Tax Structure in Pakistan

taskation structure of Pakistan TAX To assess (from the Latin revenueo I estimate) is to impose a financial charge or some other levy upon a taxpayer (an individual or legal entity) by a aver or the functional equivalent of a state such that failure to pay is punishable by law. Some commentators harbour argued that a direct tax is one that can non be shifted by the taxpayer to soulfulness else, whereas an indirect tax can be. A income tax is a tax levied on the income of individuals or businesses (corporations or other legal entities).When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or lettuce tax. Individual income taxes often tax the totality income of the individual (with some deductions permitted), date corporate income taxes often tax net income (the difference between unprocessed receipts, expenses, and additional write-offs). Asales taxis aconsumption taxaerated at thepoint of purchasefor certain goods an d services. The tax tally is usually calculated by applying aper centimeagerate to the assessable price of a sale.Most sales taxes are collected from the buyer by the seller, who remits the tax to a government agency. Sales taxes are commonly charged on sales of goods, but many sales taxes are likewise charged on sales of services. Ideally, a sales tax would adjudge a high compliance rate, be difficult to avoid, and be truthful to calculate and collect Income tax PakistanLaw concerning taxation of income in Pakistan is give tongue to in the Income Tax rule, 2001 (the Ordinance) and the rules framed there under viz. Income Tax Rules, 2002 (the Rules).The Ordinance is a Central statute and is, therefore, applicable to the whole of Pakistan . below section 4 of the Ordinance, income tax is imposed for each tax division at specified rates on every soulfulness who has taxable income for the year Tax Year in PakistanTax year is a period of twelve months ending on 30th June and shall be denoted by the calendar year in which the said date falls. Taxable Income in PakistanIt is the total income of a person for a tax year cut back by the total of any deductible allowances, under the Ordinance, for the year.A person is authorize to a deductible allowance for the amount of any Zakat paid by the person in a tax year under the Zakat & Ushr Ordinance, 1980. amount Incomeit is the sum of a persons income under each of the heads of income for the year. Heads of Income in PakistanUnder the Ordinance income is classified into the following five heads Salary, Income from property, Income from business, Capital gains and Income from other sources.The income of a person under a head of income shall be the total of the amount derived by the person in a tax year that are chargeable to tax under the head as reduced by the total deductions allowed under the ordinance to the person under that head. CORPORATE TAX ratePakistan corporate tax rate is 35% of net taxable income of a company. For nonresidents, a 15% rate is levied on the gross amount of royalties or technical service fees, and 30% for other earningss under the presumptive tax regime. Residence An entity is resident if it is registered under the law of Pakistan or its management and halt is situated wholly in Pakistan.Basis Resident entities are taxed on intercontinental business income nonresidents pay tax only on Pakistan-source income. Taxation of dividendsA resident entity pays tax at a rate of 10% on dividend income regardless of whether the dividends are Pakistan or foreign source. A nonresident pays tax at a rate of 10% on Pakistan source dividends. PAKISTAN gross sales TAXThe standard rate of Sales Tax in Pakistan is 16%. Taxable transactions Sales Tax is levied on the supply of goods and services, and the entailment of goods.Sales Tax Registrationis mandatory for manufacturers if turnover exceeds PKR 5 million for retailers, if the quantify of supplies exceeds PKR 5 million and for importers and other persons if required by another federal or provincial law Filing and sales tax paymentSales Tax returns and payments must be made on a monthly basis. RGSTThe RGST is actually plain old Value Added Tax (VAT) with a new name. Since the VAT has already had its fill of bad publicity, the government decided it would be a smart move to rename and repackage the new taxation system.The RGST is a taxation system that operates by an addition of 15 per cent tax on each and every value addition on taxable products Who is involved? The key players behind the proposed RGST are the International pecuniary Fund (IMF), the World Bank, United States Mission to the European Union (USEU) and other assorted donors who are tired of paying their taxpayers money to cover up for the leaks in our taxation system. But this is not to say that we do notneed reforms in our taxation system. The International Monetary Organizations might be the catalysts towards the reforms just now, b ut in all reality, tax reforms have been hanker overdue.