WHT on payments of royalty and FTS, when royalty or FTS is not attributable to a PE in Pakistan, is 15% or a lower treaty rate of royalty or gross fees. The tax withheld is deemed to be the final tax liability of the non-resident. In the case of a non-resident where royalty or FTS is attributable to a PE in Pakistan, the amount of royalty/FTS shall be chargeable to tax as normal income. If a reduced rate is available in a tax treaty, such rate would be applicable. Royalty payment made to resident persons is also subject to WHT at 15%, which is adjustable in nature.
Resident corporations making certain types of payments must withhold tax as follows:
|Recipient (1, 2, 3)||WHT (%)|
|Resident individuals||7.5 (22)/15||15||15|
|Resident corporations||7.5 (22)/15||15||15|
|Belgium||10 (11)/15||15||15/20 (12)|
|Bosnia and Herzegovina||10||20||15|
|Canada||15 (11)/20 (10)||25||15/20 (12)|
|Czech Republic||5/15 (10)||10||10|
|Finland||12/15/20 (10)||10 (13)/15||10|
|Germany||10/15 (10)||10 (13)/20||10|
|Ireland, Republic of||5 (10)/10||10||10|
|Italy||15/25 (10, 11)||30||30|
|Korea, Republic of||10 (11)/12.5 (10)||12.5||10|
|Malaysia||15 (11)/20 (11)/10||15||15|
|Nepal||10 (10)||10 (19)/15||15|
|Netherlands||10/20 (10)||10 (13)/15/20 (10)||5/15 (16)|
|Philippines||15/25 (10)||15||15 (14)/25|
|Poland||15 (10, 11)||(7)||15/20 (12)|
|Saudi Arabia||5 (15)/10||10||10|
|South Africa||10/15 (10)||10||10|
|Sri Lanka||15 (10)||10||20|
|Thailand||15 (11)/25 (10)||10 (13)/25||10/20 (18)|
|Turkey||10 (11)/15 (10)||10||10|
|United Arab Emirates||10/15 (10)||10||12|
|United Kingdom||10 (11)/15/20 (10)||15||12.5|
- This table is a summary only and does not reproduce all the provisions that may be relevant in determining the application of WHT in each tax treaty.
- Resident and non-resident imply tax status.
- Individuals and companies are required to render annual returns of income and pay tax at the applicable rates. Credit is given for WHT deducted.
- WHT rates for interest and royalties given to non-resident corporations (treaty countries) also apply to non-resident individuals.
- The following remarks for dividends should be noted:
- The inter-corporate rate of tax on dividends received by a foreign corporation is 15%; corresponding treaty WHT rates in excess of 15% have been specified.
- The rates given in the table for treaty countries relate to recipient corporations. The maximum rate, as stated above, in respect of inter-corporate dividends is 15%.
- Certain treaties provide for tax exemption of interest paid to the government or the central bank of the contracting state and on foreign loans specifically approved by the federal government.
- No concession is provided under the treaty.
- Royalties are exempt from tax, provided the recipient does not have a PE in Pakistan.
- Inter-corporate dividend where companies are entitled to group relief is exempt.
- WHT rate depends on percentage of holding in the company.
- This rate applies if the paying company is engaged in the industrial undertaking.
- Consideration for technical know-how or information concerning industrial, commercial, or scientific experience.
- This rate applies if the beneficial owner is a bank.
- This rate applies if the paying company operates in preferred areas.
- This rate applies if the company is owned by the government.
- 5% is applicable for royalties payable for copyright of a literary, artistic, or scientific work, but excluding cinematograph films and tapes for television or broadcasting. All other royalties are taxable at 15%.
- 18% is applicable for royalties payable for patent, trademark, design or model, plan, secret formula, or process of any industrial or scientific equipment, or for information concerning industrial and scientific experience; 15% for copyright of literary, artistic, or scientific work; and 10% for copyright of cinematograph films or tapes for television or radio broadcasting.
- 10% is applicable for royalties payable for copyright of literary, artistic, and scientific work. All other royalties are taxable at 20%.
- The rate applies if the beneficial owner is a financial institution, an insurance company, or investment company.
- 15% applies if the beneficial owner of dividends is a company.
- 0% applicable in case interest is being earned by the government, a company 51% or more shares of which are held by the government, or the loan is guaranteed by the government or any of its institutions.
- In case of dividend paid by independent power producers, rate of WHT on dividend would be 7.5%, subject to certain conditions.
- Rate of 12.5% applicable in case of ‘royalty’ and rate of 10% applicable for ‘fee for technical services’.