On 27 April 2018, the newly-appointed Finance Minister Miftah Ismail presented the 2018/2019 Budget to parliament. The following corporate tax measures are proposed in the Budget:

Reduction in corporate tax rates: Reduce the corporate tax rates from 30 percent in Tax Year 2018 to 25 percent in Tax Year 2023. Accordingly, the corporate tax rate will be 29 percent in Tax Year 2019 and will be reduced by 1 percent each year up to Tax Year 2023. ( i.e the corporate tax rate will be 29 percent for Tax Year 2019, 28 percent for Tax Year 2020, 27 percent for Tax Year 2021, 26 percent for Tax Year 2022 and 25 percent for Tax Year 2023);

Successive reduction in the rates of super tax: In order to encourage, incentivize and increase the competitiveness of companies and to enable them to contribute optimally towards economic growth, super tax will be gradually withdrawn. It will be continued at the same rate for the financial year 2017-2018, however, the rate of super tax for both banking as well as non-banking persons shall be reduced by 1 percent for each successive year starting from the financial year 2018-19;

Reduction in tax rate on undistributed profit: Changes to the undistributed profits tax on public companies, including a reduction in the minimum required distribution from at least 40% of after-tax profits within six months of the end of the tax year to at least 20% of after-tax profits (if minimum condition met, the tax does not apply), and a reduction in the tax rate from 7.5% of accounting profits before tax to 5%.

Extension of tax credits up to 30th June, 2021: An extension to 30 June 2021 of the 10% tax credit for investments in plant and machinery for the purpose of extension, expansion, balancing, modernization, and replacement of existing plant machinery, as well as the 100% tax credits for investments in plant and machinery for new industrial undertakings and the expansion of existing undertakings with at least 70% new equity (currently scheduled to expire 30 June 2019).

Introducing concept of start–ups: In order to promote innovation and entrepreneurship in Information Technology the concept of start–up has been introduced with annual turnover up to PKR 100 million that have been registered and certified by the Pakistan Software Export Board (PSEB) as an information technology entity engaged in offering technology driven products or services to any sector of the economy;

Revamping the mechanism of Alternative Dispute Resolution: Changes in the alternative dispute resolution (ADR) mechanism to provide that the orders of ADR committees will be binding on both the taxpayer and the Federal Board of Revenue and that the orders of ADR committees must be passed within 120 days of appointment.

Reduction in penalty for failure to file withholding statements within the due date: The existing penalty, under section 182 of the Ordinance for failure to file withholding tax statements within the due date is Rs. 2,500 per day subject to a minimum penalty of Rs.10,000/-. This penalty is perceived as severe for withholding agents who have nil liability to pay tax or for those who have deducted and deposited the tax withheld within the prescribed time limit but could not file withholding tax statement. In order to provide relief to withholding tax agents who have deposited tax within the due date but have failed to file their withholding tax statements, the minimum penalty for failure to file such withholding tax statements has been reduced from Rs.10,000/- to Rs.5000/- and only the proposed minimum penalty of Rs.5000/- may be imposed if withholding tax statement is filed within three months of the due date. However existing penalty of Rs. 2,500/- per day (from the due date of filing of withholding tax statement) would apply if the statement is filed after a period of three months from the due date.

CFC rules: The introduction of new controlled foreign company (CFC) rules to provide that passive income attributable to a CFC will be included in the taxable income of a resident person for a tax year, including that a non-resident company will be considered a CFC if:

• More than 50% of the capital or voting rights in the non-resident company are directly or indirectly held by one or more persons resident in Pakistan, or 40% if held by a single resident;
• The tax paid by the non-resident company is less than 60% of the tax that would be paid if resident in Pakistan;
• The non-resident company does not derive active business income; and
•  The shares of the non-resident company are not traded on a recognized stock exchange in the jurisdiction in which it is resident for tax purposes.