Corporate taxes are taxes on corporation profits. These taxes are basically the taxes that have to be disbursed on taxable income of a company. Keep in mind that this also comprises expenses like administration expenses and general expenses, research and development, sales and marketing as well as other operational costs.
Let’s first look at the tax rates that have been set by the Federal Board of Revenue (FBR) of Pakistan.
The Rates of Corporate Income Taxes Issued by The Federal Board of Revenue (FBR) of Pakistan
The corporate income tax rates that are applied to the companies for the tax year 2022 has been issued by the Federal Board of Revenue (FBR) of Pakistan and shall be 29% for tax year 2021-2022.
The Government of Pakistan has abridged the companies’ income tax rates. The Government then gradually started reducing the tax rate and then put a halt to the tax reduction and set it at 29% for tax year 2019 and onwards.
However the tax rate deduction is not present for banking companies. 35% of the income has to be paid by the financial institutions and is their legal responsibility.
The Government of Pakistan had before proclaimed a reduction in the rates of corporate taxes aside from banking companies, down from 29% to 25% by the 2023 tax year. The Income Tax Ordinance, 2001 had been altered and was inhibited through the Finance Act, 2019.
The corporate tax rate income was 25% in the case of a small-sized company but this had later changed through tax year 2019 and will be decreased further to 20% by tax year 2023.
A Brief Explanatory on Corporate Taxes & How to Prepare For It
Now, let’s go into Corporate Taxes and how a corporation can prepare for it. Let’s look at it subjectively:
The taxation of a residential company is based on its worldwide income. Pakistan’s non-resident companies that operate in connection with a branch are taxed generally on their source income that they generate in Pakistan through an attributed branch at a company’s appropriate rates.
How to Pay for Taxes
Before you can do anything, the first step is to register yourself as a filer. You can do so by going to the registration portal of the FBR. Companies that are earning and making profit need to pay corporate taxes. These companies are subjected to pay tax in advance on tax liability basis for the direct preceding tax year according to their income which does not include presumptive income or gains in capital.
This advance tax must be disbursed 4 times a year on or prior to 25th September, 25th December, 25th March, and 15 June in every financial year. These payments in advance tax are payable on a per month basis for banking companies.
The liability of the complete tax amount is to be liquidated when filing income return.
Taxes that are pending and even advanced taxes are changeable contrary to the tax that is payable with income return.
Authorities that collect taxes usually emphasize on the issues that are listed below:
- WHT – Withholding Tax
- Transfer Pricing
- Affiliation of expenses with the taxpayer’s business
- Advanced Tax
- The duly payment of tax in connection with the prescribed time
- The auditing of the returns that have been filed
- Taxpayer’s Compliance
- Arrears Collection
Note: From July 1st through June 30th is the tax year period with the exception of the tax related agencies, on the other hand, giving an authorized approval of a special year-end.
For details on how to become a filer, you can visit our blog here. Tax Home provides step by step guidance on all the requirements and how to fulfill them to ensure you pay your taxes on time. Contact us now and become a responsible tax filer.
