Pakistan’s tax system is divided into Federal and Provincial taxes. The Federal Board of Revenue (FBR) is the primary body responsible for collecting federal taxes, while provincial revenue authorities handle provincial taxes.
Federal Taxes
1. Income Tax
Income tax is applied to individuals, businesses, and corporations. Income tax in Pakistan is progressive, with rates varying based on income levels. For individuals, the tax brackets range from 0% for incomes below the taxable threshold to 35% for higher income levels. Corporate tax rates are generally fixed, with different rates for banking companies and other corporate entities.
2. Sales Tax on Goods (GST)
All goods that are imported, manufactured or traded are subject to sales tax with some conditions & except the goods which are exempt from sales tax. The standard rate of GST in Pakistan is 18% which is being collected when the products are imported or manufactured and then finally passed on to the end consumer.
3. Custom Duties
Every consignment that is imported into Pakistan is liable to customs duty. The rates vary according to products & different HS Codes. Pakistan Customs is bound to collect custom duty & other taxes before releasing the import consignment.
4. Federal Excise Duty (FED)
This tax is levied on the production and sale of specific goods, such as tobacco, beverages, and petroleum products. Excise & Taxation Department Islamabad is the body responsible for collecting these taxes.
Provincial Taxes
Provincial tax bodies in Pakistan are as follows:-
D. Balochistan Revenue Authority
1. Sales Tax on Services
Sales tax on services is collected by the relevant province from which the service is originating. Each province apply sales tax on services at different rate.
2. Property Tax
Levied on the ownership of property, this tax is collected by provincial authorities and used for local infrastructure and services. Not every property is subject to property tax it has some conditions which vary from province to province.
3. Excise & Taxation Department
Excise department is liable to Motor vehicle registrations & collection of tax, professional tax, Alcohol, Tobacco, Cotton Fee, Luxury house tax and others varying from province to province.
Excise & Taxation Departments in Pakistan are as follows:-
A). Punjab Excise
B). Sindh Excise
C). KPK Excise