Legal advice Sales Tax, Taxes on Registered Firms, Personal and Company Taxation

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Personal Taxation in Pakistan

All individuals, unregistered firms, association of persons and every artificial juridical person other than companies are liable to tax on their taxable income at rates set out in First Schedule to the 2001 Ordinance with minimum of 0.5% (of total income) where total income is more than Rs. 100,000 but less than Rs. 110, 000 (no tax is payable by a female citizen of Pakistan unless her total income exceeds Rs. 250, 000).

 Tax on Pakistani Companies

Tax on dividends received by public or insurance company is payable at rate of 5%, 10% in all other cases. Bonus shares in the hands of shareholders are not taxable nor is a company required to withhold tax on bonus shares. Nonresident air and shipping enterprises are taxed at flat rate of 3% and 8% respectively on their gross earnings. The primary principle for taxation of banking companies is that all profit and gains for purposes of taxation will mainly be pre-tax profits from all sources as computed in yearly financial statements submitted to State Bank of Pakistan.

Tax on Registered Firms in Pakistan

Registered firms (partnership) are liable to pay super tax only at rates specified in the First Schedule to the Ordinance. The share of income of each partner of registered firm is added to his other income if any and tax is levied on his aggregate income after deducting super tax. New provisions on Alternate Dispute Resolution have been incorporated into law to provide for efficient and quick mode of determination of disputes.

Pakistani Sales taxes 

 A single point sales tax at the general rate of 15%, as well as retail tax and turnover tax, is levied on all goods imported into Pakistan or manufactured or produced in Pakistan. Certain articles are exempt from tax. Sales tax has also been imposed at 15% on certain services provided in province of Sindh. Furthermore, the Finance Act 1999 has increased additional tax rate for supply to non-registered persons to 3%, thereby raising effective rate for such supplies to 18%. The Finance Ordinance 2002 declares all persons liable to be enrolled as deemed to be enrolled. However, 3% further tax has been retained for such unregistered persons except in specified cases. A Capital Value Tax is also payable in certain transactions relating to transfers of motor vehicles if transferee not taxpayer. New provisions on Alternate Dispute Resolution have been incorporated into law to provide for efficient and quick mode of determination of disputes. Presently, the statutory requirement to retain records and documents is three years.