Standard Corporate Tax Rates 2025–26
| Company Type | Tax Rate |
|---|---|
| Public/Private Limited Company | 29% |
| Small Company (as defined under Income Tax Ordinance) | 20% |
| Banking Company | 39% |
| Modaraba | 25% |
Small company definition: A company qualifies as a "small company" if it has paid-up capital plus undistributed reserves not exceeding the prescribed limit, employs no more than 250 employees, has turnover not exceeding Rs. 250 million, and is not formed by splitting an existing larger business.
Super Tax (Section 4C) — Tiered Rates
| Income Slab | Super Tax Rate |
|---|---|
| Up to Rs. 150 million | 0% |
| Rs. 150M – 200M | 1% |
| Rs. 200M – 250M | 2% |
| Rs. 250M – 300M | 3% |
| Rs. 300M – 350M | 4% |
| Rs. 350M – 400M | 6% |
| Rs. 400M – 500M | 8% |
| Above Rs. 500 million | 10% |
Super tax is applied in addition to standard corporate tax and is calculated on total income above the threshold — it primarily impacts large, highly profitable companies and certain specified sectors.
Minimum Turnover Tax (Section 113)
Even if a company reports a loss or very low taxable profit, it must pay a minimum tax of 1.25% of turnover in most cases (rates vary by sector — e.g., distributors of certain goods may have lower minimum tax rates). This ensures companies with high revenue but manipulated low declared profit still contribute a baseline tax.
Worked example: A company with Rs. 50 million annual turnover but only Rs. 2 million declared profit would normally owe ~Rs. 580,000 at 29%. But minimum tax of 1.25% × Rs. 50M = Rs. 625,000 applies instead, since it's higher.
Available Tax Credits for Companies
- Tax credit for investment in plant & machinery (subject to conditions)
- Tax credit for enlistment on a stock exchange
- Tax credit for charitable donations to approved institutions
- Group relief/group taxation benefits for qualifying corporate groups
How to Minimise Corporate Tax Legally in Pakistan
The most effective starting point for reducing corporate tax liability is maximising all allowable deductions before computing taxable income. Depreciation on fixed assets, research and development expenditure, employee training costs, and contributions to approved staff pension or provident funds are all fully deductible under the Income Tax Ordinance. Companies that fail to claim these deductions correctly — or that use incorrect depreciation rates for different asset classes — end up overpaying tax unnecessarily each year.
Timely payment of advance tax installments is equally important: underpayment triggers a KIBOR-linked surcharge that erodes profits. On the credit side, companies should review eligibility for tax credits on plant and machinery investment, charitable donations to approved institutions, and enlistment on the Pakistan Stock Exchange. A qualified tax consultant can identify credits that are often overlooked and ensure they are properly claimed in the return. Kamboh Associates provides corporate tax planning and return filing for companies across Pakistan — WhatsApp 0328-4675162 for a consultation.
Dividends: The Second Layer of Tax
Corporate tax is only part of the picture for owners. When a company distributes profit, it deducts withholding tax on the dividend under section 150, at a rate that is higher for shareholders not on the Active Taxpayers List. For an individual shareholder this deduction is generally the final tax on the dividend. Owners comparing a company with a sole proprietorship should therefore add corporate tax, super tax where applicable and dividend tax together before deciding.
Accounting Year and Filing Date
Most companies use a 30 June year end and file by 31 December. A company can apply for a special tax year, for example to align with a foreign parent's calendar year, in which case its filing date shifts accordingly. Advance tax under section 147 is payable quarterly in either case.
Frequently Asked Questions
Is dividend income taxed after the company pays corporate tax?
Yes. The company deducts withholding tax on dividends under section 150, which is generally final tax for individual shareholders.
What is the difference between a small company and a regular Pvt Ltd for tax purposes?
A small company benefits from a reduced 20% tax rate instead of the standard 29%, provided it meets the criteria on capital, employee count, and turnover, and is newly incorporated (not a split of an existing business) for the relevant years specified in the law.
Does super tax apply to all companies?
Super tax applies to companies with income above Rs. 150 million, with rates increasing in tiers up to 10% for income above Rs. 500 million. Companies below this threshold are not subject to super tax.
Can minimum turnover tax be carried forward or adjusted?
Yes, the excess of minimum tax paid over the actual tax liability can be carried forward for adjustment against tax liability in subsequent tax years, subject to the time limits specified in the Income Tax Ordinance.
Need Corporate Tax Planning?
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