:: ZAFAR & ASSOCIATES

Dr. Ilyas Zafar

DR. ILYAS ZAFAR

Founder & Sr. Partner

South Asia

Rana Munir Hussain

MUNIR HUSSAIN

Senior Partner

Lahore, Pakistan

Shagufta Jabeen

SHAGUFTA JABEEN

Managing Partner

Lahore, South Africa

M. Akram Raza

M. AKRAM RAZA

Senior Partner

Sialkot, Pakistan

M. Safdar Mir

M. SAFDAR MIR

Senior Partner

Gujranwala, Pakistan

Waseem Akram

WASEEM AKRAM

Tax Law Consultant

Manchester, UK

Haseeb Zafar

HASEEB ZAFAR

Partner & Tax Specialist

Lahore, Pakistan

Rana Saqib Munir

SAQIB MUNIR

Partner & Tax Consultant

Lahore, Pakistan

Waseem Ashfaq

WASEEM ASHFAQ

Chartered Accountant

Lahore, Pakistan

Syed Nasir Ali Gilani

NASIR ALI GILANI

Tax Law Consultant

Lahore, Pakistan

M. Siddique Bhatti

M. SIDDIQUE BHATTI

Senior Partner

Hafizabad, Pakistan

Ishfaq Ahmed Razi

ISHFAQ A. RAZI

Senior Partner

Gujrat, Pakistan

Liaqat Mehmood Baig

LIAQAT M. BAIG

Senior Consultant

Sialkot, Pakistan

M. Nadeem Qureshi

M. NADEEM QURESHI

Senior Litigator

Karachi, Pakistan

Aftab H. Nagra

AFTAB H. NAGRA

Senior Consultant

Sialkot, Pakistan

Shahid Mehmood

SHAHID MEHMOOD

Tax Consultant

Sialkot, Pakistan

Mian Ghulam Sarwar

GHULAM SARWAR

Senior Litigator

Islamabad, Pakistan

M. Ilyas Mian

M. ILYAS MIAN

Senior Litigator

Rawalpindi, Pakistan

Mir Ahmed Ali

MIR AHMED ALI

Senior Litigator

Rawalpindi, Pakistan

Ghias Ahmed Malik

GHIAS AHMED MALIK

Senior Litigator

Faisalabad, Pakistan

Rana Munawar Almas

MUNAWAR ALMAS

Tax Law Consultant

Lahore, Pakistan

:: Core Competencies

  • Personal financial planning for consultants
  • Taxation compliance
  • Expatriate taxation
  • Offshore taxation issues
  • Tax residency and 180 days rule
  • Local tax legislation in the working country
  • Offshore expat regulations and restrictions
  • Issues of interactions between domicile rules and the length of contract / assignment
  • Opportunities to ensure that your international earnings are managed in a tax efficient way

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:: Tax Law in Pakistan

Business Tax Planning in Pakistan

Here you may find information about tax law in Pakistan. Our dedicated team of professional lawyers best assists their clients as to tax law in Pakistan.

Virtually every business decision today has tax consequences. You deserve the most practical, tuned-in and well-crafted tax solutions. We provide a comprehensive range of services from the completion of tax returns under corporation tax, self assessment to complex consultancy assignments and strategic tax planning.

Our ability to focus on our clients and deliver innovative tax solutions is enhanced by our knowledge of specific business environments including financial services, leisure, retail, sport, high growth companies, manufacturing and automotive, technology and communications, public sector, property and utilities. We also have a number of specialist tax groups who deal with specific complex areas of tax law.

Our consultants can help you plan, grow and structure your business. We are known for our straightforward approach to solving our clients' most complex business challenges. We work hand-in-hand with clients to improve business performance, drive shareholder value and create competitive advantage.

Our Services include:

  • Corporate and individual tax planning including of Trusts, Cooperative Societies and NGOs.

  • Compliance services including preparation of income tax and sales tax returns and Customs clearance.

  • Representing clients before tax authorities and assisting in preparing appeals to the Tribunals, High Courts and Supreme Court.

  • International Tax Consultancy including tax on international transactions and advising on double taxation treaties.

  • Assisting with sales tax matters including registration, de-registration and assessment.

  • Obtaining Advance Ruling on proposed investments or business transactions.

  • Establishing gratuity funds, provident funds and other employees benefit schemes and their approval from tax authorities.

  • Providing general tax advice based on current and evolving laws and rulings.

:: Featured Domains Associated With Tax Law Practice

Business Tax Planning

International Tax Law

Local Tax Law

Business Tax Planning International Tax Law Local Tax Law

We recognize the anxiety that is created when your tax verdict is unknown, the disappointment you realize when you unnecessarily paid too much! Click here to find more.

Our foreign tax desk program has revolutionised the provision of international tax services. Click here to find more.

We provide a comprehensive range of services from the completion of tax returns under corporation tax, self assessment to complex consultancy. Click here to find more.

TAX LAW SYSTEM IN PAKISTAN

Federal taxes in Pakistan like most of the taxation systems in the world are classified into two broad categories, viz., direct and indirect taxes. A broad description regarding the nature of administration of these taxes is explained below:

Direct Taxes

Direct taxes primarily comprise income tax. For the purpose of the charge of tax and the computation of total income, all income is classified under the following heads:

  • Salaries

  • Interest on Securities

  • Income from Property

  • Income from Business or Profession

  • Capital Gains

  • Income from Other Sources

Personal Tax

All individuals, unregistered firms, associations of persons, etc., are liable to tax, at the rates ranging from 10 to 35 per cent.

Tax on Companies

All public companies (other than banking companies) incorporated in Pakistan are assessed for tax at corporate rate of 35%. However, the effective rate is likely to differ on account of allowances and exemptions related to industry, location, exports, etc.

Wealth Statement u/Sec. 116

Wealth Statement u/Sec. 116 is compulsory, where declared income is Rs. 500,000/- or more.

Tax u/Sec. 153(8A) (omitted)

Now, where NTN/CNIC is not available, the excess tax @ 2% shall not be collected.

Inter-Corporate Dividend Tax

Tax on the dividends received by a public company from a Pakistan company is payable at the rate of 5% and at the rate of 15% in case dividends are received by a foreign company. Inter-corporate dividends declared or distributed by power generation companies is subject to reduced rate of tax i.e. 7.5%. Other companies are taxed at the rate of 20%. Dividends paid to all non-company shareholders by the companies are subject to with holding tax of 10% which is treated as a full and final discharge of tax liability in respect of this source of income.

Treatment of Dividend Income

Dividend income received as below, enjoys tax exemption, provided it does not exceed Rs. 10,000/-.

  • Dividend received by non-resident from the state enterprises Mutual Fund set by the Investment Corporation of Pakistan.

  • Dividends received from a Domestic Company out of income earned abroad provided it is engaged abroad exclusively in rendering technical services in accordance with an agreement approved by the Central Board of Revenue.

Unilateral Relief

A person resident in Pakistan is entitled to a relief in tax on any income earned abroad, if such income has already been subjected to tax outside Pakistan. Proportionate relief is allowed on such income at an average rate of tax in Pakistan or abroad, whichever is lower.

Customs

Goods imported and exported from Pakistan are liable to rates of Customs duties as prescribed in Pakistan Customs Tariff. Customs duties in the form of import duties and export duties constitute about 37% of the total tax receipts. The rate structure of customs duty is determined by a large number of socio-economic factors. However, the general scheme envisages higher rates on luxury items as well as on less essential goods. The import tariff has been given an industrial bias by keeping the duties on industrial plants and machinery and raw material lower than those on consumer goods.

:: National Entry & Exit Points
National Entry & Exit Points
:: Pakistan Customs
Pakistan Customs

Federal Excise

Federal Excise duties are leviable on a limited number of goods produced or manufactured, and services provided or rendered in Pakistan. On most of the items Federal Excise duty is charged on the basis of value or retail price. Some items are, however, chargeable to duty on the basis of weight or quantity. Classification of goods is done in accordance with the Harmonized Commodity Description and Coding System which is being used all over the world. All exports are exempted from Federal Excise Duty.

Sales Tax

The following personnel shall make an application in the Form STR-1, transmitted to the CRO “Central Registration Office” electronically or through registered mail or courier services for registration under Sales Tax Rules, 2006, Chapter I “Registration, compulsory Registration and De-Registration” as per following conditions:

PERSON

CONDITION

LIABILITY
EXEMPTION

Manufacturer

Value of Taxable supplies does not exceed Rs. 5,000,000 in any period during the last twelve month or whose annual utility bills does not exceed Rs 600,000 during the last 12 months.

Supplies will be exempted under Sr. 42 of the Sixth Schedule.

Retailer

Value of supplies does not exceed Rs. 5,000,000 in any period during the last twelve month.

Supplies will be exempted under Sr. 42 of the Sixth Schedule.

Importer

Person is liable to be Registered.

Wholesaler / Supplier including Dealer and Distributor

Person is liable to be Registered.

As per newly inserted Section 8B of the Act, a registered person is restricted to claim adjustment of input tax to the extent of ninety percent of output tax for that tax period. Further, it permits the adjustment of input charged in acquisition of fixed assets in twelve equal monthly installments after the start of production of a new unit. The Board is empowered to exclude any person from the above purview.

However, the input tax inadmissible in excess of 90% of the output tax, may be allowed on yearly basis in the second month following the end of the financial year of the registered person subject to the following condition namely:

  • In case of a registered person whose accounts are subject to audit under the Companies Ordinance, 1984 upon furnishing a statement along with annual audited accounts duly certified.

  • In other cases, adjustment may be allowed as per specific notification issued by the Board.

Time of Supply

Sales Tax was taxable at the earlier of the time of delivery of goods or when any payment is received by the supplier in respect of such supply. If has now been restricted only to the time of delivery of goods by the supplier irrespective of the actual time of payment.

Through newly inserted subsection (1A) of Section 23, the Board is empowered to restrict a registered person to use as many number of business bank accounts as may be specified.

As per amendment in Section 24 of the Act, retention of record and documents by a registered person has been enhanced from three years to five years.

A new concept of Withholding Agent has been introduced through SRO No 550(1)/2007, dated 30th June, 2007 wherein a withholding agent shall deduct as amount equal to one fifth (1/5th) of total sales tax shown in the sales tax invoice issued by the supplier and make payment of the balance amount to him.

Default Surcharge

  • For first six months 1% per month

  • For subsequent period till the final payment 1.5% per month

  • In case of tax fraud till the final payment 2% per month

Offence and Penalties

OFFENCES

PENALTIES

SECTION
REFRENCE

Non filing of returns

Five thousand rupees within fifteen days, one hundred rupees for each day of default

Sec. 26

Non issuance of invoices

Five thousand rupees of five percent of the amount which ever is higher

Sec. 23

Issuance of invoices without authority

Ten Thousand rupees or five percent of the amount which ever is higher

Sec. 3, 7 and 23

Non notification change in the particulars of registration

Five Thousand rupees

Sec. 14

Failure of deposit the amount of tax due

Ten Thousand rupees or five percent of the amount whichever is higher

Within fifteen days, give hundred rupees each day of default. No penalty for miscalculation.

Non payment and imprisonment for three year or both

Sec. 3, 6, 7 and 48

Repeation of miscalculation for less tax during the year

Ten Thousand rupees or three percent of the amount whichever is higher

Non filing of application registration

Ten Thousand rupees or five percent of the amount whichever is higher

Non filing after sixty days conviction and imprisonment for three years

Non maintenance of records

Ten Thousand rupees or five percent of the amount whichever is higher

Non compliance with Section 25

Five Thousand rupees

Sec. 25

Receipt of second notice

Ten Thousand rupees

Receipt of third notice

Fifteen Thousand rupees

Non filing of information required by the board

Ten Thousand rupees

Sec. 26

Filing of false documents

Destruction / alteration of record

Making of false statement

Twenty Five Thousand rupees or one hundred percent of the amount whichever is higher. Conviction and imprisonment of three years or with both

Sec. 2 (37) and General

Obstruction of Sales Tax Officer

Twenty Five Thousand rupees or one hundred percent of the amount whichever is higher. Conviction and imprisonment of three years or with both

Sec. 25, 38 and 38A

Abetment in commissioning of tax fraud

Twenty Five Thousand rupees or one hundred percent of the amount whichever is higher. Conviction and imprisonment of three years or with both

Sec. 2 (37)

Violation of any embargo placed or removal of goods in connection with recovery of tax

Twenty Five Thousand rupees or one hundred percent of the amount whichever is higher. Conviction and imprisonment of three years or with both

Sec. 48

Obstructions of Sales Tax Officer

Twenty Five Thousand rupees or one hundred percent or three percent of he amount whichever is higher

Sec. 31 and General

Non compliance with Section 73

Five thousand rupees or three percent of the amount whichever is higher

Sec. 73

Non fulfillment of notification issued under any of the provisions of this Act

Five Thousand Rupees of three percent of the amount whichever is higher

Sec. 71 and General

Sales Tax officer causing loss to the sales tax revenue

Convection and imprisonment for three year or five equal to tax, or with both

General

Contravention with provision of this act and no penalty has been provided

Five Thousand Rupees or three percent of the amount, which ever is higher

General

Non filing of the summary of sale or purchase invoices

Twenty Five Thousand Rupees

Sec. 26(5)

Sales Tax is levied at various stages of economic activity at the rate of 15 per cent on:

  • All goods imported into Pakistan, payable by the importers;

  • All supplies made in Pakistan by a registered person in the course of furtherance of any business carried on by him; and

  • There is an in-built system of input tax upto 90% adjustment and a registered person can make this adjustment of tax paid at earlier stages against the tax payable by him on his supplies. The tax paid at any stage does not exceed 15% of the total sales price of the supplies.

Performing a High Quality Audit

In today's ever changing global economy, businesses need trusted advisers. Our audit specialists take the time to understand your business as well as the industry in which you operate, whether it is in Pakistan and/or abroad.

Our audit approach focuses on understanding the clients’ business and control issues from the inside out. It combines a rigorous risk assessment, diagnostic processes, and audit testing procedures as well as a continuous assessment of our clients’ service performance. Our state of the art, audit tool, Audit System supports all phases of the audit process including planning, executing, reporting.

Investment Advisory Services

All investment carries some risk and thus needs careful analysis and expert advice. The key to be a successful investor is to achieve appropriate risk/return trade off by identification of risks that exist and their proactive management.

Our Investment Advisory Service professionals specialize in identifying risks arising from regulation, competition and macro economic forces and designing strategies to manage it to your advantage. Our range of services includes:

  • Advice on analyzing investment prospects and mode of doing business in Pakistan including advising on the form of legal entity, incorporation, obtaining of necessary permissions and help in dealing with local regulators.

  • Identification of suitable business partners and conducting due diligence.

  • Feasibility studies including preparation of projected financial statements and project.

  • Appraisal through NPV, IRR, Payback and DCF analysis including cost assessment and revenue projections.

  • Sensitivity analysis

  • Tariff and pricing studies

NOTE:

The contents as narrative above are subject to change through annual amendment.

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