Tax In Pakistan

A Contractor's Guide to Taxes : 

One of the most consistently challenging aspects of contracting in Pakistan is complying with the country’s tax system. As well as paying tax in Pakistan, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.

How do I calculate my taxable income: 

If you’re working in Pakistan under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Pakistan for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Pakistan, but contractors may not be offered this service because of their short stay with each employer.

Anybody who can’t pay their tax in Pakistan through PAYE is left with the prospect doing everything themselves.

Do you know much about Pakistani Tax Law? Does Pakistan have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Pakistan can range from 2 to 30 percent, and you need to be sure you are placed in the correct tax brackets.

Tax Calculator: 

If you are a contractor and want a calculation on your tax and net retention in Pakistan, we can supply it to you free of charge.

Using an Umbrella Company for Income Tax : 

Contractors in Pakistan are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Pakistani umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).

The companies are experts in Pakistani taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Pakistani tax office or tax department directly including processing your tax refund if you are eligible.

How We Can Help You with Tax: 

We work with numerous umbrella companies in Pakistan, many of whom are experts in tax and immigration laws. If you have any questions about tax in Pakistan, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Pakistani work permit.

Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Pakistan but without the overhead of directly dealing with the Pakistani tax authorities. Get in touch with us today for some reliable advice on tax in Pakistan!

When Do You Need to Lodge Your Tax Return?: 
30 September (31 August for individuals with income above PKR500,000)
Tax Filing Deadline : 
30 September (31 August for individuals with income above PKR500,000)
Can you file it online? : 
Yes, https://iris.fbr.gov.pk/infosys/public/txplogin.xhtml
Currency: 
Pakistani Rupee (PKR)
Tax-free Threshold in: 
PKR400,000
Grossed Income: 
0-400,000
Tax Rate: 
0%
Grossed Income: 
>400,000-500,000
Tax Rate: 
2%
Grossed Income: 
>500,000-750,000
Tax Rate: 
5%
Grossed Income: 
>750,000-1,400,000
Tax Rate: 
10%
Grossed Income: 
>1,400,000-1,500,000
Tax Rate: 
12%
Grossed Income: 
>1,500,000-1,800,000
Tax Rate: 
15%
Grossed Income: 
>1,800,000-2,500,000
Tax Rate: 
17.5%
Grossed Income: 
>2,500,000-3,000,000
Tax Rate: 
20%
Grossed Income: 
>3,000,000-3,500,000
Tax Rate: 
22.5%
Grossed Income: 
>3,500,000-4,000,000
Tax Rate: 
25%
Grossed Income: 
>4,000,000-7,000,000
Tax Rate: 
27.5%
Grossed Income: 
>7,000,000
Tax Rate: 
30%
How long does it take to set up: 
12 days
How much does it cost: 
PKR1600
Is it easy? : 
Starting a Business Rank: 142/190 (Source: World Bank)
How to File Taxes in: 

Step 1: Register

Obtain a Registration Number and password for Iris, the Federal Board of Revenue’s online system for taxpayer registration, here .

Go to ‘Registration for Unregistered Person’ and provide the required information. You’ll be sent an email or SMS to verify your account. Following this, you’ll be sent a login PIN. This process may take a few days, for security reasons.

Step 2: File Taxes Using Iris

You can now log in with your Registration Number and password, and file your taxes. Your Registration Number can be found on your CNIC (National Identity Card)/NICOP (National Identity Card for Overseas Pakistanis) (13 digits).

A detailed step-by-step guide on how to file your income tax returns can be found on the FBR website here.

Notes: 

Income tax is withheld from salaries by the employer. The amount to be withheld is determined by applying the average rate of tax on the estimated salary of the employee for the fiscal year.

Does the 183 day rule apply in: 

Yes

When do you become a tax resident in: 

You become a tax resident in Pakistan when:

  • You are present in Pakistan for 183 or more in a tax year (1 July through to 30 June); or
  • You are an employee of the Pakistani federal or provincial government and you are posted outside Pakistan during the tax year.
Am I taxed on my global income in: 

Residents are taxed on their global income in Pakistan. Non-residents are taxed on their Pakistan-sourced income only.

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