What is the corporate income tax rate for a foreign company in Pakistan?

A non-resident company with a branch or permanent establishment in Pakistan is taxed on its Pakistan-source income at the rates that apply to companies: 29% for most companies, 39% for banking companies and 20% for qualifying small companies. A super tax applies in addition above set income thresholds.

Is the super tax still charged after the Finance Act 2026?

Partly. Super tax was abolished for persons with income of up to PKR 500 million. For income above PKR 500 million the rate fell from 10% to 8%. The relief does not apply to banking, fertiliser and certain other specified sectors.

What withholding tax applies when a Pakistani company pays a foreign company?

For non-resident corporations outside a tax treaty, the listed rates are 15% on dividends, 10% on interest and 15% on royalties, and 5% to 20% on fees for technical services. A double taxation treaty may reduce these rates.

Taxes for Foreign Companies in Pakistan: 2026-27 Guide

Q: What is the sales tax rate in Pakistan?

The standard rate on goods is 18%. Sales tax on services is levied by the provinces, the Islamabad Capital Territory and Azad Jammu and Kashmir at rates from 15% to 16%.

Foreign companies planning to operate in Pakistan usually ask the same question early: what will the tax cost be? The answer depends on the legal form of the business, the kind of income, and whether a double taxation treaty applies. This guide sets out the main federal taxes for foreign companies as they stand after the Finance Act 2026, which took effect for the 2026-27 fiscal year.

It is an orientation based on official and professional sources, not legal or tax advice. Rates and thresholds change with each Finance Act. Figures below are drawn from sources reviewed up to 24 August 2026, and should be confirmed against the Finance Act, current FBR notifications and a qualified tax adviser before any decision.

Corporate income tax

Companies in Pakistan pay federal income tax on their taxable income at these rates (PwC Worldwide Tax Summaries, Pakistan):

Type of company	Rate
Banking company	39%
Public company (other than banking), and any other company	29%
Small company (conditions apply)	20%

A foreign company that operates through a branch or other permanent establishment is taxed on the Pakistan-source income attributable to that establishment, at the same company rates. A locally incorporated subsidiary is taxed as a Pakistani company on its income.

Super tax

A super tax applies on top of the rates above, above set income levels. The Finance Act 2026 changed it. According to the Federal Board of Revenue (FBR), super tax was abolished for persons with income of up to PKR 500 million, and the rate was reduced from 10% to 8% for income above PKR 500 million. These concessions do not apply to the banking and fertiliser sectors and certain other specified sectors (FBR, Salient Features of Budget 2026-27). Banking companies, fertiliser sellers and income computed under Part 1 of the Fifth Schedule continue to pay 10% above PKR 150 million (PwC, as above). Super tax also does not apply where export proceeds exceed 80% of total turnover (PwC, significant developments).

Minimum tax and alternate corporate tax

Where a company’s tax payable is lower than a percentage of its turnover, minimum tax on turnover applies. The general rate is 1.25% of turnover, and certain sectors pay rates from 0.25% to 0.75%. There is also an Alternate Corporate Tax of 17% of accounting income, which does not apply to insurance companies, petroleum exploration and production companies, banking companies, or companies with reduced rates (PwC, as above).

For a permanent establishment of a non-resident company, minimum tax on gross consideration is 5% for the sale of goods, 15% for services and 8% for contract execution, with 8% for specified services and 4% for IT and IT-enabled services. These rates double for taxpayers on the inactive list (PwC, as above).

Exporters and IT exporters

For exports, the FBR reports that tax collected on export proceeds (a 1% withholding tax and a 1% advance tax) was reduced from 2% to 1.25%. For IT and IT-enabled services exporters, the concessionary rate of 0.25% was extended from 2026 up to Tax Year 2029 (FBR, as above). PwC adds that the 0.25% rate applies to persons registered with the Pakistan Software Export Board, and that a start-up certified by that Board receives a 100% tax credit for the certification year and the next two tax years (PwC, tax credits and incentives).

Withholding tax on payments to non-residents

When a Pakistani company pays a foreign company, tax is generally withheld at source. For non-resident corporations that are not covered by a treaty, the rates are (PwC, withholding taxes):

Payment	Rate without a treaty
Dividends	15%
Interest	10%
Royalties	15%
Fees for technical services	5% to 20%

Pakistan has double taxation treaties with many countries, and the treaty rate may be lower than the domestic rate. Where a treaty rate is higher than the domestic rate, the payer may apply the domestic rate. Which rate applies depends on the investor’s country of residence, so this is one of the first questions to settle before choosing a structure. Our guide to repatriating profits and dividends covers how the money is then remitted.

Sales tax

Sales tax, which is Pakistan’s value added tax, is ordinarily levied at 18% on the value of goods. Sales tax on services is levied by the provinces, the Islamabad Capital Territory and Azad Jammu and Kashmir, at rates from 15% to 16% (PwC, other taxes). Some goods and services are exempt or taxed at reduced rates. The 2026-27 budget also extended the sales tax exemption on imports of completely knocked down kits for electric vehicles to 30 June 2027 (FBR, as above).

What the Finance Act 2026 changed

Super tax: abolished up to PKR 500 million of income, and cut from 10% to 8% above that, outside the excluded sectors.
Exports: a single 1.25% minimum tax replaced the 1% withholding tax and the separate 1% advance tax, and the 0.25% rate for IT exporters was extended to Tax Year 2029.
Digital compliance: a tax credit of 10% of the amount invested in electronic resources for integration with FBR systems was introduced, and the expense disallowance for non-integration was reduced from 8% to 3% of total expenditure claimed (PwC, significant developments).
Non-resident investors: concessions for foreign currency value accounts and non-resident rupee value accounts, previously limited to non-resident individuals, were extended to non-resident associations of persons and corporate investors. Withholding tax on capital gains from disposing of debt securities rose from 15% to 20%, excluding securities settled through the National Clearing Company on a registered stock exchange (PwC, significant developments).
Administration: a National Faceless Centre for audits, assessments and appeals, an algorithmic settlement mechanism, and a requirement for companies to file financial statements in machine-readable electronic formats (FBR, as above).

Questions to settle before you commit

Will the business be a locally incorporated company or a branch, and how does that change the tax position (see branch or liaison office and registering a company)?
Which tax treaty applies, and does it reduce withholding on dividends, interest, royalties and fees?
Does the activity qualify for a sector rate, such as the export and IT export rates?
How will profits be paid out, and what is withheld along the way?

How PIVRA can help

PIVRA can help you understand the tax and regulatory conditions that apply to your investment. Our investment due diligence and market entry roadmaps set them out for your sector and structure, from official sources, and expert consultations connect you with Pakistani specialists on specific questions. We work alongside your tax advisers. Request a quote.

Taxes for Foreign Companies in Pakistan: Corporate, Withholding and Sales Tax in 2026-27