Pakistan levies tax on its residents on their worldwide income. A non-resident individual is taxed only on Pakistan-source income, including income received or deemed to be received in Pakistan or deemed to accrue or arise in Pakistan.
Personal income tax rates
The following tax rates apply where income of the individual from salary exceeds 75% of taxable income:
The following tax rates are applicable in other cases (for Individuals & Association of Persons):
In general payments made on account dividend, interest, royalties and fee for technical services income derived from Pakistan sources are subject to a 15% withholding tax (WHT), which tax has to be withheld /deducted from the gross amount paid to the recipient. Majority of these payments do not attract enhancement of 100% even if the recipients are not appearing on the ATL.
From July 1st, 2020, a withholding tax rate of 10% is applicable on payment of profit on debt to non-resident individuals on debt instruments issued by the Federal Government under the Public Debt Act, 1944. Such debt instruments must be purchased from bank account maintained abroad, a Non-Resident Rupee Account Repatriable (NRAR) or a foreign currency account maintained with a banking company in Pakistan. The tax so deducted is final tax, with no requirement for non-resident individuals to file his return of income in Pakistan.
Local taxes on income
The only significant tax on salaries is federal income tax.