Pakistan corporate tax - guide for international expansion

Are you planning to do business in Pakistan? Then it's essential to understand how corporate income tax works and what it means for your company operating in this South Asian market.

In this guide, we'll break down everything you need to know about corporate taxes in Pakistan, from understanding tax rates to staying compliant with local regulations. Whether you're launching a new venture or expanding your business into Pakistan's growing economy, understanding your tax obligations is key to running a successful operation.

And if you're looking for smart ways to manage international payments and handle cross-border transactions, we'll also show you how Wise Business can help simplify your financial operations in Pakistani rupees.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Pakistan Corporate tax rate in 2025

The standard corporate income tax rate in Pakistan is 29% for the tax year 2025, applicable to companies other than banks. A reduced rate of 20% applies to qualifying “small companies” under defined turnover and capital thresholds.¹

Banking companies face a higher rate of 44%, reflecting the special nature of their business operations, as introduced by the Income Tax (Amendment) Ordinance, 2024.² Additionally, certain sectors may qualify for reduced rates or tax incentives under government schemes.³

Corporate tax is levied on worldwide income for resident companies, while non-resident companies are taxed only on their Pakistan-source income. A company is considered resident if it is incorporated in Pakistan or if its management and control is exercised in Pakistan during the tax year.⁴

Read more about Corporate Tax Planning best practices

How to pay corporate tax in Pakistan

Corporate tax payments in Pakistan are managed through the Federal Board of Revenue (FBR) online platform known as IRIS (Integrated Revenue Information System).⁵ All registered companies are required to use this digital system for filing returns and making tax payments.⁶ Corporate taxes must be paid in Pakistani Rupees (PKR).

The annual corporate income tax return must be filed by 31 December for companies following the standard financial year ending 30 June.⁷

Companies are required to pay advance tax in quarterly instalments during the tax year, calculated under Section 147 of the Income Tax Ordinance. The instalments are generally based on the previous year’s liability or estimated current-year income. The final settlement is made when filing the annual return.⁷

Failure to pay tax or advance instalments by the due date may result in penalties and default surcharges imposed by the FBR. In cases of non-payment or shortfall, a default surcharge can apply under the law.⁸

For a company with an annual turnover of PKR 150 million (approximately $1.5 million at current exchange rates) and operating with a 10% profit margin, the taxable profit would be PKR 15 million.

At Pakistan's tiered tax structure, this would fall in the 25% bracket, resulting in a tax liability of PKR 3.75 million.

When expanding your business to Pakistan, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to manage international finances. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in Pakistan

Some key steps to keep your company compliant with tax regulations in Pakistan:

• Register early with FBR: Ensure timely registration for income tax, sales tax, and other duties to avoid penalties.
• Calculate corporate tax accurately: Maintain proper accounting systems to track profits, deductions, and sustainability-related corporate tax deductions.

Annual statutory returns:⁹

• Form A: Annual Return of Company (Section 125, Companies Act, 2017)
• Form 29: Certificate of Compliance (Section 452, Companies Act, 2017)
• Audited financial statements (Section 236, Companies Act, 2017)

Filing deadlines:⁹

• Private and public unlisted companies: within 30 days of the annual general meeting (AGM)
• Public listed companies: within 120 days of the financial year-end
• Submission methods: Online via SECP eServices Portal or manually at Company Registration Offices (CROs).

Penalties for non-compliance: Late filing fees range from PKR 10,000 to 50,000, plus daily fines; prosecution under Section 472 of the Companies Act is possible.⁹

• Record-keeping and audit readiness: Maintain books of accounts for at least six years; prepare for risk-based audits and follow transfer pricing rules for cross-border transactions.¹⁰
• Professional guidance: Consult accountants or tax advisors to ensure compliance and verify whether corporate gifts are tax-deductible.

International Expansion to Pakistan

Pakistan’s position at the crossroads of Asia makes it a natural hub for trade, logistics, and investment opportunities. It connects the Middle East, Central Asia, and China through key ports, including Karachi, Port Qasim, and Gwadar, thereby creating an essential trade and energy corridor. This advantage makes Pakistan a natural gateway for companies seeking access to regional and global markets.¹¹

The country’s youthful demographic adds further appeal. Over 64% of the population is under 30, and over 400,000 skilled professionals enter the workforce annually. This has positioned Pakistan among the top 10 labour forces globally. The talent pool is not only cost-efficient (particularly in IT, where labor costs are estimated to be 70% lower than in North America and Europe), but also highly dynamic. As a result, Pakistan has become the second-largest provider of freelancing software and technology services worldwide.¹²

Along with this, economic reforms and government initiatives also support expansion. The Special Investment Facilitation Council (SIFC), launched in 2023, was created to attract foreign direct investment and streamline the regulatory environment. U.S. companies and multinationals already operate successfully across consumer goods, agribusiness, financial services, and technology sectors, signalling confidence in the country’s investment climate.¹³

Businesses also benefit from a growing consumer base. Over 180 million cellular subscribers and 100 million 3G/4G users highlight the strength of Pakistan’s digital market. The consumer appetite, extensive transport infrastructure, and $6.1 trillion in estimated mineral reserves point to long-term opportunities across multiple industries.¹⁴

Below is the roadmap to follow when establishing a business in Pakistan:¹⁵

1. Conduct market research.
2. Create a solid business plan and secure funding.
3. Choose a legal structure.
4. Reserve a company name and register with SECP.
5. Obtain a National Tax Number (NTN) from the FBR.
6. Open a business bank account.
7. Set up accounting and bookkeeping.
8. Use a corporate tax assistant to file taxes, manage international obligations, and avoid late filing penalties.

Expanding to Pakistan gives businesses access to a young workforce, a fast-growing market, and clear tax policies. Setting up the right systems helps ensure compliance and smooth operations. Popular payment methods like digital wallets, mobile banking, and traditional bank channels also make it simple to manage transactions.

Discover the top 5 best Corporate Tax softwares

Incorporation of Business in Pakistan

To incorporate a company in Pakistan, you must register through the Securities and Exchange Commission of Pakistan (SECP) eServices portal. The following information and documents are required:¹⁶

• Company name: a unique name reserved with SECP.
• Principal line of business: selected from SECP’s prescribed activity codes; determines if special licenses (e.g., banking, insurance) are needed.
• Registered office address: the official legal address where all notices and correspondence are sent.
• Subscribers/shareholders: individuals or entities that own shares; details such as CNIC/passport, signatures, and shareholding must be provided.
• Directors: individuals appointed to manage the company; must meet eligibility under the Companies Act, 2017 (not disqualified or bankrupt).
• Company share capital: includes authorised capital (maximum allowed) and paid-up capital (amount contributed by shareholders at incorporation).
• Memorandum and Articles of Association: the company’s constitution, setting objectives, structure, and internal governance rules.
• Copies of identification documents: CNICs for locals or passports for foreign shareholders and witnesses.
• Application forms (auto-generated in eServices): including Form-1, which confirms compliance with incorporation requirements.

Once submitted and approved by the SECP, the company is officially incorporated and can commence business.

Types of Businesses in Pakistan

Under the Companies Act, 2017 and related laws, businesses can choose from several entity types depending on their needs:^{17 18}

• Private Limited Company (Ltd): Owned by at least two shareholders with limited liability; shares are not publicly traded.
• Public Limited Company (PLC): Requires at least seven shareholders; shares can be offered to the public and traded on a stock exchange.
• Single Member Company (SMC): A private limited company owned by a single shareholder.
• Foreign Company: Incorporated outside Pakistan but registered with the SECP to conduct business locally.
• Partnership Firm/Association of Persons (AOP): Formed under the Partnership Act, 1932, with two or more partners; partners have unlimited liability.
• Limited Liability Partnership (LLP): Provides limited liability to partners, governed by the LLP Act, 2017.
• Sole Proprietorship: Owned and managed by one person, who is personally liable for debts and obligations.

Choosing the proper business structure is vital since each has its own compliance, ownership, and tax rules. A corporate tax planner can align this choice with long-term goals while ensuring ongoing compliance. They help set up payment plans, keep records, file taxes on time, and advise on expenses such as corporate gift deductibility.

International corporate tax best practices

Here are some essential strategies to ensure compliance with local tax laws and optimise your tax position when operating internationally.

Stay compliant with local and international tax laws by completing proper legal registration in every country where your business operates. File all required tax returns on time to avoid penalties, and ensure you stay updated with local tax law changes to remain fully compliant with Pakistani regulations.

Companies should also understand and adhere to global standards set by organisations like the Organisation for Economic Co-operation and Development (OECD). With frameworks like Base Erosion and Profit Shifting (BEPS), companies can ensure transparency, prevent tax avoidance, and avoid legal risks.

Leverage double taxation treaties (DTTs) to ensure you're not taxed on the same income twice. Pakistan has signed double taxation avoidance agreements with over 60 countries, which can significantly reduce your overall tax burden when operating across borders. Understanding these treaties and how they apply to your business structure is essential for tax optimisation.

Maintain up-to-date and transparent financial records as required by Pakistani law. This helps companies prepare accurate tax returns, reducing the risk of errors that could lead to penalties. Additionally, organised financial records simplify the audit process and demonstrate compliance with local regulatory requirements.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Pakistan efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate tax in Pakistan

Who is liable for corporate tax in Pakistan?

All companies incorporated in Pakistan are liable for corporate tax on their worldwide income. Non-resident companies are liable for tax only on their Pakistan-source income. This includes income from business operations, property rental, and capital gains derived from Pakistani sources. The liability extends to both public and private limited companies, as well as foreign companies operating through permanent establishments in Pakistan.

Are there any tax incentives for businesses in Pakistan?

Yes, Pakistan offers various tax incentives to promote investment and economic growth. These include reduced tax rates for small companies, export-oriented industries, and businesses operating in Special Economic Zones (SEZs). Manufacturing companies may qualify for accelerated depreciation allowances, while technology companies can benefit from tax holidays under the IT policy. Additionally, companies investing in less developed areas may receive additional tax concessions.

What is the tax treatment of dividends in Pakistan?

Dividends paid by Pakistani companies are subject to withholding tax at source. The rate varies depending on the recipient - individual shareholders face a 15% withholding tax, while corporate shareholders may face different rates. Foreign shareholders are typically subject to withholding tax at rates specified in applicable double taxation treaties, which can range from 10% to 15% depending on the treaty provisions.

What is the process for registering for corporate tax in Pakistan?

Companies must register with the Federal Board of Revenue (FBR) within 30 days of incorporation or commencement of business operations. The registration process involves obtaining a National Tax Number (NTN) through the FBR's online portal IRIS. Required documents include the certificate of incorporation, memorandum and articles of association, and details of directors and shareholders. Once registered, companies receive their tax registration certificate and can begin filing returns.

What are the common pitfalls to avoid regarding corporate tax in Pakistan?

Common pitfalls include failing to register for tax within the prescribed timeframe, inadequate record-keeping, missing quarterly advance tax payment deadlines, and incorrect calculation of withholding taxes. Many companies also struggle with transfer pricing documentation requirements and fail to properly apply double taxation treaty benefits. Additionally, not staying updated with frequent changes in tax laws and rates can lead to non-compliance issues and penalties.

Sources used in this article:

1. PwC Tax Summaries: Pakistan Corporate Income Taxes
2. KPMG: Income Tax Amendment Ordinance 2024 Increases Tax Rate for Banking Sector
3. PwC Tax Summaries: Pakistan Tax Credits and Incentives
4. PwC Tax Summaries: Pakistan Corporate Residence
5. Federal Board of Revenue (FBR): File Income Tax Return Information
6. FBR: IRIS Login Portal
7. PwC Tax Summaries: Pakistan Tax Administration
8. FBR: Pay Income Tax Information
9. Irfan Law: Company Annual Statutory Return Filing Requirements
10. URCA: Top Tax Planning Strategies for Businesses
11. Board of Investment (BOI): Reasons to Invest in Pakistan
12. SIFC: Why Invest in Pakistan (Geo-Strategy)
13. U.S. Department of State: 2024 Investment Climate Statements - Pakistan
14. BOI: Investment Guide (PDF)
15. GoDaddy: How to Start a Business in Pakistan
16. Securities and Exchange Commission of Pakistan (SECP): Company Registration Brochure (PDF)
17. PK Legal: List of Business Laws in Pakistan
18. Hamza & Hamza: Different Types of Companies in Pakistan

Sources last checked 03/10/2025