The Government of Pakistan collects taxes through the Federal Board of Revenue (FBR), which is responsible for implementing tax laws, collecting federal taxes, and regulating the national tax system. These taxes are used to fund the operations of the government, including public sector development, infrastructure, defense, education, and healthcare.
In Pakistan, different types of taxpayers are categorized based on their legal status, nature of income, and source of earnings. Each category is treated differently under the Income Tax Ordinance, 2001, and is subject to specific tax rates and compliance requirements. These classifications help the FBR ensure accurate tax collection and monitoring of economic activity. Below are the main types of taxpayers in Pakistan:
• Individual Taxpayers:
An individual taxpayer is a natural person who earns income through any legal means such as employment, business, property, capital gains, dividends, or freelancing. Income tax on individuals is applied according to progressive tax slabs ranging from 0% to 35% (as per Tax Year 2025).
Examples include:
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Salaried employees
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Freelancers and consultants
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Shopkeepers and sole proprietors
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Professionals like doctors, engineers, and lawyers
Filing an income tax return and wealth statement is mandatory for individuals exceeding the minimum taxable threshold, which is currently PKR 600,000 per annum for salaried individuals and PKR 400,000 for business income.
• Association of Persons (AOPs):
An Association of Persons (AOP) is a group of individuals or entities formed to conduct a joint business or activity. The AOP is treated as a separate taxable entity. The income earned by the AOP is taxed according to slab rates prescribed for AOPs.
Examples include:
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Unregistered partnerships
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Joint ventures
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Family businesses operating without incorporation
Members of the AOP may also need to declare their share of profit in their personal income tax returns.
• Companies:
Companies in Pakistan are legal persons separate from their owners and shareholders. They are taxed at corporate rates based on their type and activity.
Types of companies include:
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Private Limited Companies (PLCs)
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Public Limited Companies
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Single Member Companies (SMCs)
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Not-for-profit companies registered under Section 42
For Tax Year 2025: -
Standard corporate tax rate is 29%
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Banking companies pay 39%
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Small companies (meeting certain thresholds) are taxed at 20%
Companies must file audited financial statements along with corporate income tax returns and comply with withholding tax requirements.
• Partnership Firms:
Partnership firms are businesses jointly owned by two or more individuals who share profits and losses. In Pakistan, they are taxed as AOPs under the Income Tax Ordinance.
Types include:
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General Partnerships
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Limited Liability Partnerships (LLPs)
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Limited Partnerships
The firm files a return, and the individual partners also reflect their respective shares in their personal returns. LLPs must also be registered with the SECP.
• Non-Resident Taxpayers:
Non-resident taxpayers are individuals or entities that do not reside in Pakistan but derive income from within the country. Tax is levied only on Pakistan-source income.
Examples include:
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Foreign companies with a permanent establishment in Pakistan
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Individuals earning rent from Pakistani property
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Foreigners providing digital or technical services
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Non-residents investing in Pakistani stock markets
Withholding tax is often the main collection method. If a Double Taxation Treaty (DTT) exists between Pakistan and the taxpayer’s country, tax credits or reduced rates may apply.
• Trusts:
A trust is a legal arrangement in which a person (trustee) holds property or income for the benefit of another (beneficiary). Trusts can be taxed as separate entities based on the income they generate.
Types of trusts:
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Charitable trusts (may get exemptions under Section 100C if conditions are met)
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Private/family trusts
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Religious trusts
If not exempt, income is taxed at slab rates applicable to AOPs or under special provisions.
• Clubs, Societies, and Other Similar Organizations:
These are non-profit associations formed for social, cultural, recreational, or professional purposes. If these organizations earn any income from subscriptions, investments, or services, they may be subject to taxation.
Examples include:
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Sports clubs
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Cultural societies
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NGOs with partial commercial operations
Such entities must file annual tax returns. They can also apply for tax exemption if they fulfill the relevant requirements under tax laws and SECP regulations.
Benefits of Being on the Active Taxpayers List (ATL):
Taxpayers whose names appear on the FBR’s Active Taxpayers List enjoy the following advantages:
• Lower tax deduction on bank profits and cash withdrawals
• Reduced withholding tax on registration and transfer of vehicles
• Lower advance tax rates on property transactions
• Reduced capital gains tax on sale of securities
• Lower withholding tax on dividends and prize bond winnings
• Eligibility for refunds of excess tax paid
• Preference in government contracts and tenders
• Avoidance of higher penalties and enforcement actions
To remain on the ATL, timely filing of income tax returns is mandatory. The ATL is updated weekly and publicly available on the FBR website.
