IMPORTANT Sale of taxable activity or transfer of ownership

To a registered person as a going concern

Transfer through zero rated invoice - means no tax on transfer
Sales tax shall be paid by buyer when he subsequently sells

To an unregistered person
Supplies are taxable and registered person shall be required to pay tax on these.
Unpaid tax first charge on company - recovered from transferee if unrecovered from registered person

Person registered temporarily

Shall not issue a sales tax invoice.

Hire purchase
Complete sales tax charged at the time of agreement
No impact of change in rate of tax.

Input claim
Available for claim within 6 tax periods

Value addition tax

Part of input tax
Deducted against output
Cannot be refunded
Will be carried forward for adjustment

Tax credit not allowed - means can't claim input

Fake invoices
Purchases from persons who are suspended or blacklisted
Purcahses from Person temporarily registered
Purchases from Non active tax payer
ered from registered person.
Minimum tax means that is your minimum liability.
Witholding not treated as minimum, is allowed as a deduction from tax assessed under NTR. - means dena hi dena nahein h. If

Resident Person
Foreign Source - From business outside Pakistan.
Pakistan Source - From activities in Pakistan.
Importers
Commercial Importers - sell as it is (no value addition)
rter. i) Exempt from withholding tax at the time of supply.
ii) Tax payable shall be the higher of:
- Advance tax paid at the time of imports as minimum tax.
- Tax liability calculated under normal tax regime.

SALES TAX on imports of 3rd Schedule items

3% VAT - value addition tax not applied
Import stage sales tax charged at retail price.

Importers that add value

i) No Exemption on withholding tax at the time of supply.
ii) Tax paid on imports @ 1% subjected to normal tax regime.
iii) Tax liability calculated under normal tax regime.

Sale of Manufactured Goods

Company NTR
Individual / AOP Minimum tax

Trading
Company NTR
Individual / AOP Minimum Tax

SALES TAX on sale of used vehicles in open market

Sold after value addition - means not in the same condition
Sales tax paid at the time of import or manufacturing
Value = Value of supply less purchase price of used

Provision of services
Company
Individual / AOP

ers? Execution of contracts outside Pakistan

Final tax shall be charged at reduced rate on income (not-receipt) from such contracts
Bought to Pakistan through normal banking channels

Contract with a sport person

Say you engaged a sports person for branding your product - or other contract.
 Withhold tax @ 10% - treated as minimum tax for sports person.

Builders and Developers (100D)

Registered with the board as builder or developer as applicable.
Builder - Constructs buildings and disposes them off.
Developer - develops plots/lands either for self or otherwise. - like housing societies.
Section 100D shall apply if they opt for it.
On projects to be completed by September 2022.

Exporters
All proceeds charged to tax @ 1%.
This tax shall be treated as final tax.
Say we set up a distribution centre in foreign country - sales shall not be foreign source rather e
However, option is available to opt out of FTR.
Further Tax deducted @ 1% shall be treated as Minimum tax.
Opting out will available on year to year basis. Means goes back to normal unless you apply for

SALES TAX on EXPORTERS of zero rated

Only those exporters who intend to obtain refund on zero rated supplies need to be registered in sa

IMPORTANT Exporters of computer softwares or IT services or IT enables services (Individual.AOP and company)
Exempt from tax - NO turnover tax at 1.25% - NO corporate tax at 17%.
PROVIDED - 80% of the proceeds are brought into Pakistan through normal banking channels.
If not qualified for exemption - 1% of proceeds as final tax. (S154)
If returnds, withholding statements, sales returns are filled.
Tax credits shall not be allowed.
Option to opt out available.
IMPORTANT Exporters of Services (individual,AOP and Company)
1% of proceeds as FINAL tax - if all returns sales, income tax, withholding statements filed
No tax credit for taxes paid shall be allowed.
Option to opt out available.
Serivces shall include:
IT services as discussed above.
Royalty, technical services, patents, etc. used by foreign company
Construction contracts executed outside Pakistan

Expenses prior to commencing business operation

Straight line basis @ 20%

PPE set up in under developed area

First year (initial) allowance @ 90%

PPE set up for alternate energy projects

First year (initial) allowance @ 90%
 Asset put to commercial production
Initial allowance @ 25% if not _ transport vehicle, already used in Pakistan before, furniture fitting,

DISPOSING BUSINESS
Individual to wholly owned company
AOP to wholly owned company

DISPOSING ASSETS
Between wholly owned companies

LOSSES
Spec to spec 6 year carry forward
For to for 6 year carry forward
NSP to Spec is also okay 6 year carry forward
Pak to for is also okay 6 year carry forward
Unabsorbed depreciation until set-off fully - 50% of total income restriction applies

Non-Resident Person
Foreign Source - None of our business
Pakistan Source - From activities in Pakistan.
Permanent Establishment
Our Imports - their income
Services where we pay them for using their patents or technical services, etc.
ns dena hi dena nahein h. If over and above then shall be carried forward as applicable.

uch contracts
ousing societies.

t be foreign source rather exports cause only distribution in foreign country.

ormal unless you apply for it again.

need to be registered in sales tax.

al.AOP and company)

normal banking channels.

statements filed
n before, furniture fitting, building.
 303 Taxation of Joint Venture - same as associate
322 Permanent of Non-Resident Individual
1. What is a PE?
A non-resident (say TECNO) sets up a factory/ a workshop here in Pakistan.
2. Tax Treatment
PE shall be treated as separate to TECNO. - The factory shall be treated as a separate company fo
3. Chargeability
Tax charged at 29% at company rate.
Subject to turnover tax @ 1.5%.
PE selling to prescribe person - Prescribe person shall deduct minimum tax.
PE selling to other than PP - Other than PP can't deduct tax hence treated under NTR.
4. Inadmissible expenses and incomes including head office expenses.
IMPORTANT ● Interest on loan - paid (expense) or received (income) by PE to/from head office or Other PE
IMPORTANT ● Royalty fees / Commission paid or received by PE to or from head office or other PE
IMPORTANT ● Charges for service provided or taken by PE

0 Resident Company with Foreign operations

Set up operations in FOREIGN COUNTRY i.e. FOREIGN SOURCE income
1. Determine Status of person as per Pakistan tax law.
You are a RESIDENT COMPANY / AOP.
2. Determine Income Regime.
NTR
You have to pay both taxes i.e. as foreign law and as per Pakistan laws.
Exemptions or credits:
Tax credit on f-income at lower of f-tax paid and Pakistan tax that would be paya
No such credit shall be refunded or carried forward. Means the benefit shall be lo
Means - You will add this f-income in your return and reduce your tax l
2.1. Are there any current or potential losses?
LOSSES:
F to F only - means your Pakistan source operations can not benefit fro
They’ll keep it to themselves for 6 years but won't give it to
But your foreign operations can benefit from your Pakistan source loss
So this would mean when calculating your Pakistani tax on y
Impact on RESIDENT EMPLOYEES drawing salary from your foreign operations
No tax on f-salary if f-tax paid
No tax if they leave Pakistan and stay abroad in a tax year
No tax if they have not been resident for prior 4 years in tax year they c
Royalty, technical services, patents, franchises, information concerning commercial or scien
EXEMPT - Company did anything as mentioned above and got paid for it, such inc

2.1. Are there any PRE-COMMENCEMENT EXPENDITURES?

Examples includes prototypes, feasibility studies cost, trial production a
Not includes cost of land, share premiums, share discounts, taxes paid.
AMMORTISE on straight line basis @ 20%.
 Foreign Remittances shall be treated as dividend
IMPORTANT (i) 15% final tax shall be charged to dividends received by ABC company from it's foreign subsidiary.
IMPORTANT (ii) No deduction shall be allowable for any expenditure in deriving the amount of dividend.
IMPORTANT (iii) The amount of dividend shall not be reduced by any deductible amount or set off of any loss.
IMPORTANT (iv) Tax payable by ABC shall not be reduced by any tax credits.

298 Company having share in profits of an AOP

To be reduced from profits of AOP
Charged to tax at companies rate of 29%

298 Company having share in LOSSES of an AOP

No need to separate from AOP
Allowed to be carried forward by AOP to set off in furture - no deduction allowed to company for loss
IMPORTANT Share in AOP turnover added to company turn over when calculating 1.25%
Credit allowed to company if tax already deducted by AOP
IMPORTANT Share of profit / total taxable income x tax of AOP withheld

A pharmaceutical manufacturer incurring promotional expense in excess of 10% of revenue

Not allowed as deduction in excess of 10%.

Scientific research
Allowable expenditure
deduction if

- Incurred in Pakistan
- Conducted to derive income from business chargeable to tax.

Emplyee training and facilities

Allowable deduction if:
- training in connection with scheme approved by Board / trainee citizen of Pakistan / Does not have t
- Person k employees ya un k dependant k liye / Education institute / Hospital bnaya ho
- Industrial workers ki training k liye school / in Pakistan / run by Government

64D. Tax credit for investing in point of sale machines as required by board for real time reporting of sale
Any person who is required to integrate with Board’s computerized system for real time reporting of
Tax credit shall be allowed at the lower of:
Rs. 150,000 per machine OR Actual amount invested

SALES TAX implication

All tier 1 retailers required to integrated.
Non-intergration attracts penalty of 1 million upto.
Continuing non compliance will cause business being seal
This will be when fine already charged but still not integrated in 2 months.
Integration would attract tax at reduced rate of 12% rather than 17% (for specific products only)
Limit to claim output tax is increase from 90% to 95%

Asset put to use in commercial production

 Allowed initial allowance at 25% - means 25% of assets cost allowed as deduction
If asset is eligible - Means
Not Previously used in Pakistan
Not furniture or fittings
Not Road transport
IMPORTANT Not building let out with plant and machinery ( available on plant and machinery only)

Plant and Machinery installed in specified under developed areas or for alternate energy projects
Where owned and managed by company allowed 90% first year allowance.
For alternate energy projects - no restriction on area where to install.

Pre-commencement Expenditures
Expense incurred prior to commencement of business operations - like feasibility studies etc.
Allowed @ 20% on straight line basis. Means deduction spread over 5 years.

FINANCING
Loan borrowed - profit on debt paid
For business purpose - allowed
IMPORTANT For work in progress - disallowed
Depreciation shall be allowed when asset is complete and put in use in business

Acquisition by share for share exchange

No implication in case of foreign acquisition.
There may be implications if group taxation or group relief is in question.

IMPORTANT AOP took loan from it's member

Profit on debt paid to member NOT allowed as deduction.
 ed as a separate company for taxation purposes.

eated under NTR.

from head office or Other PE - Not allowable or chargeable to tax

ad office or other PE

istan tax that would be payable.

Means the benefit shall be lost if your are unable to adjust it in the current year.
return and reduce your tax liability by the tax credit (if possible).

perations can not benefit from your foreign source losses.

r 6 years but won't give it to you.
om your Pakistan source losses. (See it as that's just how Pakistanis are - too good :p )
lating your Pakistani tax on your f-income you can adjust these losses.
m your foreign operations

ad in a tax year
prior 4 years in tax year they come back
ncerning commercial or scientific knowledge, etc.
e and got paid for it, such income is exempt from tax.

tudies cost, trial production activities.

, share discounts, taxes paid.
y from it's foreign subsidiary.
amount of dividend.
unt or set off of any loss.

allowed to company for losses

10% of revenue

of Pakistan / Does not have to be employee of Company

pital bnaya ho

or real time reporting of sales or receipts

em for real time reporting of sale or receipt shall be entitled

% (for specific products only)

nt and machinery only)

rnate energy projects

easibility studies etc.

in business
 No Gain or Loss on Disposal of assets under below

A Individual to Wholly owned Company

Consideration = Irredeemable 100% shares of company
Share value = Assets Value (Substantially the same)
Unabsorbed depreciation / carried forwad_ALLOWED
Liabilites of asset become liabilities of Company now.
Compnay year of disposal main exempt from tax na ho.

B AOP to Wholly owned Company

All of the above except "individual to wholly owned company"
Shares owned in proportion to share in AOP

Compnay to Company
C Wholly onwed to wholly owned
(i) Purchase
Either one is wholly owned of other OR wholly owned of a third
Liabilites of transferor company become liabilities of transfree.
Unabsorbed depreciation / carried forwad_ALLOWED
Compnay year of disposal main exempt from tax na ho.

(ii) Amalgamation
100% requirement relaxed to 75%
Algamated company is company incorporated in Pakistan
Scheme approved by State bank of Pakistan, Court OR Authority.
Liabilites of transferor company become liabilities of transfree.
Unabsorbed depreciation / carried forwad_ALLOWED
Compnay year of disposal main exempt from tax na ho.

D Other than that: Only under approved scheme of reconstruction

Scheme approved by HS, SBP, SECP
Liabilites of transferor company become liabilities of transfree.
Unabsorbed depreciation / carried forwad_ALLOWED
Compnay year of disposal main exempt from tax na ho.
 287 Group Taxation
Holding company and subsidiaries taxed as one fiscal unit.
● Can only choose once - irrevocable election.
● Subsidiaries must be 100% owned.
IMPORTANT Means if you divest even a 1 % - then group taxation shall no longer be applied - it shall be
But you can divest 100% of it. Group taxation shall continue to apply the remaining 100% h
● All company locally incorporated under CO 1984.
Means you can't make this election if you have a foreign subsidiary.
IMPORTANT Means if you are considering to acquire a foreign subsidiary then group taxation shall not a
● Companies must comply with Corporate Governance requirements.
● Inter-corporate DIVIDEND - no withholding done
GROUP must have filed last year's tax return to avail this exemption
If subsidiary pays dividend to the parent, it will not withhold tax if group taxation election i
Vice versa, if parent pays dividend to subsidiary.
● Old LOSSES shall not be carried forward in group taxation. - not even unabsorbed depreciation.
IMPORTANT Means if you are looking to opt for group taxation just for the sake of being able to settle y
● Return filled under Holding company name
However, Withholding statements shall be filed separately for each company.
All companies to have similar accounting period for income calculation.
Copy of audited accounts of ALL Companies of group shall be attached.
IMPORTANT Means mere group accounts shall not suffice.
● Exemption for no gain or loss on transfer of assets by one company to the other is irrespective of opti
IMPORTANT ● Transactions shall be carried out and recorded on arm's length - between group and ASSOCIATE
So if you are group and have opted for group taxation - when making transactions with AO
 Nominee shares may be held to ensure compliance with shareholding guidelines of CO 1984.
nger be applied - it shall become inapplicable.
apply the remaining 100% holdings.
All companies shall apply separately - means separate application forms.

n group taxation shall not apply on that.

Submit a certificate issued by SECP as an evidence.

if group taxation election is made.

sorbed depreciation.
ake of being able to settle your losses then it is not going to work. - Even GROUP RELEIF shall not help.

ach company.

other is irrespective of opting group taxation.

group and ASSOCIATE
aking transactions with AOPs keep this in mind.
 288 Group Relief
Subsidiaries being able to surrender their losses to their holding company or holding ki subsidiary companies.
It shall be treated as purchase of losses by the claiming company.
Means the loss claiming company shall actually buy these tax losses - at an amount equal to tax s
This sale of losses is not a taxable event.
RESTRICTIONS
Means holidng k parent ko nahien de sktay. Only subsidiaries.
Also, can't give to subsidiaries that are trading companies.
HOLDING
Holding company must hold ATLEAST - 55% (if atleast one listed in group) or 75% (no listed in gro
IMPORTANT Public listed is like you PARCHI to leniency of shareholding percentage.
Maintain this holding for 5 years - if not maintained that benefit shall be reversed.
LISTING
Holding company must become LISTED (if not already listed) - within 3 years of claiming loss - los
Means sirf group main listed honay se kaam nahein chalay ga - khud parent ko listed hona p
Other Compliances
All companies should comply with corporate governance requirements.
Subsidiary shall continue the same business during 3 years.
IMPORTANT Means if the loss making subsidiary is devising a strategy to reverse it's loss ma
should keep in mind it can't change it's business if it wants to surrender it's losses
EXEMPTION for inter-corprate dividneds
Inter-corporate dividend given by claiming company exempt from tax.
APPROVALS
Board of both companies must approved - surrending and claiming companies.
LOSSES
Can't be brought forward losses. - i.e. prior to opting for releif.
Means jis saal main loss aya h us saal main hi surrender kr sktay hain.
IMPORTANT Means if you are considering to opt for group relief to make use of your prior period losses t
Capital losses don't qualify for this relief.
IMPORTANT Can only claim in proportion to holding percentage.
Can be adjusted for 3 years. - year of loss followed by 2.
After this to be carried as normal loss - 6 year carry forward (3 tax years reh jain ge after 3)
g ki subsidiary companies.

- at an amount equal to tax saved by these losses.

roup) or 75% (no listed in group) of surrending company

olding percentage.
shall be reversed.

3 years of claiming loss - loss year followed by 2.

khud parent ko listed hona paray ga.

ategy to reverse it's loss making position, it

wants to surrender it's losses.

of your prior period losses then forget it! Try something else.

ax years reh jain ge after 3)