KARACHI: It was proposed to the Federal Board of Revenue (FBR) to reduce the general level of the minimum tax to 0.25%.
The Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for the 2022/2023 budget informed the FBR to review minimum tax regimes (MTR) / abolish corporate tax replacement (ACT) under section 113 and 113C of income tax Ordinance 2001.
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The OICCI recommended that the general rate of minimum tax under section 113 of the ITO 2001 be reduced to 0.25%.
For companies operating in sectors with high turnover and low margins (eg marketing of petroleum / refinery / LNG terminal operators, large chemical companies, authorized dealers of local car manufacturers, distributors and dealers, including large trading houses), this rate must be applicable on the gross profits instead of revenues.
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The alternative corporate tax under Section 113C should be abolished in the presence of the minimum tax under Section 113.
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The OICCI had previously proposed that the FBR continues the previously announced policy to annually reduce the tax rate from 29% to an eventual rate of 25%, including bank companies.
Pakistan’s corporate tax rate at 29% is higher than most countries in the region, as shown in the table below.
Companies are required to pay various taxes in addition to income tax, namely WWF (2%), WPPF (5%), stamp duty, infrastructure tax (1.2%) , etc., which ultimately results in an effective tax rate of around 35% to 45%, which is well above the effective tax rates of other countries in the region.
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