5. Start-up means – (Sec-2(62A)) of Income Tax Ord, 2001
A business of a resident individual, AOP or a company that
commenced on or after first day of July, 2012 and the person is
engaged in or intends to offer technology driven products or
services to any sector of the economy provided that the person is
registered with and duly certified by the Pakistan Software Export
Board (PSEB) and has turnover of less than one hundred million in
each of the last five tax years; or
Any business of a person or class of persons, subject to the conditions as
the Federal Government may, by notification in the official Gazette,
specify.
Income Tax
Startup
6. Profit and gains derived by a start–
up as defined in Sub-section (62A)
of Section 2 for the tax year in
which the start-up is certified by
the Pakistan Software Export Board
and the following two tax years.
Part I, 2nd Schedule Clause (143)
to the Income Tax Ord., 2001
EXEMPTIONS FROM TOTAL INCOME
7. Withholding Tax - Part IV, 2nd Schedule (43F)
The provisions of Section 153 shall not apply in the case of a start-up, being recipient of
payment, as defined in Sub-section (62A) of section 2.
Minimum Tax - Part IV, 2nd Schedule (11A)
The provisions of section 113, regarding minimum tax, shall not apply to,-
• start-up as defined in Sub-section (62A) of section 2.
• a taxpayer who qualifies for exemption under clause (133) of Part-I of this Schedule, in
respect of income from export of computer software or IT services or IT enabled services;
EXEMPTION FROM SPECIFIC PROVISIONS
9. Fee for Offshore Digital Services
(Sec-2(22B))
Finance Bill 2018 has introduced a concept of 'fee for offshore digital services' which
means consideration for rendering or providing services of online advertising including:
Digital advertising space, designing, creating, hosting or
maintenance of websites
Digital or cyberspace for websites, advertising, e-mails, online
computing, blogs, online content and online data
Any facility for online sale of goods or services or any other online
facility
Tax @ 5% shall be imposed on the income of non residents not having a Permanent
Establishment in Pakistan.
Providing any facility or service for uploading, storing or distribution of digital content, including
digital text, digital audio or digital video, online collection or processing of data
12. Minimum Tax - Part IV, 2nd Schedule (94)
Minimum Tax conditionality for services shall not apply in the case of IT services and IT enabled services.
Provided that the tax payable or paid on services shall not be less than 2% of the gross amount of turnover from all sources and that
the company furnishes in writing an irrevocable undertaking by the fifteenth day of November, 2015 to present its accounts to the
Commissioner within thirty days of filing of return, for audit of its income tax affairs for any of the tax years 2016 to 2019
Provided further that for tax year 2019, the company shall furnish irrevocable undertaking by November, 2018 to present its accounts
to the Commissioner.
Tax Benefits
Exemption – Income from Exports - Part I, 2nd Schedule (133)
Income from exports of computer software or IT services or IT enabled services shall be exempt upto the period ending on 30th day of
June, 2019.
It is mandatory that eighty per cent of the export proceeds is brought into Pakistan in foreign exchange remitted from outside Pakistan
through normal banking channels.
a) IT Services include software development, software maintenance, system integration, web design, web development, web hosting, and
network design, and
b) IT enabled services include inbound or outbound call centres, medical transcription, remote monitoring, graphics design, accounting
services, HR services, telemedicine centers, data entry operations locally produced television programs and insurance claims processing.
IT Services and IT Enabled Services
13. The rates of tax as specified in
Division II of Part-IV of the First
Schedule shall be five percent in
the case of a person running online
marketplace
Reduced rate
Part IV, 2nd Schedule Clause (28c)
Online Market Place
Minimum Tax for a person running
an online marketplace as defined in
clause (38B) of section 2.] is 0.5%
Minimum Tax
Part I, 2nd Schedule Clause (28c)
“Online Marketplace” means an information technology platform run by e-commerce entity over an
electronic network that acts as a facilitator in transactions that occur between a buyer and a seller;
15. (1) Royalty or fees for technical services tax deducted from the gross amount paid.
(2) Every person making a payment to a non-resident person on the execution of:
(a) a contract or sub-contract under a construction, assembly or installation project in
Pakistan, including a contract for the supply of supervisory activities in relation to
such project; or
(b) any other contract for construction or services rendered relating thereto; or
(c) a contract for advertisement services rendered by T.V. Satellite Channels,
shall deduct tax from the gross amount.
The tax deductible shall be a final tax on the income of a non-resident person arising from a contract.
Where a person intends to make a payment to a non-resident person without deduction of tax, other than payments liable to reduced
rate under relevant agreement for avoidance of double taxation, the person shall, before making the payment, furnish to the
Commissioner a notice in writing.
Payments to non-residents
Income Tax Ordinance, 2001
Tax Rate
7% for filer
13% for a non-filer
16. Tax on certain payments to non-residents
(Sec-6 - Income Tax Ordinance, 200)
02
03
A tax shall be imposed on every non-resident
person who receives any Pakistan-source
royalty or fee for technical services.
01
The tax imposed on royalty or fee for technical
services on a non-resident person shall be
computed by applying tax @ 15% to the gross
amount of the royalty or fee for technical
services.
Any royalty or fee for technical services that is
exempt from tax under this Ordinance.
03
02
01
This section shall not
apply to —
Any royalty where the property or right giving
rise to the royalty is effectively connected
with a permanent establishment in Pakistan
of the non-resident person;
Any fee for technical services where the services giving rise to
the fee are rendered through a permanent establishment in
Pakistan of the non-resident person;or
17. Withholding Rates Income Tax Ordinance, 2001
Payment to resident
company or permanent
establishment of non
resident on account of:
Sale of Goods
Rendering of
Services:
Execution of
Contract
-in case of companies
2%
A
B
A
B
C
C
A
B
Filer Non Filer
4% 8%
-in any other case Filer Non Filer
4.5% 9%
Passenger transport
services
Other services
Payment to electric or
printing media for
advertisement service:
Filer Non Filer
8% 14.5%
Filer Non Filer
10% 17.5%
D
-in case of companies
Filer
Non Filer
Compay
Other
Cases
1.5% 12% 15%
by sports persons
other than sports persons
In any other case
Exporter or export house for rendering of
service of stitching, dying, printing,
embroidery, washing, sizing and weaving
10%
Filer Non Filer
7% 14%
7.5% 15%
1%
18. Tax treated as final tax under any of
the provisions of the Ordinance
Royalty and fee for technical
services payment to non-resident
Tax on shipping and air transport
income of a non-resident person
Salary
Quarterly Advance Tax
Every individual with the latest assessed income of 1,000,000 or more and every other taxpayer whose income was
charged to tax for the latest tax year is required to pay advance tax on quarterly basis other than income under the
following heads:
Calculation of advance tax in
case of company
Formula for calculation is
(AxB/C)-D
A is the turnover for the quarter
B is the tax assessed for the latest tax year
C is the turnover for the latest tax year
D is the tax paid in the quarter
Note: Tax assessed includes tax payable under
section 113 (minimum tax) and 113C
(alternative corporate tax)
19. Registration is compulsory.
Note: A person liable to be registered but not
actually registered shall not be entitled to any
benefit available to a registered person under any of
the provisions (input not allowable in respect of
unregistered period).
Sales Tax
Registration (Sec-14)
21. Withholding agents
The Sales Tax Act, 1990
Company as per ITO, 2001 and
registered for Income, sales or federal
excise tax
person registered as exporter
Recipient of advertisement
services
Autonomous bodies, federal
and provincial government,
public sector org.
22. Purchases from Non-
registered
By Federal/provincial Government, autonomous
body- Fully amount of sales tax calculated at tax
fraction (17/117) from persons liable to be
registered but not actually registered.
Other withholding agents: 1% of value of goods
from only those liable to be registered including
third
23. 2019
Provincial Sales Tax
on Services Laws
www.crowehorwath.pk
Regulatory Framework
of Sales Tax on
Services: Territory
Sales Tax on
Services
Legislation Regulator Rate
All over Pakistan See Note-1
Federal Excise Act,
2005
FBR As per First Sch.
Islamabad
Islamabad Sales
Tax
Islamabad Capital
Territory (Tax on
Services) Ord 2001
FBR 16%
Sindh Sindh Sales Tax
Sindh Sales Tax on
Services Act, 2011
SRB 13%
Punjab Punjab Sales Tax
Punjab Sales Tax on
Services Act, 2012
PRA 16%
KPK KPK Sales Tax
Khyber Pakhtunkhwa
Finance Act, 2013
KPKRA 15%
Balochistan
Balochistan Sales
Tax
Balochistan Sales Tax
on Services Act, 2015
BRA 15%
IT and IT-enabled services will be charged at reduced rate of 5% in Islamabad Capital Territory
hence no input is allowed in Islamabad and business support services at 10%
Note: 1
Advertisement on CCTV, Cable TV,
Newspaper, periodicals, sign boards,
pole signs, hoarding boards, Shipping
agents, services provided by banking
companies, insurance, modaraba,
leasing companies, foreign exchange
dealers, NBFC, Franchise services and
services provided by stock brokers are
subject to Federal excise only if
provincial sales tax is not levied on such
services.
24. Services over a Period
of Time
Where services are provided over a period of time and payment for the same is
made on a periodic basis, the services shall be treated as comprising two or more
separate and distinct services each corresponding to the part of the services to
which each separate part of the consideration relates.
Provision of services over a period of time
www.crowehorwath.pk
ILLUSTRATION
Where services are provided for a two year period and payment is
made on a semi-annual basis, the provision of services for each six
month period constitutes a separate service.
25. A company which is resident or
has place of business in Punjab,
Sindh, balacochistan or KPK will
be withholding agent. Hence IT
Development Company as a
resident company would be a
withholding agent in all the
provinces.
Withholding Agent
Withholding
Agent
Provincial Tax
Laws
www.crowehorwath.pk
