the supply of goods and provision of services. Under the 18th changes to the Constitution of Pakistan, the right to charge sales levies on services has been given to the regional governments whereas the right to charge sales duty on goods has been given to the civil government. Accordingly, regional revenue bodies were created to manage and collect regional sales levies in their separate businesses.
A person is a Resident for a Tax Year if the individual:
- Is present in Pakistan for a duration of 180 days or more.
- Is present in Pakistan for a duration or period amounting in a total of 120 days or more in levy year and, in the 4 years preceding the levy year, has been in Pakistan for a period of, amounting in total to, three hundred and sixty- five days or more.
- Is a worker or an official of the Federal Government or a Provincial Government posted abroad during the Tax Year.
Value-added tax
Value added tax (locally known as ‘sales tax ’) is normally levied at 17 percent on the value of goods unless specifically exempted, later allowing the same input credits. Businesses levy sales levy on certain services.
Property levies
Property owners are needed to pay property duty levied and collected by regional governments through external governments at varying rates.
Registration taxes
Registration levies are a regional duty and are payable substantially on the enrollment of property and vehicles.
Take away
In Pakistan, the levies reform must be aimed at adding levy bases, rather than assessing levies on taxpayers. The recent reduction in duty rates is a welcome development that may encourage voluntary duty payments, still, this might exclude a large number of likely taxpayers. On the other hand, the reduction in rates would help increase savings or consumption that would, in turn, support advanced profitable actions. Given the large duty gap, businesses must enhance their attempts to bring untapped sources into the levy net in order to reduce reliance on civil transfers. Also, Pakistan’s income duty system is grounded on universal solo – assessment schemes and profit capacity are limited due to the large informal sector. During financial year 13, 73.3 percent of jobs were generated by the informal sector, which means only a part of the remaining quarter would be paying levies. A well-allowed policy aiming to ameliorate duty compliance across being sectors and bringing the informal sector into the duty net can make the system more progressive.
