Domestic Taxes, comprising Income Tax, Sales Tax, and Federal Excise Duty, constitute about 90% of the revenue collected by the Federal Board of Revenue (FBR). These taxes are not only similar in essence but are also interdependent in practice. Below are key taxes collected by the Government of Pakistan, including updates based on the latest tax regulations and budget announcements for the fiscal year 2024–25:
• Income Tax: Income tax is imposed on individuals, associations of persons (AOPs), and companies based on their income level. For the tax year 2025, individual tax rates range from 0% to 35%, and corporate tax rates vary between 29% and 39%, depending on business structure and industry. All taxpayers are required to file income tax returns and, where applicable, wealth statements annually.
• Sales Tax: Sales tax is levied on the supply of goods at a federal level and on services at the provincial level. The standard federal sales tax rate is now 18%, as increased in the 2024 Finance Act. Provincial sales tax rates on services vary from 13% to 16% depending on the province.
• Federal Excise Duty (FED): This duty is imposed on certain goods (like cigarettes, beverages, cement, and petroleum products) and services (e.g., air travel and telecom). Rates are product-specific. For example, FED on sugary drinks is now 20%, and on tobacco products it exceeds 30%.
• Customs Duty: Customs duty applies to imported goods under the Customs Act, 1969. Rates can range from 0% to 50% based on the nature, classification, and origin of the goods. Goods from countries under Free Trade Agreements (like China) may be exempted or have reduced duty.
• Agricultural Income Tax: This is a provincial tax on income from agricultural land. It is levied at rates typically ranging from 5% to 10%, depending on the size of landholding and income level. Agricultural income is exempt from federal income tax only if documented per provincial laws.
• Withholding Tax: WHT is deducted at the source on transactions such as contracts, dividends, salaries, and banking transactions. For example, dividend WHT is 15% for Active Taxpayers and 30% for non-ATL persons. It is the largest contributor to direct tax collection in Pakistan.
• Property Tax: Property tax is levied by provincial governments based on the annual rental value or area of a property. Rates vary significantly between urban and rural areas and by province. For instance, in Punjab, the property tax ranges from 5% to 20% of the annual rental value.
• Capital Value Tax (CVT): CVT is imposed by the federal government at 1% of the fair market value of property located in urban areas, applicable on transactions above PKR 50 million. Some provincial governments also levy their own CVT on immovable property.
• Token Tax: Token tax is charged on motor vehicles either annually or at the time of registration. The rate depends on engine capacity, vehicle type (private/commercial), and whether the vehicle is locally assembled or imported. Hybrid/electric vehicles may have reduced token tax.
• Professional Tax: This is a provincial tax levied annually on salaried professionals and self-employed individuals such as doctors, lawyers, consultants, and contractors. The tax amount ranges from PKR 500 to PKR 100,000, depending on income level and profession type.
