AnÂ income taxÂ is a tax imposed on individuals or entities (taxpayers) that varies with respective income or profits (taxable income). Income tax generally is computed as the product of aÂ tax rateÂ times taxable income. Taxation rates may vary by type or characteristics of the taxpayer. The tax rate may increase as taxable income increases (referred to as graduated or progressive rates). The tax imposed on companies is usually known asÂ corporate taxÂ and is levied usually at a flat rate. However, individuals are taxed at various rates according to the band in which they fall. Further, the partnership firms are also taxed at flat rate. Most jurisdictions exempt locally organizedÂ charitable organizationsÂ from tax. Here you may find material about Income Tax Laws and Lawyers in Pakistan. Our committed team of skilled lawyers and professionals best assists their clienteles in understanding the tax laws of Pakistan. Essentially, every business decision today has tax consequences. You deserve the most real, useful, tuned-in and well-crafted tax solutions. We offer a comprehensive series of services from the completion of tax returns under corporate tax, self-assessment to composite consultancy assignments and strategic tax advisory.
Our ability to emphasis on our clients and deliver innovative tax solutions is enriched by our knowledge of specific business situations including financial services, leisure, retail, sport, pay roll, 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 laws and culture. Our tax advisors 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 confidence, trust and required expertise with clients to improve the business performance, improve shareholder value and create the competitive advantage. In Pakistan the income tax regime is being regulated under Income Tax Ordinance, 2001 & Income Tax Rules, 2002. We at ZAHID L&A-LLP has such knowledge, expertise and understanding.
Before commencing a business in Pakistan, it is recommended that one should establish basic understanding regarding Registration and Filing of your Income Tax Return. Knowledge of basic concepts would not only ensure that the tasks are performed easily but also in the prescribed manner.
Taxable Income means Total Income reduced by donations qualifying straight for deductions and certain deductible allowances.
Total Income is the aggregate of Income chargeable to Tax under each head of Income.
Head of Income
Under the Income Tax Ordinance, 2001, all Income are broadly divided into following five heads of Income:
- Income from property;
- Income from business;
- Capital gains; and
- Income from Other Sources
- An Association of Persons (AOP) is Resident for a Tax Year if the control and management of its affairs is situated wholly or partly in Pakistan at any time in that year;
- A Company
is Resident for a Tax Year if:
- It is incorporated or formed by or under any law in force in Pakistan;
- The control and management of its affairs is situated wholly in Pakistan at any time in the year; or
- It is a Provincial Government or a local Government in Pakistan.
- An individual is Resident for a Tax Year if he/she:
- Is present in Pakistan for a period of, or periods amounting in aggregate to, 183 days or more in the Tax Year; or
- Is an employee or official of the Federal Government or a Provincial Government posted abroad in the Tax Year.
An Association of Persons, a Company and an Individual are Non-Resident for a Tax Year if they are not Resident for that year.
Pakistan Source of Income
Is defined in section 101 of the Income Tax Ordinance, 2001, which caters for Incomes under different heads and situations. Some of the common Pakistan source Incomes are as under: –
- Salary received or receivable from any employment exercised in Pakistan wherever paid;
- Salary paid by, or on behalf of, the Federal Government, a Provincial Government, or a local Government in Pakistan, wherever the employment is exercised;
- Dividend paid by Resident Company;
- Profit on debt paid by a Resident Person;
- Property or rental Income from the lease of immovable property in Pakistan;
- Pension or annuity paid or payable by a Resident or permanent establishment of a Non-Resident.
Foreign Source of Income
Is any Income, which is not a Pakistan source Income.
- An Individual;
- A Company or Association of Persons incorporated, formed, organized or established in Pakistan or elsewhere;
- The Federal Government, a foreign government, a political subdivision of a foreign government, or public international organization.
- A Company as defined in the Companies Ordinance, 1984 (XLVII of 1984);
- A body corporate formed by or under any law in force in Pakistan;
- A modaraba;
- A body incorporated by or under the law of a country outside Pakistan relating to incorporation of Companies;
- An amendment has been made through Finance
Act, 2013 to enlarge the scope of definition of a Company. Now as per
Income Tax Ordinance, 2001 a company includes:
- A co-operative society, a finance society or any other society;
- A non-profit organization;
- A trust, an entity or a body of persons established or constituted by or under any law for the time being in force.
- A foreign association, whether incorporated or not, which the Board has, by general or special order, declared to be a company for the purposes of this Ordinance;
- A Provincial Government;
- A Local Government in Pakistan;
- A Small Company
Association of Persons
Includes a firm (the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all), a Hindu undivided family, any artificial juridical person and anybody of persons formed under a foreign law, but does not include a Company.
Is a period of twelve months ending on 30th day of June i.e. the financial year and is denoted by the calendar year in which the said date falls. For example, tax year for the period of twelve months from July 01, 2017 to June 30, 2018 shall be denoted by calendar year 2018 and the period of twelve months from July 01, 2018 to June 30, 2019 shall be denoted by calendar year 2019. It is called Normal Tax Year.
Special Tax Year
Means any period of twelve months and is denoted by the calendar year relevant to the Normal Tax Year in which closing date of the Special Tax Year falls. For example, Tax Year for the period of twelve months from January 01, 2017 to December 31, 2017 shall be denoted by calendar year 2018 and the period of twelve months from October 01, 2017 to September 30, 2018 shall be denoted by calendar year 2019.
ZAHID L&A-LLP Services Includes:
- Filing of Income Tax Returns (ITR), Withholding Statements, Wealth Statements, Advance Taxes;
- Appellate work out of orders passed by FBR and Income Tax Tribunals;
- Corporate and individual tax planning including of Companies, Trusts, Cooperative Societies, NPOâ€™s and NGOâ€™s.
- Providing general tax advice based on current laws and rulings.
- Pay Rolls and Auditing of Accounts.
- 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.
- Cases pertaining to Tax Ombudsman and Alternate Dispute Resolution.
- 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, Worker Welfare Fund (WWF), Workers Participation Funds (WPF) and other employees benefit schemes and their approval from tax and other authorities.
Income from Property
The rent received or receivable by a person for a Tax Year shall be chargeable to tax in that year under the head income from property.
Rent means any amount received or receivable by the owner of the land or a building as consideration for the use or occupation of, or the right to use or occupy the land or building and includes any forfeited deposit paid under a contract for the sale of land or building.
Advance Tax on Sale or Transfer of Immovable Property (Sec. 236-C of ITO, 2001)
Any Person responsible for registering or attesting transfer of any immoveable property shall at the time of registration or attesting the transfer shall collect from the seller or transferor advance tax at the rates specified in Income Tax Ordinance. This advance tax is adjustable in particular Tax Year through filing Income Tax Return.
Advance Tax on Purchase or Transfer of Immovable Property (Sec. 236-K of ITO, 2001)
Any Person responsible for registering or attesting transfer of any immoveable property shall at the time of registration or attesting the transfer shall collect from the purchaser or transferee advance tax at the rates specified in Income Tax Ordinance. This advance tax is adjustable in particular Tax Year through filing Income Tax Return.
Tax on Purchase of Transfer of Immovable Property (Sec. 236-W of ITO, 2001)
Every Person responsible for registering or attesting transfer of any immoveable property shall at the time of registering or attesting the transfer shall collect from purchaser or transferee advance tax at the rate of three per cent of the amount computed. This advance tax is not adjustable.
Capital Gain Tax on Disposal of Capital Assets / Immovable Property
A Gain arising on the disposal of a Capital Asset / Immoveable Property by a Person in a Tax Year, other than a gain that is exempt from tax shall be chargeable to tax in that year under the Capital Gains head prescribed by the rates therein. The Gain arising on the disposal of capital Asset / Immoveable Property by a person shall be computed in accordance with the following formula
Computation Formula Under ITO, 2001
A is the consideration received by the person on disposal of the Asset/Immoveable Property:
B is the cost of the Asset / Immoveable Property
We at ZAHID L&A-LLP are available to help and advice you on Property Income and Real Estate Transactions taxes with our expert opinions and best possible solutions for your Real Estate Taxation related issues. ZAHID LAWMAN & ASSOCIATES-LLP helps corporate sectors to achieve their business goals in a tax-efficient manner, both locally and globally. Understanding the tax impact on business operations and transactions in multiple jurisdictions including Pakistan is vital for a company’s survival. We provide tax consulting, advisory and cross-border restructuring support services from conceptualization of the tax strategy through analysis of tax and regulatory implications of transactions and finally implementation assistance, from the perspectives of domestic law and the international tax treaty network.