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Pakistan Sets High Tax Rates of Up to 70% on Dividend Income for Taxpayers Not on Active Taxpayers List
Pakistan's tax
authority, the FBR, has implemented new tax rates for the 2023-24 fiscal year.
These new rates significantly change the taxation of dividend income.
Companies and
individuals listed on the Active Taxpayers List (ATL) will benefit from lower
tax rates, while non-ATLs will face much higher taxes.
Dividend income
received by a REIT scheme from a Special Purpose Vehicle will be taxed at 0%
for both ATLs and non-ATLs. However, the tax rates differ greatly for other
sources of dividends.
For non-ATL
individuals receiving dividends from Special Purpose Vehicles, the tax rate is
an exorbitant 70%. In contrast, ATL individuals paying only 35% for the same
income.
For dividends from
IPPs, ATLs will pay 7.5% while non-ATLs will pay 15%.
For cash from mutual
funds, REITs and unrelated to IPPs or SPVs, the tax is 15% for ATLs and 30% for
non-ATLs.
For companies paying
no tax due to losses or credits, ATLs face a 25% rate while non-ATLs pay 50%.
These measures aim to
incentivize taxpayers to register as ATLs, boosting compliance and revenue.
However, critics warn of the burden on non-ATLs, potentially impacting
investments and economic activity.
Businesses and
individuals are advised to review the new rates with tax experts to understand
the implications for their finances and investments. The FBR’s changes are
expected to significantly impact Pakistan's fiscal situation.
