PM Announces New Reforms Package with Lower Income Taxes & Amnesty for Defaulters

The PMLN Government has introduced an Economic Reforms Package, cutting down on the tax rates as a part of their “Unleashing Economic Growth” agenda. The agenda’s main mission revolves around building a credible taxation system, deepening financial markets and focusing on second generation reforms along with strengthening the investment climate.

Significant Cuts to Income Tax

The Reforms Package, introduced this month, brings some pretty significant changes in individual tax rates. Not only does it significantly reduce the percentage of tax for every tax bracket, but it has also reduced the number of tax brackets to only four.


ALSO READ

Govt to Reduce Income Tax on Salaried People in a Bid to Gain Support for Elections


The older system, based on 12 tax brackets, started from 0% tax rate for an annual income of below Rs.400,000 to 1,422,000+30% of the amount exceeding Rs.700,000. The newer system imposes flat tax rates — 0% for an annual income for below Rs.1,200,000 and 15% for Rs.4,800,000 and above.

Income Tax Rates in Pakistan for 2018:

The new income tax rates in Pakistan are as follows:

  • Upto Rs. 1.2 million per year: 0%
  • Between Rs. 1.2 million and Rs. 2.4 million a year: 5%
  • Between Rs. 2.4 million and Rs. 4.8 million a year: 10%
  • Above Rs. 4.8 million a year: 15%

You can check out the older tax rates on salaries and non-salaried individuals here.

Foreign Assets Declaration and Repatriation Ordinance

The changes in the Foreign Assets Declaration and Repatriation Ordinance are as follows,

  • Foreign exchange repatriation on 2% payment
  • Foreign exchange repatriation will have 2 options
  • Bonds for 5 years at the rate of 3% per annum (6 month payment) [not encashable in year 1]
  • All encashment in Pak rupee @ prevailing Interbank Dollar rate
  • Local holders of forex can also buy this bond
  • Dollar account holders in Pakistan who have purchased dollars through undeclared money can also regularize on 2% payment
  • Declaration of Foreign Fixed Assets on 3% payment
  • Foreign Fixed asset at market price but should be in no case less than the cost of acquisition
  • Foreign Liquid assets including Cash/Securities/Bonds etc. held abroad and in local dollar accounts may be declared at 5% payment
  • All remittances less than 100,000/year/person will continue without any questions from any agency about the source and enjoy tax exemptions
  • All remittances greater than 100,000/year/person will enjoy tax exemptions but only FBR may question the source
  • Any new foreign exchange accounts can only be opened by tax filers

Pakistan Progress on Access to International Information

  • This has established an exchange of information mechanism for tax purposes with more than 100 countries, including tax havens.
  • This has enabled us to seek information on banking and other details of our residents from these countries for taxable periods 2018 onwards and for tax matters involving intentional conduct which is liable to prosecution, for earlier taxable periods as well.
  • Pakistan is also commencing automatic exchange of financial accounts information under the OECD’s umbrella from September 2018 onwards. We will receive detailed information about banking and other financial accounts of our residents automatically each year from other countries and jurisdictions.
  • All this will expose Pakistanis’ hidden offshore accounts and assets to government and help contain cross border tax evasion.

Voluntary Declaration of Domestic Assets Ordinance

  • All undeclared incomes earned before June 30, 2017 on all local assets (gold, bonds, property etc) can be regularized on a payment of 5%
  • FBR rate on property being abolished from 1st July 2018 and provinces being requested to abolish DC rate
  • No purchase of property over Rs. 4 million is possible for nonfilers of tax returns from 1st July 2018
  • CNIC to be the tax number
  • Reduced tax incidence:
  • Maximum 1% tax (local and provincial) for registration of property being recommended
  • At Federal level Adjustable Advance Income Tax being reduced to 1%
  • Federal Government to have power to buy individual properties anywhere in Pakistan within six months of registration for:
  • 100% more for properties registered in FY 2018-19 (50%)
  • 75% more for properties registered in FY 2019-20 (57%)
  • 50% more for properties registered in FY 2020-21 & thereafter (67%)

Exemptions

  • The Foreign Assets Declaration and Repatriation Ordinance is not valid for the following categories:
  • Money laundering
  • Drug smuggling
  • Terror financing
  • It is not applicable to public office holders/ people in service of Pakistan including their spouses and dependent children


  • Jamal Khan

    You forget to add politicians in exemption list ?

    • SZSaifi

      I think they are on exemption list in the last

  • Muhammad Haris

    If annual salary is 13 lac then 5% would be deducted on 1 lac(i.e. 1 lac more than 12 lac) or on 13 lac?

    Because in existing syste if ur salary is 5 lac then taxable income is only 1 lac not 5 lac. As till 4 lac its exempted.

    • Muhammad Shakeel Ishaq

      It will be on 1 lac

    • Imtiaz Mustafa

      The 5% will be deducted on full annual income i.e. On 13lac.
      So 65K will be deducted annually.

      Tax on 1 lac will be 5K. How is it possible that this choor government will collect 5000 annually? Whereas currently i am paying around 8600 rs tax monthly on 16lac annual income.

    • Rizwan Memon

      1.2 million exempted and 5 % would be charged amounting exceeding to 1.2 million..between 2.4 million.

      Example . 1,800,000 (1,800,000-1,200,000)*5% =30,000 Tax Chargeable

  • Kashif Syed

    what a joke, the one who couldnt run Pakistan Airlines is now going to run Pakistan.

    • Youthias

      Yeah, same question please… Who could not maintain his marriage life– likes to give divorce (against Islamic ideology), how can he maintain a full country… And how can he make Pakistan state of Makkah and Madinah???

      • hahah

        he never said about that guy all of them are useless no one in this country is capable to run it

  • hahah

    This was all done to save GANGA SHARIF