Business & Taxation Laws

Business Laws

To adopt one of the forms as mentioned above of businesses, the most suitable way is by registering for a limited liability company.

  • Sole proprietorship
  • Partnership
  • Joint venture
  • Limited liability company

Business laws of Pakistan

Four common types of business forms are adopted privately in Pakistan. These are:

  • Companies Ordinance, 1984
  • Companies General Provisions and Forms Rules, 1985
  • Single Member Companies Rules, 2003
  • Schedule of Filing Fee

Companies Ordinance, 1984

Under the Companies Ordinance, 1984, there are three types of companies:

  • A company limited by shares
  • A company limited by guarantee
  • An unlimited liability company

The legal regime for the formation and regulation of companies in Pakistan is given in the Companies Ordinance, 1984. In contrast, the role of administration of these companies is given to the Securities and Exchange Commission of Pakistan and to the Registrar of Companies appointed by the SEC of Pakistan at a provincial level where such company is to be registered.

The limited liability company further has two types:

  • A private limited company
  • A public limited company

Registration of a limited liability company

Please refer to our section of company Registration for Further details.

Taxation Laws

The obligatory contribution in the revenue of the state by an individual upon the Income he/she generates on an annual basis is called a tax. There are two main types of taxation laws in Pakistan:

  • Income tax
  • Sales tax
  • Property tax
  • Income Tax

The tax an individual pays on his annual Income is called income tax. Income tax is divided into two basic categories:

  • Individual income tax
  • Corporate income tax

The total sum of Income is attained after the deduction of:

  • Zakat paid under the Zakat and Ushr Ordinance, 1980
  • Workers Welfare Fund paid under the Workers Welfare Fund Ordinance, 1971
  • Workers Participation Fund paid under the Companies Profit Act, 1968

Heads of Income

Under the Income Tax Ordinance, 2001. Incomes are divided into:

  • Salary
  • Income from business
  • Income from property
  • Capital gain
  • Income from other resources

Tax Year

The taxation year in Pakistan is effective from 1st day of July and ends on 30th day of June.

Individual Income Tax

On personal Income, tax is applicable only if a person is earning more than Rs.600,000 annually. An individual is liable for paying tax fee, i.e. resident, if,

  • Resides for 183 days in a tax year resides in Pakistan for 120 days in a tax year, four years prior the tax year
  • Is a federal or provincial government employee

Income Of Individual

Under section 101 of the Income Tax Ordinance, 2001, tax is applicable on an individual when he generates Income from:

  • Salary received from employment in Pakistan (private or government)
  • Dividend paid by resident Company in Pakistan
  • Profit on debt paid by a Resident bank / Person
  • Rental Income from immovable property in Pakistan
  • Pension paid by a resident company

Corporate Income Tax

Under section 101 of the Income Tax Ordinance, 2001, tax is applicable on a corporate when it:

  • If a company is formed under the law of Pakistan
  • Controls and manages an affair solely in Pakistan
  • Under the federal of the provincial government of Pakistan

Sales Tax

Under the Sales Tax Act, 1990, the federal government collects sales tax on the:

  • Sale
  • Supply and
  • import of goods in Pakistan.
  • The goods include moveable items of every kind other than the money, actionable claims, shares, stocks, and securities.

The federal government collects sales tax on services under The Islamabad Capital Territory Ordinance, 2001.

Property Tax

Property tax is a tax collected by the provincial government on land or a building on its annual value. The property tax is collected at a rate of 5% annually.

The property tax should be submitted before the 30th day of September every year.

Exemptions of property tax

Under the following conditions, property tax is exempted:

  • if the residential house is constructed on a land of an area of fewer than five marlas
  • if the estimated annual rent on the property does not exceed then RKR. 4320/-
  • if the house is used for the owner’s residence
  • if the lease of a single-story house does not exceed PKR. 6480/-
  • if the lease of a building does not exceed PKR.12150/- per annum and is owned by a widow, minor orphan or disabled.
  • Mosques
  • Buildings of Government offices
  • Lands and Buildings used as public playgrounds and parks, boarding, schools, libraries, hostels, and hospitals.
  • Property devoted to religious or public charitable institutions

Our services

Our team of competent and experienced online lawyers in Pakistan offer the following services regarding taxation:

  • Preparation of legal documents for the establishment of businesses and its forms
  • Establishment and registration of a limited liability company of any legal form
  • Registration of the business of any legal form
  • Registration for income/sales tax
  • Changing in personal details for income tax
  • Calculation of tax
  • Return of income/sales tax
  • Withholding tax
  • Income/sales tax refund
  • Income/sales tax appeals
  • Valuation of immovable property

You can ask a lawyer online about the business and taxation laws by filling the form below or through contacting us on WhatsApp or phone. We also offer free legal advice online at any time of the day.