Pakistan announced a number of tax changes in its 2017/18 Budget, delivered on May 26.
Certain start-up businesses with turnover of less than PRK100m (USD953,639) in each of the last five years will benefit from a three-year exemption from income tax, withholding taxes, and alternative minimum tax.
The 2017 Finance Bill additionally proposed an increase in the 12.5 percent withholding tax rate on dividend payments for filers to 15 percent and the introduction of a 10 percent tax on undistributed profits where a company has not distributed at least 40 percent of its post-tax profits as cash dividends or bonus shares within six months of the end of its tax year.
With regard to capital gains on share and debt securities, the budget proposes flat rates of 15 percent for filers and 20 percent for non-filers, for securities acquired on or after July 1, 2013.
An increase in the current alternative minimum tax rate from one percent to 1.25 percent was also proposed, in addition to increases in various withholding tax rates for non-filers.
The Budget also proposed a number of measures designed to boost the information technology and telecoms sectors, including reducing withholding tax payable on cell phone calls from 14 percent to 12.5 percent, and Federal Excise Duty on the same from 18.5 percent to 17 percent. Reductions in customs and import duties on mobile and smart phones were announced, in addition to an exemption for software start-ups from income tax for three years. Exports of IT services from Islamabad and other federal territories will also benefit from sales tax exemptions.