FBR proposed to reduce the minimum tax rate to 0.25%


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.

READ MORE: Foreign investors require a reduction in the corporate tax rate

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.

READ MORE: The tax rates are key to attracting foreign direct investment

All income streams, including income from commercial importers, should be taxed under the normal tax regime. Special tax regimes should only be reserved for non-corporate or inactive taxpayers.

The alternative corporate tax under Section 113C should be abolished in the presence of the minimum tax under Section 113.

READ MORE: KTBA recommends separate proceedings for tax evasion

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.

READ MORE: FBR asked to remove irritants in the reimbursement of sales tax


Comments are closed.