Pakistan

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:

Notes

1. 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.
2. Resident and non-resident imply tax status.
3. Individuals and companies are required to render annual returns of income and pay tax at the applicable rates. Credit is given for WHT deducted.
4. WHT rates for interest and royalties given to non-resident corporations (treaty countries) also apply to non-resident individuals.
5. 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%.
6. 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.
7. No concession is provided under the treaty.
8. Royalties are exempt from tax, provided the recipient does not have a PE in Pakistan.
9. Inter-corporate dividend where companies are entitled to group relief is exempt.
10. WHT rate depends on percentage of holding in the company.
11. This rate applies if the paying company is engaged in the industrial undertaking.
12. Consideration for technical know-how or information concerning industrial, commercial, or scientific experience.
13. This rate applies if the beneficial owner is a bank.
14. This rate applies if the paying company operates in preferred areas.
15. This rate applies if the company is owned by the government.
16. 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%.
17. 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.
18. 10% is applicable for royalties payable for copyright of literary, artistic, and scientific work. All other royalties are taxable at 20%.
19. The rate applies if the beneficial owner is a financial institution, an insurance company, or investment company.
20. 15% applies if the beneficial owner of dividends is a company.
21. 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.
22. In case of dividend paid by independent power producers, rate of WHT on dividend would be 7.5%, subject to certain conditions.
23. Rate of 12.5% applicable in case of ‘royalty’ and rate of 10% applicable for ‘fee for technical services’.