Pakistan taxes residents on worldwide income and non-residents on Pakistan-source income only. Pakistan operates a self-assessment system, with the Federal Board of Revenue (FBR) conducting post-filing review and audit.
The Pakistani tax year generally runs 1 July to 30 June (though a company may adopt a different special tax year with approval). The individual filing deadline is generally 30 September following the tax year-end.
Pakistan's headline corporate income tax (CIT) rate is 29%.
The headline personal income tax (PIT) rate is 35% salaried; 45% non-salaried (plus possible surcharge).
The standard VAT/GST (or equivalent consumption tax) rate is 18% goods; 15-16% services (provincial).
Under Pakistan's tax law, an individual is resident for a tax year (July 1 - June 30) if present in Pakistan for an aggregate of 183 days or more in that tax year, or if present for 120 days or more in the current tax year and 365 days or more in aggregate across the preceding four tax years, or if a federal/provincial government employee posted abroad. Residents are taxed on worldwide income; non-residents only on Pakistan-source income. A resident who is not a Pakistani citizen, and who is resident solely due to employment with presence not exceeding three years, may qualify for a foreign-source income exemption (subject to conditions).
A non-Pakistani entity has a Pakistan permanent establishment through a fixed place of business or a dependent agent habitually concluding contracts in Pakistan on the entity's behalf, following the OECD Model Treaty definition as applied under Pakistani domestic law and any applicable tax treaty.
Pakistan's CFC regime attributes income to a Pakistan-resident shareholder holding more than 50% of the capital or voting rights of a non-resident company, where that company faces an effective tax rate below 60% of the applicable Pakistani rate. Attributed CFC income is included in the resident's taxable income and taxed as if earned directly in Pakistan, with attribution generally prorated by ownership percentage and subject to de minimis exemptions.
Interest deductions for foreign-controlled resident companies are restricted where the foreign debt-to-foreign equity ratio exceeds 3:1 at any point in the tax year, combined with a fixed-ratio test. Financial institutions and banking companies are exempt from these rules.
Pakistan does not use an elective check-the-box classification system; entity classification generally follows the entity's actual legal characteristics. Pakistan does not have a comprehensive ATAD2-style anti-hybrid regime, though Pakistan's own CFC regime (see CFC section above) addresses related cross-border deferral concerns.
Pakistan has a dedicated foreign asset disclosure regime under Section 116A of the Income Tax Ordinance, 2001 (introduced by the Finance Act 2018, applying from Tax Year 2019 onward): a resident individual must separately file a Foreign Income and Assets Statement where their foreign-source income (excluding salary already taxed by a foreign government) is at least USD 10,000 in the tax year, or where they hold foreign assets valued at USD 100,000 or more, covering foreign bank accounts, investments, real estate, and other property. Non-compliance carries a penalty of 2% of the unreported foreign income or asset value per year of default, in addition to the general wealth-statement reconciliation requirements under Section 116.
Pakistan does not provide a broad participation exemption for foreign dividends in the European sense; foreign dividends received by a Pakistani company are generally taxable, with relief from double taxation available through Pakistan's foreign tax credit system rather than an outright exemption.
Pakistan has a real foreign tax credit regime available to both individuals and companies for foreign tax paid on foreign-source income also taxed in Pakistan, capped at the Pakistani tax otherwise due on that income.
Pakistan has executed tax treaties with 68 countries.