Free invoice generator and tax tools for Pakistan

Two federal taxes reach most small businesses, both collected by the Federal Board of Revenue (FBR). Income tax is charged under the Income Tax Ordinance, 2001. A company other than a bank pays 29% of taxable income, and a small company pays 20%, under the First Schedule. Sales tax on goods is charged under the Sales Tax Act, 1990. Services are taxed by the provinces, each through its own revenue authority, so a business that sells both goods and services can have returns with the FBR and with a provincial authority.

Businesses also collect tax for the FBR. An employer deducts income tax from each salary payment under section 149 and files withholding statements under section 165. The FBR's summary of the 2026-27 budget also raises, from Rs 100 million to Rs 200 million, the turnover threshold below which small traders are exempt from withholding tax. Large companies and other high earners also meet the super tax in section 4C.

The latest reform is the Finance Act 2026, gazetted on 26 June 2026 and in force from 1 July 2026 for the tax year 2027. It abolishes the section 4AB surcharge and omits section 7E, which taxed deemed income from capital assets such as property. It also cuts the super tax. A person other than a bank, a fertilizer seller or a Part I Fifth Schedule taxpayer now pays 8% of income where that income exceeds Rs 500 million. Banking companies and fertilizer sellers pay 10% on income exceeding Rs 150 million.

Pakistan has no single statutory small-business scheme with a published turnover limit and rate. The Income Tax Ordinance, 2001 instead lets the Federal Board of Revenue (FBR) set special procedures by notification. Section 99B covers small traders and shopkeepers in specified cities and may include fixed tax, return filing and assessment. Section 99C covers small businesses, construction, medical practitioners, hospitals and educational institutions, and may set scope, payment, record keeping and filing. Section 99A collects tax from retailers who are not Tier-1 retailers, and from specified service providers, through commercial electricity bills at rates fixed by an income tax general order; the order can make that tax adjustable, final or minimum. Check the notification that applies to your trade and city on fbr.gov.pk before assuming any fixed amount.