Global Payroll Outsourcing Provider Issues Statutory Change Alert for Pakistan

Pakistan introduces a new tax bracket – companies are required to retroactively recalculate and declare income tax applied since July 1, 2018.

On September 18, 2018, the Ministry of Finance for Pakistan introduced Finance (Amendment) Bill 2018/2019, which amended the previously announced tax year 2019 personal income tax rates and brackets. In accordance to the new bill, the following tax brackets apply to the salaries paid during July 1, 2018 to June 30, 2019 to Pakistani tax residents:

 

Annual Income (in PKR)  
From To Tax Rate/Minimum Tax Amount in PKR*
1 400,000 0%
400,001 800,000 1,000
800,001 1,200,000 2,000
1,200,001 2,500,000 5% of the amount exceeding PKR 1,200,000.00
2,500,001 4,000,000 PKR 65,000 plus 10% of the amount exceeding PKR 2,500,000.00
4,000,001 8,000,000 PKR 290,000 plus 20% of the amount exceeding PKR 4,000,000.00
8,000,001 Above PKR 1,090,000 plus 25% of the amount exceeding PKR 8,000,000.00

*Respective minimum tax amounts are applied to all taxpayers with annual taxable income between 400,000 and 1,200,000. For example, if the annual taxable income of an employee exceeds PKR 800,000 but is less than PKR 1,200,000 then the total annual income tax liability of the taxpayer is PKR 2,000.

Total annual net income should be rounded to the nearest Pakistani Rupee for the income tax calculation purposes.

The revised income tax brackets are applicable to all taxable employment income earned after July 1, 2018 and before June 30, 2019. Therefore, the employers are required to retroactively apply the revised rates and brackets on all compensation already paid and declared since the beginning of the current tax year; i.e. from July 1, 2018.

Please contact your Mercans’ services delivery team for any additional information regarding the implications of the above changes.

For additional information please visit https://www.mercans.com/.