Pakistan: Tax provisions in 2016 finance bill

Pakistan: Tax provisions in 2016 finance bill

Pakistan’s finance bill 2016 includes tax provisions that generally have an effective date of 1 July 2016.

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Among the tax proposals are the following:

  • Extension of the one-time “super” tax to tax year 2016 (the “super” tax was initially imposed for tax year 2015 at a rate of 4% on the income of banking companies and 3% on the income of “any other person” having income exceeding Rs. 500 million)
  • Fixed tax rates for developers of land and builders of residential, commercial and other buildings 
  • Graduated tax rates for income from property realized by individuals and associations
  • Disallowance of expenses to be extended to instances when there was no withholding by the payer (if withholding is required by law)
  • A limit on tax-deductible expenses for sales promotion, to 5% of turnover
  • A limit to group relief, restricted to a percentage of holding of the parent company in the subsidiary company
  • Repeal of an exemption from inter-corporate dividend for companies exercising group relief
  • A tax credit relating to health insurance premiums 
  • Extension of a tax credit for industries that generate employment, and of a tax credit for modernization of plant and machinery, extended by one year to industries established by 30 June 2019
  • Recordkeeping of transactions with related parties and associates, with taxpayers required to provide the tax authorities with such documentation within 45 days of a request
  • A minimum tax of 1% of turnover exceeding Rs. 10 million in 2017
  • Sales tax incentive regimes 

 

Read a June 2016 report [PDF 1.87 MB] prepared by the KPMG member firm in Pakistan

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