Pakistan

Major developments in the tax laws through Finance Act, 2025 relating to the corporate sector are summarised as follows:

• The super tax rates for incomes exceeding 250 million Pakistani rupees (PKR) and up to PKR 500 million have been reduced by 0.5% (please see the Taxes on corporate income section for details).

• 50% of the expenditures attributable to cash sales exceeding PKR 200,000 are to be disallowed (please see the Deductions section for details).
• A disallowance of 10% expenditure is applicable for purchase from person not holding a National Tax Number (NTN) (please see the Deductions section for details).
• The useful life of intangibles having an indefinite period has been reduced from 25 to 15 years (please see the Deductions section for details).

• The carryforward period for minimum tax (turnover tax) has been reduced from three years to two years (please see the Taxes on corporate income section for details).
• The withholding tax (WHT) rate for profit on debt received on account or deposit maintained with a banking company or financial institution, as well as from government securities, has been increased from 15% to 20%.

• The corporate recipients of dividends derived from a mutual fund's debt-related income will now be taxed at the corporate rate of 29% (please see the Income determination section for details). 

• The tax holiday period of Special Economic Zone and Special Technology Zone enterprises is now limited up to 30 June 2035 (please see the Tax credits and incentives section for details).
• The set off of business losses is no longer available for adjustment against rental income.
• The payments for digital transactions via e-commerce platforms are now subject to WHT at 1% for digital or banking transactions and 2% for cash on delivery (COD) transactions (please see the Taxes on corporate income section for details).
• The Commissioner is now empowered to issue a full exemption certificate to public limited companies, compared to the earlier capability to issue a reduced rate certificate up to 80% of the applicable WHT rate.

• The two-tier appeal system has been revamped by way of introducing pecuniary jurisdictions for the Commissioner Inland Revenue (Appeals) (CIR(A)) and the Appellate Tribunal Inland Revenue (ATIR). Pecuniary limits for tax appeals are removed, therefore all Inland Revenue officer orders can now be appealed to the CIR(A), or directly to the ATIR if the taxpayer chooses.