Companies (mid-size and large)

Corporate tax rate, super tax, minimum tax, dividends and withholding duties. Each answer below explains one point in plain words, works through an example, and links the exact section of the law it relies on.

• What is Alternative Corporate Tax under section 113C, when does 17% of accounting profit apply, and which companies are outside it?Section 113C makes a company pay the higher of corporate tax or 17% of accounting profit less exclusions. Fourth, Fifth and Seventh Schedule cases are excluded.
• Can Alternative Corporate Tax paid over normal tax be carried forward, and for how long?Section 113C carries excess Alternative Corporate Tax forward against Division II tax for up to ten tax years, separately from section 113 minimum tax credit.
• Which company expenses are disallowed for cash payments, purchases from people without an NTN, or failing to integrate with FBR?Section 21 disallows cash expenses over Rs. 250,000 per head, 10% of purchases from non-NTN holders, and part of expenses tied to cash sales or non-integration.
• What happens if my company does not deduct withholding tax from a payment: do we pay it ourselves and lose the expense?A company that fails to deduct withholding tax is personally liable under section 161, pays 12% default surcharge, and can lose the expense under section 21(c).
• What is the income tax rate for a private or public limited company in Pakistan for tax year 2027?For tax year 2027 the Division II Table sets 29% for an ordinary company, 20% for a small company and 42% for a banking company. How section 4 applies them.
• When are a company's quarterly advance tax instalments due, how are they calculated, and does super tax go into them?A company pays advance tax by 25 September, 25 December, 25 March and 15 June using the section 147(4) turnover formula, which counts super tax as well.
• When must a company file its income tax return, and in what format must its financial statements be attached?Every company must file a return under section 114. Section 118 sets 31 December or 30 September, and financial statements must now be machine readable.
• How much tax must a company deduct when it pays a dividend, and why is it 25% when the company paid no tax?Section 150 makes a company deduct 15% from most dividends, 7.5% for qualifying IPP dividends and 25% where it had no tax payable due to exemption or losses.
• My company made a loss this year. Do we still have to pay tax?Section 113 charges minimum tax on turnover when a company has no tax payable because of a loss. The whole amount is then carried forward for two tax years.
• Does tax on undistributed profits under section 5A still apply to companies that do not pay dividends?Section 5A now charges 5% of accounting profit only for tax years 2017 to 2019, on public companies that did not distribute 20% of after-tax profit in cash.
• Can a subsidiary's tax loss be surrendered to its holding company under group relief, and what shareholding is needed?Section 59B lets a group company surrender its current-year assessed loss for use over three years, with 55% (listed) or 75% (unlisted) holding for five years.
• Can a holding company and its wholly owned subsidiaries be taxed as one group under section 59AA?Section 59AA lets a 100% owned group of locally incorporated companies opt, irrevocably, to be taxed as one fiscal unit if SECP designates it as eligible.
• For how many years can a company carry forward business losses and unabsorbed depreciation?Section 57 carries business losses forward six years, oldest first. Unabsorbed depreciation has no time limit but offsets only half of later business income.
• For how many years can excess minimum tax be carried forward and adjusted against later tax?Section 113(2)(c) lets a company adjust excess minimum tax against normal tax in the next two tax years only. The Finance Act, 2025 cut the period from three.
• Does my company have to withhold sales tax from suppliers' invoices as a withholding agent?The 2007 Withholding Rules name companies as withholding agents. The Eleventh Schedule sets 1/5th, 1/10th or 5%, with an exclusion for active taxpayer sales.
• Is a single member company (SMC) taxed as a company or as the owner personally?An SMC is a company under section 80, so it pays the Division II company rate and must file a return under section 114. Dividends to the owner are taxed apart.
• Is a dividend one company receives from another company taxable, and is it exempt within a group?A dividend paid by one company to another is taxed under section 5 at Division III rates. Clause (103A) exempts it only inside a filed section 59AA group.
• What is minimum tax on turnover under section 113, what counts as turnover, and what rate does a company pay?Section 113 makes a resident company pay a Division IX percentage of turnover when its normal tax is lower. The general rate is 1.25%. What turnover includes.
• Does a company that supplies taxable goods have to register for sales tax and file monthly returns?Section 14 of the Sales Tax Act lists who must register, section 26 requires returns by the due date, and section 34 charges default surcharge on late tax.
• What tax must a company deduct when paying a foreign company for royalties, technical fees or services, and can treaty rates be used?Section 152 requires 15% deduction on royalties and technical fees paid to non-residents, 7% on project contracts and 20% on most other payments.
• How much tax must a company deduct from payments to suppliers for goods, services and contracts, and is it higher for suppliers not on the Active Taxpayers List?Companies deduct section 153 tax at Division III rates on payments for goods, services and contracts, and the Tenth Schedule doubles it for non-ATL payees.
• How is income for super tax worked out, and are brought-forward losses and depreciation deducted?Section 4C builds its own income base for super tax and expressly keeps out brought-forward depreciation, amortisation and business losses. How to compute it.
• Does super tax under section 4C apply to my company, and at what income level and rate?Section 4C super tax applies at 10% above Rs. 150 million for banks, E&P income and fertilizer sellers, and at 8% above Rs. 500 million for everyone else.
• Why can my company not adjust all its input tax, and how does the 90 percent limit in section 8B work?Section 8B of the Sales Tax Act caps input tax adjustment at 90% of output tax monthly, except capital goods. Audited companies can recover the excess yearly.
• What is a small company for tax purposes, and does it get a lower rate?Section 2 defines a small company by capital, staff, turnover and origin. The Division II Table taxes it at 20%, against 29% for most other companies.
• When are a company's quarterly withholding tax statements due, and what is the penalty for filing late?Section 165 withholding statements are due 20 October, 20 January, 20 April and 20 July, even for nil quarters. Section 182 sets the late filing penalty.