What Is The Corporate Tax Rate For Registered Companies In Pakistan?

Corporate tax is a crucial consideration for anyone running or planning to Company Registration In Pakistan. Once a company is registered with the Securities and Exchange Commission of Pakistan (SECP) and receives a National Tax Number (NTN) from the Federal Board of Revenue (FBR), it becomes subject to the corporate taxation system as outlined in the Income Tax Ordinance, 2001. The corporate tax rate varies depending on the type of company, its size, and the sector it operates in.

This article provides a detailed overview of the corporate tax rates applicable to different types of registered companies in Pakistan as of the 2024–2025 fiscal year.

1. Standard Corporate Tax Rate for Companies

For most private and public limited companies, the standard corporate tax rate is:

• 29% of taxable income (for tax year 2025)

This rate is applicable to large-scale companies that do not qualify for any special status or exemption. It applies to companies across various sectors such as manufacturing, services, trading, and general commercial operations.

2. Reduced Tax Rate for Small Companies

The FBR provides relief to small companies by applying a reduced tax rate. A small company is defined under the Income Tax Ordinance as one that:

• Is registered with SECP;

• Has paid-up capital plus undistributed reserves not exceeding Rs. 25 million;

• Has annual turnover not exceeding Rs. 250 million;

• Employs less than 250 employees;

• Is not formed by splitting up or reconstructing an existing business.

The corporate tax rate for small companies is:

• 20% of taxable income (for tax year 2025)

This reduced rate is designed to promote small businesses and encourage more startups and SMEs to formalize their operations.

3. Tax Rate for Banking Companies

Banks and financial institutions are taxed at a higher rate due to the scale and nature of their earnings. As of tax year 2025:

• The corporate tax rate for banking companies is 39%

This includes all types of commercial banks, including foreign banks operating in Pakistan.

4. Tax Rate for Oil and Gas Sector Companies

Companies engaged in the exploration and production of oil and gas have a separate tax regime. These companies are taxed under special agreements or petroleum concession agreements with the government.

Generally, the applicable tax rate is:

• 40% (unless a different rate is specified under the relevant concession agreement)

These companies may also be subject to royalty payments, windfall levies, and other sector-specific duties.

5. Minimum Tax on Turnover

Even if a company has no taxable income (due to losses or other reasons), it is subject to minimum tax on turnover. As of tax year 2025:

• The minimum tax rate is 1.25% of the company’s turnover.

This applies to all companies except those in sectors where a reduced minimum tax rate is allowed (e.g., exporters, oil marketing companies, etc.).

This tax ensures that all Company Registration In Pakistan contribute something to the national exchequer, regardless of profitability.

6. Sector-Based Tax Relief

Some industries are given sector-specific relief or incentives to encourage investment. For example:

• IT and software companies registered with the Pakistan Software Export Board (PSEB) may enjoy tax exemptions on export income.

• Special Economic Zone (SEZ) companies may get 10-year tax holidays on certain activities.

• Startups that meet FBR and SECP criteria can benefit from three years of income tax exemption.

7. Filing Obligations and Penalties

Once a company is registered, it is required to:

• File annual income tax returns

• Submit withholding tax statements

• Maintain proper financial records

• File sales tax returns if registered under sales tax law

Failure to comply with these requirements may result in penalties, additional tax liabilities, and loss of exemptions.

Conclusion

The corporate tax rate for registered companies in Pakistan ranges from 20% to 40%, depending on the type and size of the company. While large companies are taxed at 29%, small companies enjoy a reduced rate of 20%. Banks and oil & gas companies are taxed at higher rates, while startups and IT exporters may qualify for exemptions. Proper tax planning and compliance by Hamza & Hamza Law Associates are essential for benefiting from available incentives and avoiding penalties. Understanding the applicable tax rate helps businesses make informed decisions and stay financially healthy.