Any relief from Pakistani income tax that is provided in any other law and not provided for in the Income Tax Ordinance or a treaty is not valid.
Tax credits are available for corporate taxpayers for employment generation; making sales to sales-tax-registered persons; making investments for balancing, modernisation, and replacement; and enlistment on a stock exchange.
In case non-filers file a return of dividend income, they will be entitled to a refund of 5% of the 20% tax withheld on receipt of dividend income.
Profits and gains derived from an electric power generation project set up in Pakistan are exempt from tax.
Profits and gains derived by a company from the export of computer software, IT services, or IT-enabled services are exempt from tax through 30 June 2019.
Profits and gains from solar and wind energy plant and equipment manufacturing are exempt from tax for five years if set up by 31 December 2016.
Profit and gains from agricultural cold chain and warehousing are exempt from tax for three years if set up between 1 July 2015 and 30 June 2016.
Profits and gains from halal meat production are exempt from tax for a period of four years if set up between 1 July 2015 and 30 June 2017.
Profits and gains from new manufacturing units set up in Khyber Pakhtunkhwa and Balochistan are exempt from tax for five years if set up between 1 July 2015 and 30 June 2018.
Profits and gains from electricity transmission projects are exempt from tax for ten years if set up between 1 July 2015 and 30 June 2018.
Profits and gains from manufacturing of cellular phones are exempt from tax for five years if business commenced between 1 July 2015 and 30 June 2017.
Activities of small companies are encouraged with a reduced income tax rate of 25%.
A small company has been defined to mean a company that:
- is registered on or after 1 July 2005 under the Companies Ordinance, 1984
- has a paid-up capital plus undistributed reserves not exceeding PKR 50 million
- has employees not exceeding 250 at any time during the year
- has an annual turnover not exceeding PKR 250 million, and
- is not formed by splitting up or the reconstitution of business already in existence.
Charitable donations credit
Companies are allowed a tax credit equivalent to 20% of their taxable income in respect of donations to:
- any board of education or university in Pakistan, established by or under federal or provincial law
- any educational institution, hospital, or relief fund established or run in Pakistan by federal government, provincial government, or local government, and
- any non-profit organisation.
Foreign tax credit
Where a resident taxpayer derives foreign-source income on which foreign income tax is paid within two years from the year in which it is derived, the taxpayer is allowed a tax credit equal to the lower of (i) the foreign income tax paid or (ii) the Pakistan tax payable in respect of that income. However, foreign tax paid is not refundable.