On 30 June 2021, the Finance Act 2021 was enacted after passage by Pakistani Parliament and assent of the president. The Federal Board of Revenue (FBR) of Pakistan has published the Finance Act 2021 on their official website. Some of the key income tax measures include:
- Capital gains tax rates on the disposal of immovable property are as follows, gains up to PKR 5 million – 3.5%; gains over PKR 5 million up to 10 million – 7.5%; gains over PKR 10 million up to 15 million – 10.0%; and gains over PKR 15 million – 15.0%.
- The withholding tax rate on mobile phone services is reduced from 12.5% to 10% for the 2022 tax year, with a further reduction to 8% in subsequent years.
- A special tax regime is introduced for manufacturing SMEs, i.e. tax rate of 0.25% on turnover or 7.5% on taxable income for qualifying SMEs with turnover up to PKR 100 million (Category-1 SMEs); and tax rate of 0.50% on turnover or 15.0% on taxable income for qualifying SMEs with turnover exceeding PKR 100 million up to PKR 250 million (Category-2 SMEs);
- A special regime is incorporated for exported services to promote IT services, freelancers, and the export of other services, which provides for a reduced 1% final tax on all service receipts, brought to Pakistan through banking channels.
- The scope of the 100% tax credit for the export of IT and IT enabled services is expanded to include data storage and cloud computing services;
- An exemption from minimum tax is provided for Special Economic Zone (SEZ) Enterprises from the 2021 tax year;
- New incentives are introduced for Special Technology Zones (SEZ), including:
- minimum tax exemption;
- tax exemption on the import of capital goods;
- a tax exemption on dividend income of private funds from investments in zone enterprises; and
- a 10-year tax exemption for the Special Technology Zone Authority, Zone Developers, and Zone Enterprises.
