Any income received or accrued or deemed to be received from any source is liable to tax in Pakistan. However, income remitted to Pakistan by resident companies, non-resident companies and non-resident individuals is exempted from tax. Any activity is taxable which involves the supply of goods or rendering of services on which sales tax has been levied and which is carried on in the form of a business, trade or manufacturing concern.
The tax year in Pakistan is a period of twelve months ending on the 30th day of June. The taxes on incomes, sales, central excise and customs’ duty are charged on the Federal level. Income from agriculture is charged on a Provincial level. The Federal laws and rules covering taxes and duties are enforced by the Central Board of Revenue, and are as follows:
- (a)Income Tax Ordinance of 2001 & Income Tax Rules of 2002
- (b)Sales Tax Act, 1990 and Rules issued there under.
- (c)Central Excise Act of 1944 and Central Excise Rules of 1944
- (d)Customs Act, 1969 & Pakistan Customs Tariff
Pakistan has recently undergone major reforms in the taxation structure, in an effort to make the taxation procedures more comprehensible for the average Pakistanis. These have been undertaken by the Central Board of Revenue (CBR) on five levels:
- Management and Institutional Development: Managing Organizational Change, Internal Affairs and Vigilance Function, Training, Improving Professional Ethics
- Improving Revenue Operations: Direct Taxes, Sales Tax, Customs
- Strengthening Revenue Services: Establishing Audit Function, Establishing Collection & Enforcement Function, Establishing Custom and Tax Fraud Function
- Tax Compliance Culture: Establishing Taxpayers Identification, Registration, Return Processing and Accounts Function, Establishing Facilitation and Tax Education Function, Impact Evaluation, Quality Assurance and Monitoring
- Adopting Responsive IT Systems: Direct Tax Information System, Sales Tax Information System, Customs Information system
A universal self-assessment system is in place, in which one must declare his/her income and determine his/her tax liability himself. I.T. services have been leveraged to provide the population with online tax calculations and information regarding the taxation is made available online along with correspondence facilities.