Updated for FY 2025-26
Business Tax Guide Pakistan 2025-26
A comprehensive guide to corporate income tax rates, SME concessions, AOP taxation, advance tax, withholding obligations, Super Tax, and FBR compliance for businesses in Pakistan.
TL;DR – Key Facts at a Glance
- Standard corporate tax rate is 29% — banking companies pay 39%; small companies pay 20% if eligible.
- AOPs are taxed at individual slab rates — but without the Rs. 600,000 exemption threshold that individuals enjoy.
- Advance tax is paid quarterly — any business with a prior-year tax liability above Rs. 1,000 must pay in four instalments.
- Withholding tax is a core obligation — companies and qualifying AOPs must deduct and deposit tax on salaries, supplier payments, rent, and more.
- Super Tax applies above Rs. 300 million income — additional rates of 1–10% on top of normal tax.
- Minimum tax of 1.25% of turnover — applies when normal tax is lower than this floor (Section 113).
Business Structures & Their Tax Treatment
Private Limited Company (Pvt. Ltd.)
A private limited company is a separate legal entity taxed at the flat rate of 29% on net taxable income. Companies must file under Section 114 and are subject to Super Tax, minimum tax, and advance tax provisions.
- Dividends paid to shareholders attract a further withholding tax of 15%.
- Companies must maintain audited accounts and attach a tax reconciliation.
Small Company
A company qualifies as a Small Company under Section 2(59A) if:
- Paid-up capital plus reserves do not exceed Rs. 50 million.
- Annual turnover does not exceed Rs. 250 million.
Small companies benefit from a reduced tax rate of 20%.
| Business Structure | Tax Rate | Notes |
|---|---|---|
| Private Limited Company | 29% | Flat rate on net taxable income |
| Small Company | 20% | Capital ≤ Rs. 50M, turnover ≤ Rs. 250M |
| Banking Company | 39% | Higher rate under Finance Act |
| AOP / Partnership | Slab rates | No Rs. 600,000 threshold |
| Sole Proprietorship | Slab rates | Full Rs. 600,000 exemption applies |
Frequently Asked Questions
What is the corporate income tax rate in Pakistan for 2025-26?
The standard corporate income tax rate in Pakistan for FY 2025-26 is 29% for companies. Banking companies are taxed at 39%. Small companies (paid-up capital and reserves not exceeding Rs. 50 million, turnover not exceeding Rs. 250 million) are eligible for a reduced rate of 20%.
What is the tax rate for an AOP (Association of Persons) in Pakistan?
An Association of Persons (AOP) — such as a partnership firm — is taxed at the normal individual slab rates on its taxable income, but AOPs do not benefit from the basic exemption threshold (Rs. 600,000). The minimum tax of 1.25% of turnover may also apply.
What is advance tax for businesses in Pakistan?
Businesses whose latest assessed tax liability exceeds Rs. 1,000 must pay advance tax in quarterly instalments (by September 25, December 25, March 25, and June 15). Each instalment is 25% of the estimated annual tax liability, reduced by any withholding tax already suffered.
Which businesses are required to withhold tax in Pakistan?
All "prescribed persons" under the Income Tax Ordinance 2001 must withhold tax. This includes companies, AOPs with turnover above Rs. 100 million, and individuals with such a turnover. They must deduct tax at source on salaries, payments to suppliers, rent, contracts, and more, and deposit it monthly to FBR.
What is the minimum tax for businesses in Pakistan?
Under Section 113 of the Income Tax Ordinance 2001, a minimum tax of 1.25% of turnover applies to companies and AOPs where the normal tax liability is less than this amount. Certain sectors like trading companies and retailers have different minimum tax rates.
When is the tax return deadline for companies in Pakistan?
Companies must file their annual income tax return within six months of the end of their tax year. For companies with a June 30 year-end (most common), the deadline is December 31. Companies with a December 31 year-end must file by June 30 of the following year.
What is Super Tax in Pakistan?
Super Tax was introduced under the Finance Act 2022. For FY 2025-26, companies with income exceeding Rs. 300 million pay Super Tax at rates between 1% and 10% depending on the income tier. Banking companies, large manufacturers, and other high-income sectors face higher Super Tax rates.
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