The Taxation System of Pakistan



The Taxation system of Pakistan is remarkably interesting, some portion of taxes (services) is collected by provincial Governments (Punjab, Sindh Khyber-Pakhtunkhwa, and Baluchistan and Federally Administrated Territory Area of Pakistan) and major taxes are collected by the Federal Government of Pakistan. There are two major types of taxes One direct taxes and the second in indirect taxes. Pakistan collects a major share of taxes through indirect tax collection which is about 75% of total tax collection. The indirect taxes are Custom Duty, Excise duty, service tax, sales tax, and VAT. Following are the main indirect taxes imposed in Pakistan.

·         Sales tax on goods by the Federal Government at the rate of 17 percent.

·         Sales tax on services by the Provincial Government (Punjab) at the rate of 16 Percent

·         Sales tax on services by the Provincial Government (Sindh) at the rate of 13 Percent.

·         Sales tax on services by the Provincial Government (Khyber Pakhtunkhwa) at the rate of 15 Percent

·         Sales tax on services by the Islamabad Capital Territory (FATA) at the rate of 16 Percent

·         Sales tax on services by the Provincial Government (Baluchistan) at the rate of 15 Percent

Direct taxes are around 25 percent of the total tax collection in Pakistan. The types of direct tax are Income Tax (Tax imposed on the income of their people), Corporate tax(The taxes on the profit earned from the company), Property tax(Tax imposed on the property of the people), Inheritance tax(The tax on property received by the children from their parents), Gifts tax(Ta imposed on gifts received by people), and wealth tax(The tax on the wealth of the people). The income tax rates are according to nature, taxes are different for filer and no filer, companies, and individuals, according to the salaries for further specific rates please refer the web site federal board of revenue and their tax card file.  

There is a process of filing the return after the closing of the financial year, the people can directly file their returns by providing all details of their income and expenditure and also the detail of taxes they paid during that financial year.  There is also the provision of Refunds of taxes, People who file the taxes can get a refund of taxes from the federal Revenue board if they have paid more taxes to the government. there is the process of reconciliation of taxes due and taxes paid, the difference amount is payable or receivable by the person or company. 



State Bank of Pakistan


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