The National Assembly approved the Finance Bill 2025 on June 29, 2025 with certain amendments proposed therein and after the assent of the President of Pakistan, Finance Act, 2025 has been enacted on June 27, 2025. The amendments made would be effective from July 01, 2025 unless otherwise provided. Below is an overview of key amendments impacting business.
Super Tax on High-Earning Persons in Pakistan
The Finance Act 2025 (FA 2025) revises the super tax rates on high earners under section 4C of the Ordinance. From tax year 2025 onward, individuals, AOPs and companies with high income brackets face the following rates:
| Income under Section 4C | Tax Year 2025 | Tax Year 2026 and onwards |
|---|---|---|
|
Up to Rs.150 million |
0%
|
0%
|
|
Rs.150–200 million
|
1%
|
1%
|
|
Rs.200–250 million
|
2%
|
1.5%
|
|
Rs.250–300 million
|
3%
|
2.5%
|
|
Rs.300–350 million
|
4% |
3.5% |
|
Rs.350–400 million
|
6%
|
5.5%
|
|
Rs.400–500 million
|
8%
|
7.5%
|
|
Exceeding Rs.500 million
|
10%
|
10%
|
This change is designed to enhance progressive taxation in Pakistan and increase revenue from high-income segments.
Tax on Dividends from Mutual Funds
Previously, dividends from mutual funds were taxed at 15%, except for funds deriving 50% or more income from profit on debt (taxed at 25%). FA 2025 refines this:
- Dividends from mixed investments (equity + debt) will be taxed at 15% and 25% respectively, based on proportionate income derived from average annual investment in equity and debt securities.
- For corporate recipients, the component derived from debt securities is now taxed at 29% instead of 25%.
Corresponding amendments have been made to withholding tax provisions on such dividends to ensure alignment with these revised rates.
Profit on Debt – Revised Tax Rates
The profit on debt tax regime has been overhauled. Below are the new withholding tax rates (percentages in brackets represent rates for those not on the Active Taxpayers’ List (ATL)):
| Recipient | National Savings Schemes etc. | Govt. Securities | Bank Deposits |
|---|---|---|---|
|
Individuals
|
15% (30%)
|
15% (40%)
|
20% (40%)
|
|
AOPs
|
15% (30%)
|
20% (40%)
|
20% (40%)
|
|
Companies
|
15% (30%)
|
20% (40%)
|
20% (40%)
|
For individuals and AOPs, where profit on debt does not exceed Rs.5 million, the withholding tax will constitute final tax. This change incentivises digital and documented savings.
Inadmissible Business Expenditure
Purchases from Non-NTN Holders
The Finance Act 2025 introduces a significant disallowance on purchases from persons not holding a National Tax Number (NTN). Specifically, 10% of the claimed expenditure attributable to such purchases will now be disallowed for tax purposes.
This provision does not apply to agricultural products purchased directly from growers or to any person or class of persons specifically notified by the Federal Board of Revenue (FBR) in the official gazette. However, if agricultural produce is purchased from a middleman, the 10% disallowance rule will apply. This aims to incentivize direct procurement and discourage undocumented supply chains.
Expenditure Related to Cash Sales
To promote digital payments and banking channels, where a taxpayer receives payments exceeding Rs. 200,000 otherwise than through a banking channel or digital means against a single invoice (even if covering multiple transactions), 50% of the expenditure claimed in respect of such sale will be disallowed. This amendment strengthens the tax base and encourages cashless transactions in Pakistan’s economy.
Depreciation on Depreciable Assets
The Finance Act also tightens rules on tax depreciation claims. Depreciation will be disallowed for the cost of additions to capital assets where the taxpayer fails to deduct and deposit the tax under Section 152 (payments to non-residents) or Section 153 (payments to resident persons) in the relevant tax year(s). In such cases, the asset will be excluded from the depreciation schedule for computing admissible tax depreciation until full withholding compliance is met. This measure aligns tax depreciation eligibility with proper withholding compliance.
Intangibles and Amortisation
Under previous rules, where an intangible asset did not have an ascertainable useful life, its amortisation was allowed over 25 years. The Finance Act 2025 has reduced this period to 15 years, accelerating tax amortisation for intangibles with indefinite lives. This change impacts businesses investing in intellectual property, software, licenses, and other intangible assets, making their tax treatment more predictable.
Non-Profit Organizations (NPOs) – Tax Treatment in Pakistan
Under section 100C of the Ordinance, registered Non-Profit Organizations (NPOs) are eligible for a 100% tax credit on their income, subject to meeting the conditions and limitations prescribed under the Ordinance. This provision is intended to support genuine charitable and welfare activities, while ensuring stronger compliance and oversight of organizations operating under the guise of NPOs.
Recreational Clubs – Exclusion from NPO Status
The definition of an NPO under section 2(36) of the Ordinance has been tightened to prevent misuse. In particular, ‘Recreational Clubs’ charging membership fees exceeding Rs. 1 million for any class of new members are now disqualified from applying for NPO status.
In line with this, the explanation previously inserted in section 18 of the Ordinance, which deemed the income of cooperative societies from the sale of goods, immovable property, or provision of services to their members as “business income” chargeable to tax has been amended to explicitly include recreational clubs within its scope.
The Ordinance, however, does not provide a specific definition of “recreational club”, which may lead to interpretational disputes and litigation in the future.
Withdrawal of Unconditional Exemptions for Certain Institutions
Through the Finance Act, 2025, unconditional tax exemptions for several high-profile welfare institutions listed in Clauses (57) and (66) of Part I of the Second Schedule have been withdrawn. Their income is now exempt only if they comply with the conditions of section 100C of the Ordinance. This change affects institutions such as:
- Sindh Institute of Urology and Transplantation (SIUT), SIUT Trust and Society for the Welfare of SIUT
- Shaukat Khanum Memorial Trust
- Abdul Sattar Edhi Foundation
- Patient’s Aid Foundation
- Indus Hospital and Health Network
- Dawat-e-Hadiya, Karachi
- The Citizens Foundation
- Sundus Foundation
- Ali Zaib Foundation
- Make-a-Wish Foundation
- Layton Rahmatullah Benevolent Trust (LRBT)
- Saylani Welfare International Trust
- Chiniot Anjuman Islamia
- Pakistan Sweet Homes Angels and Fairies Place
- Dawat-e-Islami Trust
- Hamdard Laboratories (Waqf) Pakistan
- Film and Drama Finance Fund
- Shaheed Zulfikar Ali Bhutto Institute of Science and Technology
New Institutions Added under Section 100C
In addition, the following organizations have been newly added to the list of institutions whose income is exempt subject to section 100C of the Ordinance compliance:
- Beaconhouse National University
- Federal Ziauddin University
- Punjab Police Welfare Foundation, Lahore
Retention of Unconditional Tax Exemption under Clause 57(4)
A newly inserted Clause 57(4) of Part I of the Second Schedule preserves unconditional tax exemption for specific strategic, governmental, or international entities. These include the State Bank of Pakistan and its subsidiaries, FBR Foundation, Pakistan Council of Scientific and Industrial Research, Pakistan Water and Power Development Authority (WAPDA) and its corporatised entities, various Prime Minister’s and Chief Minister’s relief funds, international financial institutions, and development networks such as the Aga Khan Development Network (Pakistan).
This Clause also covers newly moved entities like the Pakistan Poverty Alleviation Fund and the National Rural Support Programme, which previously held exemptions subject to Section 100C but now enjoy unconditional exemption. Additionally, a new entry for the Army Officers Benevolent Fund / Benevolent Fund / Bereaved Family Scheme has been introduced under Clause 57(4), providing automatic, unconditional exemption.
| Recipient | National Savings Schemes etc. | Govt. Securities | Bank Deposits |
|---|---|---|---|
|
Individuals
|
15% (30%)
|
15% (40%)
|
20% (40%)
|
|
AOPs
|
15% (30%)
|
20% (40%)
|
20% (40%)
|
|
Companies
|
15% (30%)
|
20% (40%)
|
20% (40%)
|
Key Takeaways for Tax Compliance
These changes significantly alter the tax landscape for NPOs and welfare organisations in Pakistan. Entities previously enjoying unconditional exemptions must now ensure strict compliance with Section 100C to retain their tax benefits. The disqualification of high-fee recreational clubs and the absence of a statutory definition for such clubs may also lead to interpretational challenges and increased FBR scrutiny.
For organisations operating as charitable institutions, trusts, welfare foundations, or universities, it is crucial to review their compliance status, membership structure, and reporting obligations to secure continued tax relief under the updated regime.
Introduction of Final Tax Regime on Digitally Ordered Goods and Services
A new final tax regime under section 6A of the Income Tax Ordinance, 2001 [Ordinance] has been introduced to streamline the taxation of digitally ordered goods and services. This regime specifically targets transactions executed through locally operated online platforms, marketplaces, websites, courier businesses and payment intermediaries.
It applies to goods and services delivered from within Pakistan, ensuring that e-commerce sellers and service providers contribute fairly to the tax system while reducing duplication of withholding at multiple stages.
Under this regime, tax is levied at prescribed final tax rates on persons receiving payments for digitally ordered goods and services. Export proceeds that are already subject to withholding tax under sections 154 and 154A of the Ordinance, remain excluded from section 6A of the Ordinance. Importantly, where tax is collected under section 6A of the Ordinance by designated withholding agents, no further deduction of withholding tax under section 153(1) of the Ordinance will apply.
| Sr. No. | Collection Agent | Final Tax Rate for Seller (Section 6A) | Withholding Tax Rate (Section 153(2A)) |
|---|---|---|---|
|
(i)
|
Payment Intermediary
|
Filer: 1% / Non-Filer: 1%
|
2%
|
|
(ii)
|
Courier Business
|
Filer: 2% / Non-Filer: 2%
|
4%
|
Filing Requirements for Intermediaries and Marketplaces
To ensure transparency in e-commerce transactions, section 6A of the Ordinance prescribes specific filing requirements for payment intermediaries, courier services, and online marketplaces engaged in the sale of digitally ordered goods and services.
Every payment intermediary and courier service responsible for collecting tax under this section must submit a quarterly withholding statement in the prescribed form. This statement should clearly include the seller’s name, NTN/CNIC and address; the transaction date and invoice number or unique identifier; the total transaction value; the amount of tax deducted at the time of payment; and any other particulars as may be prescribed by the Federal Board of Revenue.
In addition, every online marketplace operating in Pakistan is required to file a monthly statement detailing, for each vendor registered on its platform, the vendor’s name, address, Sales Tax and Income Tax registration numbers, the transactional and aggregated monthly turnover, and the amount deposited into the vendor’s bank account against such transactions. The provisions of section 165 of the Ordinance including timing of filing, revision of statements, extension of time, and reconciliation, apply to these statements, ensuring consistent reporting and compliance.
Mandatory Tax Registration for E-Commerce Sellers
Section 6A of the Ordinance introduces a clear registration requirement for individuals and businesses selling digitally ordered goods or services through online platforms or courier services. Any such person must obtain a valid income tax registration (NTN).
Moreover, online marketplaces and courier services must not allow unregistered vendors to use their platforms for e-commerce transactions unless the vendor holds a valid NTN. This condition is intended to formalize Pakistan’s growing digital economy and create a level playing field among all sellers.
Penalties for Non-Compliance
To strengthen enforcement and deter non-compliance, the Ordinance prescribes the following penalties under section 6A of the Ordinance:
These penalties include monetary fines for failure to furnish statements within the due date, failure of a banking company, payment gateway or courier service to deduct or deposit tax under section 160 of the Ordinance, and heavy fines for sellers who fail to obtain mandatory registration under the Ordinance. This structure emphasizes the government’s intent to make tax compliance an integral part of digital commerce operations.
Key Definitions
| Sr. No. | Offence | Penalty |
|---|---|---|
|
1 |
Failure to furnish statements within the due date (including online marketplaces, payment intermediaries, and courier services).
|
Rs. 50,000 if the tax collected/withheld has been paid within the due date and the statement is filed within 90 days; otherwise Rs. 2,500 per day of default (minimum Rs. 10,000). Where no tax was required to be deducted/collected during the period, minimum penalty remains Rs. 10,000.
|
|
2
|
Failure of a banking company, payment gateway or courier service to deduct or deposit tax under section 160 on payments for digitally ordered goods or digitally delivered services via an e-commerce platform.
|
100% of the amount of tax involved.
|
|
3
|
Failure by a seller of digitally ordered goods or digitally delivered services through an online marketplace to obtain mandatory registration under the Ordinance.
|
Rs. 500,000 for the first default;
Rs. 1,000,000 for every subsequent default.
|
- Courier Service: Any specialized entity providing fast, secure, often tracked transportation of documents, packages and small freight, typically door-to-door, with delivery of digitally ordered goods, including collection of cash (CoD) on behalf of sellers. This includes (but is not limited to):
- Logistic services
- Ride-hailing services
- Food delivery platforms
- E-commerce services
- Payment Intermediary: Any third-party entity, including banking companies, financial institutions, licensed foreign exchange companies or payment gateways, that facilitates transfer of funds or payment instructions between two or more parties to enable, process, route or settle payments without being the ultimate source or recipient.
- Digitally Delivered Services: Any service delivered over the internet or electronic networks where delivery is automated and requires minimal or no human intervention. Examples include music/audio/video streaming, cloud services, online software, telemedicine, e-learning, online banking, architectural design, consultancy reports, accounting files or any other online facility.
- E-Commerce: Sale or purchase of goods and services conducted over computer networks through methods specially designed for receiving or placing orders, via websites, mobile applications or online marketplaces, using digital ordering features such as mobile phones, tablets or automated computer-to-computer systems.
- Online Marketplace: Expanded to include online interfaces facilitating, for a fee, direct interaction between multiple buyers and multiple sellers via digital orders for supply of goods and services, regardless of whether the platform takes ownership of goods or provides/render the services being sold.
Income from Other Sources – Digital Payments Recognised
The Finance Act 2025 recognises digital payments, as defined in section 2(17B) of the Ordinance, at par with traditional banking channels and cheques. This includes payments made through electronic transfer, online banking, mobile wallets, or digital platforms.
As a result, any amount received by a person in a tax year from another person (other than a banking company or financial institution) holding an NTN, such as loans, advances, deposits for issuance of shares, or gifts, through digital means will not be treated as taxable income under “Income from Other Sources.” This provision incentivizes the shift from cash to documented digital transactions.
Set-Off of Losses – Restriction Reinstated
Before the Finance Act 2025, a business could set off its losses under one head of income (other than capital loss) against income under any other head of income, excluding salary. The Finance Act 2021 had relaxed this by allowing business losses to be adjusted against property income.
The Finance Act 2025 has now reinstated the pre-2021 restriction, once again barring the adjustment of business loss against property income. This reversal narrows loss utilisation and requires businesses to reassess their tax planning strategies.
Group Relief – Limitation on Special Tax Regimes
Group companies in Pakistan have historically been allowed to surrender their assessed business losses to holding or subsidiary companies against payment of cash, under the group relief provisions of Section 59B.
The Finance Act 2025 introduces a key limitation: any company whose business income is chargeable to tax under a provision other than the standard corporate tax rate, such as minimum tax or a special tax regime is no longer entitled to avail group relief. This amendment restricts tax arbitrage within group structures and ensures group relief is available only to companies taxed at the normal corporate rate.
Time Limitation for Amendment or Further Amendment of Assessment
The Finance Act 2025 (FA 2025) extends the time limit for amendment of tax assessments in Pakistan. Previously, an order under section 122 of the Ordinance, had to be issued within 180 days of the issuance of a show-cause notice (excluding any period where proceedings were stayed), unless extended by the Commissioner for a period not exceeding 90 days. This limitation applied to notices issued after July 1, 2021.
Through FA 2025, this time limit has been enhanced from 180 days to one year, giving the tax authorities a longer window to amend or further amend tax assessments.
Appeal Effect Order and Recovery Proceedings
FA 2025 introduces a new provision simplifying the appeal effect order process. When the Commissioner (Appeals), Appellate Tribunal Inland Revenue (ATIR), High Court, or Supreme Court confirms the tax payable as determined in the appealed order, the Commissioner can now proceed directly with tax recovery without issuing a separate appeal effect order.
Nevertheless, if the ATIR, High Court, or Supreme Court partially sets aside or modifies the order, the Commissioner must issue an appeal effect order. This order will compute the tax payable based on confirmed or modified issues only, excluding any portion remanded back or set aside. The tax payable on confirmed issues will be recovered under the Income Tax Ordinance.
Appeals – Removal of Pecuniary Jurisdiction Limits
The pecuniary jurisdiction limits introduced via the Tax Laws (Amendment) Act 2024 and modified through the Finance Act 2024 have now been removed. Except in the case of State-Owned Enterprises (SOEs), any order passed by an officer of Inland Revenue is appealable before the Commissioner Inland Revenue (Appeals) [CIR(A)], regardless of the tax revenue involved reverting to the pre-pecuniary limit regime.
Taxpayers now have the option to file an appeal directly before the ATIR, foregoing their right of appeal before the CIR(A). The order of the CIR(A) remains appealable by either the taxpayer or the Commissioner before the ATIR within 30 days of receipt of the order. Previously, such matters could be directly challenged before the High Court.
Similar amendments have been made in the Sales Tax Act, 1990 and the Federal Excise Act, 2005, further aligning indirect tax and income tax appeal procedures. Notably, the right to appeal against orders of the Chief Commissioner or FBR Board directly before the ATIR has been withdrawn.
Reference to the High Court
Prior to FA 2025, a reference to the High Court could be filed on a mixed question of law and facts within 30 days of communication of the order from CIR(A) or ATIR.
FA 2025 enhances the time limit for filing a reference to 60 days and restricts references to purely questions of law arising out of ATIR’s orders. This amendment primarily aligns with the reintroduction of the two-tier appeal system under the Ordinance. Similar changes apply to the Sales Tax Act and Federal Excise Act.
Alternative Dispute Resolution (ADR) for State-Owned Enterprises
An enabling provision has been introduced for reappointment of ADR Committees where an SOE’s ADR Committee fails to decide a matter within 60 days. The reappointed committee must decide the matter within a further 60 days; failing this, the SOE acquires the right of appeal. Similar provisions have been incorporated in the ST Act and FE Act, enhancing ADR mechanisms for state-owned entities.
Recovery of Tax – Immediate Recovery Rationalised
Provisions earlier introduced via the Tax Laws (Amendments) Ordinance 2025 for immediate tax recovery on issues decided in favour of the tax department have been rationalised.
Now, such recovery may be made only when:
- The issue has been decided in favour of the department at three appellate forums, including the High Court; and
- The amount of tax exceeds Rs. 200 million.
Additionally, the amount of tax recovery shall be the lowest demand confirmed by any of the three appellate forums, ensuring a more balanced and fair approach to large-scale tax recoveries.
Imports – Exemption from Advance Tax Collection
Under FA 2025, the Collector of Customs is not required to collect advance income tax at the import stage where the recipient of goods is also liable to Digital Presence Proceeds Levy under the Digital Presence Proceeds Tax Act, 2025, and the same has been collected by a payment intermediary as defined under Section 153 of the Ordinance. This prevents double taxation and simplifies compliance for businesses with a digital presence in Pakistan.
Tax on Gains Arising on Disposal of Certain Debt Securities
Gains on the disposal of debt securities are subject to tax under Section 37A, computed as per a prescribed formula. FA 2025 now requires every custodian of debt securities, including banking companies maintaining Investor Portfolio Securities (IPS) Accounts, to withhold tax at 15% of the gross capital gain on disposal of such debt securities (other than disposals through a registered stock exchange settled through NCCPL).
If the person deriving such gains is not on the Active Taxpayers’ List (ATL), the withholding tax rate will be enhanced by 100%, effectively doubling the rate to 30%. This measure strengthens compliance with capital gains tax on debt instruments in Pakistan.
Capital Gains on Debt Securities Held by Non-Resident Companies
Previously, capital gains on debt securities arising on disposal of government instruments by non-resident companies with no permanent establishment in Pakistan were subject to 10% withholding tax as final tax.
FA 2025 introduces a two-tier rate structure:
- 10% tax if the Special Convertible Rupee Account (SCRA) is maintained for at least six months.
- 20% tax if the holding period is less than six months.
This amendment aligns taxation with investment holding periods and incentivises longer-term investments by non-residents.
Exemption Certificate – Non-Withholding of Income Tax
Previously, the Commissioner Inland Revenue could issue reduced rate certificates up to 80% of the withholding tax rate for payments (not subject to minimum tax) on sale of goods, services, and contracts executed by a resident person.
FA 2025 empowers the Commissioner to issue a full exemption certificate to public limited companies. Additionally, the Commissioner may now allow an exemption from withholding tax on the sale of immovable property where:
- The property was held by the seller for at least 15 years;
- The property was duly declared in wealth statements filed; and
- The property was used by the seller for personal use during that period.
This exemption is available only once every 15 years and such disposal is excluded from the applicability of super tax under section 4C of the Ordinance. These changes provide significant relief for long-term property holders and public limited companies.
Fee for Offshore Digital Services
The tax rate on fees for offshore digital services has increased from 10% to 15%. Nevertheless, banking companies and financial institutions will not deduct tax where the recipient is already liable to Digital Presence Proceeds Levy and the same has been collected, preventing double taxation in Pakistan’s digital economy.
Enhanced Withholding Tax Rates for Services and Contracts
Withholding tax rates under Sections 152(2A) and 153(1) have been enhanced:
- PE of Non-Resident Person: 8% on listed services such as transport, freight forwarding, courier, manpower outsourcing, hotel, security, software development, engineering, car rental, inspection, certification, training, oilfield services, and other specified services.
- Resident Person: 6% on the above services.
- IT services and IT-enabled services remain at 4%.
- Other services: Companies 15%, Others 15%.
- Execution of contract by sportspersons: increased from 10% to 15%.
These higher rates aim to tighten compliance in Pakistan’s services sector.
Exemption of Income from Cinema Operations
The tax holiday on cinema operations is now limited to the earlier of 30 June 2030 or five years from the commencement of cinema operations, whichever comes first. This restricts long-term exemptions while still encouraging investment in Pakistan’s entertainment sector.
Reduced Tax Rate for National Logistics Corporation (NLC)
FA 2025 fixes the rate of tax to be deducted and collected from NLC at 3% of the gross amount of payment and the gross sale price of a lease of the right to collect tolls. This tax shall be treated as minimum tax; however, if normal income tax liability exceeds this amount, the higher tax will apply.
Immunity from Audit – Restricted to Three Years
Previously, taxpayers whose income tax affairs were audited in any of the preceding four tax years enjoyed immunity from further audits under sections 177 and 214C of the Ordinance. FA 2025 reduces this immunity to three preceding tax years, tightening audit provisions and improving tax compliance in Pakistan.
Conclusion — Finance Act 2025: What Businesses Must Do Now
The Federal Finance Act 2025 tightening NPO compliance (Section 100C), introducing a final tax for e-commerce (Section 6A), revising super tax on high earners (Section 4C), recalibrating withholding on services, dividends, profit on debt and digital services, and refining rules on inadmissible business expenditure, depreciation, intangibles, group relief, and loss set-off.
With expanded digital-payment recognition, stricter audit immunity (three years), new capital gains mechanics for debt securities, and targeted incentives/exemptions (SEZ/STZ sunset, sports/ICC events, sectoral reliefs), the emphasis is clear: documentation, digital traceability, and timely filings.
Businesses should immediately map exposure by provision, update withholding SOPs, validate vendor NTN status, re-model cash flow and effective tax rates, and align contracting and pricing to the new rates and timelines. A proactive tax health check covering e-commerce reporting, property transactions, and cross-border payments, will convert compliance into advantage and minimize dispute risk in FY2025-26.
Finance Act 2025 – Frequently Asked Questions
1) When do the Finance Act 2025 changes take effect?
Most amendments become effective from 1 July 2025, unless a section specifically provides a different date. This means all taxpayers, businesses, NPOs, digital sellers, and high-income individuals, need to align their tax planning for FY2025-26 accordingly.
2) What is the new tax treatment for Non-Profit Organisations (NPOs) under Section 100C?
Registered NPOs remain eligible for a 100% tax credit under section 100C, but only if they comply with prescribed conditions on governance, filing, application of income, and auditing. The FBR has tightened oversight to ensure that only genuine charitable and welfare organisations receive tax relief.
3) Are recreational clubs still eligible for NPO status?
No. A “Recreational Club” charging over Rs 1 million membership fee for any class of new members is disqualified from NPO status (Section 2(36)). However, the Ordinance doesn’t yet define “recreational club,” which may lead to litigation and interpretational disputes with the FBR.
4) Which institutions lost unconditional tax exemption under the Finance Act 2025?
Several high-profile welfare organisations, such as SIUT, Shaukat Khanum Memorial Trust, Abdul Sattar Edhi Foundation, LRBT, Saylani, TCF, Indus Hospital, etc. now have to comply with section 100C to retain their tax exemption.
5) Which entities retain unconditional tax exemption under Clause 57(4)?
Strategic and government-linked bodies such as the State Bank of Pakistan, FBR Foundation, Pakistan Council of Scientific & Industrial Research, WAPDA corporatised entities, certain PM and CM Relief Funds, international financial institutions, and Aga Khan Development Network continue to enjoy automatic, unconditional exemption. The Pakistan Poverty Alleviation Fund and National Rural Support Programme have also been moved into Clause 57(4).
6) What is Section 6A and how does it tax digitally ordered goods and services?
Section 6A introduces a final tax regime for e-commerce and digitally ordered goods/services delivered within Pakistan via online marketplaces, websites, couriers, and payment intermediaries. Export proceeds already taxed under sections 154 and 154A remain excluded. Where tax is collected under section 6A, no further withholding under section 153(1) applies, avoiding double taxation.
7) What are the tax rates under Section 6A?
- Payment intermediaries: 1% final tax (filers and non-filers); plus 2% WHT under 153(2A).
- Courier businesses: 2% final tax (filers and non-filers); plus 4% WHT under 153(2A).
These rates apply to sellers receiving payments for digitally ordered goods and services.
8) What filing requirements apply to online marketplaces and intermediaries?
Quarterly withholding statements (payment intermediaries and couriers) and monthly vendor statements (online marketplaces) are mandatory. These must include NTN/Sales Tax numbers, turnover, bank deposits, transaction details, and taxes deducted. Section 165 rules on timing, revision, extension, and reconciliation apply.
9) Is tax registration (NTN) mandatory for online sellers?
Yes. Sellers of digitally ordered goods or services must obtain a valid NTN. Marketplaces and couriers must not onboard unregistered vendors. This formalises Pakistan’s digital economy and levels the playing field.
10) What penalties apply for non-compliance under Section 6A?
- Late statements: Rs. 50,000 (if paid but filed within 90 days) or Rs. 2,500/day (min Rs. 10,000).
- Failure to deduct/deposit digital payment tax: 100% of the tax involved.
- Unregistered sellers: Rs. 500,000 (first default) / Rs. 1,000,000 (subsequent defaults).
These penalties underscore the government’s intent to enforce digital tax compliance.
11) How did super tax under Section 4C change for high earners?
Super tax rates have been revised for tax year 2025, moderating some slabs from 2026 onward. Income above Rs. 500 million remains taxed at 10%, while mid-brackets range from 1% to 8%. This reflects a push toward progressive taxation of high-income individuals, AOPs, and companies.
12) How are dividends from mutual funds taxed now?
Dividends are now taxed based on the proportion of equity vs. debt investments:
- Equity-derived portion: 15%
- Debt-derived portion: 25% (29% for corporate recipients)
- Withholding rules have been updated to match these new rates.
13) What are the new profit-on-debt withholding tax rates?
For individuals: 15% (NSS), 15% (Govt Securities), 20% (bank deposits); Non-ATL = 30–40%.
For AOPs: 15%, 20%, 20%.
For Companies: 15%, 20%, 20%.
Where profit on debt ≤ Rs 5 million, withholding constitutes final tax for individuals and AOPs.
14) Which expenses are now inadmissible?
- 10% disallowance: purchases from non-NTN holders (except direct growers).
- 50% disallowance: expenditure on sales where > Rs 200,000 per invoice received outside banking/digital channels.
- Depreciation blocked: asset additions where withholding under Sections 152/153 not deducted & deposited.
15) How has amortisation of intangibles changed?
For intangibles without a definite life, the amortisation period is reduced from 25 to 15 years, benefiting companies with large IP or software investments.
16) Are digital payments for loans, gifts or share deposits taxable?
No. If received digitally from an NTN holder, such amounts are not taxable under “Income from Other Sources” (Section 39).
17) Can business losses still be set off against property income?
No. FA 2025 reinstates the pre-2021 restriction, barring such a set-off. Businesses must reassess tax planning accordingly.
18) Who can now claim group relief under Section 59B?
Only companies taxed at the normal corporate rate. Those under minimum tax or special regimes are excluded to prevent tax arbitrage.
19) What is the new time limit for amending assessments (Section 122)?
The order window expands from 180 days to one year (excluding stay periods), giving the FBR more time to complete proceedings.
20) How did appeals and High Court references change?
Pecuniary limits removed; taxpayers may appeal to CIR(A) or directly to ATIR. High Court references are now limited to questions of law only and must be filed within 60 days.
21) What’s new in ADR for State-Owned Enterprises?
If an ADR Committee fails to decide an SOE matter within 60 days, a new committee can be appointed for another 60 days. After that, the SOE regains the right of appeal.
22) When can the FBR make immediate recovery?
Only if the issue is decided for the department at three appellate forums (incl. High Court) and tax exceeds Rs 200 million, limited to the lowest confirmed demand.
23) Is advance tax at import always collectible under Section 148?
No. If the importer is already liable to Digital Presence Proceeds Levy and it has been collected by a payment intermediary, no Section 148 advance tax is collected at import.
24) How are capital gains on debt securities withheld?
Custodians/IPS banks withhold 15% of gross gain on off-exchange disposals (30% for non-ATL).
25) What are the new CGT rates for non-resident companies on debt securities?
10% if SCRA ≥ 6 months; 20% if holding < 6 months. This encourages long-term investment.
26) Who can now get a full exemption certificate from withholding?
Public limited companies. Plus, individuals can claim a one-time WHT exemption on sale of immovable property held ≥15 years, declared in wealth statements, and used personally, also excluded from super tax Section 4C.
27) What is the new tax rate on offshore digital services?
15% (up from 10%), with no WHT if Digital Presence Proceeds Levy already collected by banks/FIs.
28) What are the revised withholding tax rates on services and contracts?
- PE of Non-Resident Person: 8% on listed services (transport, courier, outsourcing, software, engineering, etc.).
- Resident Person: 6% on the same services.
- IT/ITeS: 4% unchanged.
- Other services: 15% (companies/others).
- Sportsperson contracts: 15% (up from 10%).
29) How long is the cinema tax holiday now?
Exempt until the earlier of 30 June 2030 or five years from start of operations. (Keywords: cinema tax exemption Pakistan)
30) What is the NLC tax rate?
3% of gross payment/lease toll collection, treated as minimum tax, but pay higher normal tax if applicable.
31) Has audit immunity changed?
Yes. Immunity from audit under sections 177 and 214C now applies if the taxpayer was audited in any of the preceding three tax years (previously four).
