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Pakistan: Tax developments in response to COVID-19

General Information

This page offers an overview of tax developments being reported globally by KPMG member firms in response to the Novel Coronavirus (COVID-19).

The content will be updated regularly. However, due to the fast-moving pace of change, it may not always reflect the most current developments in a given jurisdiction. Please refer to the date of accuracy and refer to the relevant links, under additional information, for original source information.

Date accurate as of: 18 November 2020

Authorities in Pakistan have introduced measures to mitigate the impact of the COVID-19 pandemic.

Tax Relief

23 August 2020:

FBR exempted taxes on import of oxygen gas, oxygen cylinders and cryogenic tanks. This exemption shall be available for a period of 3 months starting from 23 June 2020 and this concession shall apply to LCs opened for GDs filed on or after 23 June 2020.

30 June 2020:

FBR in its Finance Act 2020 added The Prime Minister’s COVID-19 Pandemic Relief Fund 2020 to its exemptions list. Any donation, subject to conditions, made to the fund shall be exempted from tax.

30 June 2020: Special Incentive package for construction industry announced by GoP:

  • The construction sector declared as an ‘industrial undertaking’ through suitable amendment in the Ordinance. Consequently, the sector is now entitled to seek exemption from advance tax otherwise collectible on import of machinery. 
  •  Introduction of a fixed rate tax regime effective from Tax Year 2020 for builders and developers. The scheme is optional and covers ‘new projects’ (that start after 17 April 2020 but before 31 December 2020) to be completed by 30 September 2022; and ‘existing projects’ also to be completed by the said date.
  • Immunity from probe regrading source of investment with respect to amount invested as capital in a building or land subject to certain conditions, including first purchaser of such building or land with certain conditions.
  • Exemption from withholding tax obligations on purchase of building material except steel and cement; and on services of plumbing, electrification, shuttering and allied works obtained from non-corporate service providers.
  • Exemption on dividend income received from a company being a builder or a developer out of the profits and gains derived from a project covered under certain conditions. 
  • Low-cost projects developed or approved by Naya Pakistan Housing and Development Authority (NAPHDA) or under the Ehsaas program, the tax rates levied will be reduced by 90%. 
  • The Act has introduced general reduction in capital gains tax leviable on sale of immoveable property.

30 March 2020: GoP allowed to reduce different taxes and duties on import and supply of different food items for alleviating the adverse impact of COVID -19 on different sections of the society:

  • Rate of advance tax on the import of different food items was reduced to 0% from 2%;
  • Individuals and associations of persons providing basic food items to Govt. owned departmental stores without a brand name will pay 1.5% withholding tax instead of 4.5%; and 
  • Additional customs duty (ACD) at 2% on soya bean oil, canola oil, palm oil and sunflower oil (as well as oil seeds) has also been exempted.

Additional Information

Business Income Tax

Effective May 1, 2020, the construction sector is entitled to seek exemption from advance tax on import of plant and machinery, besides claiming a tax credit on income from new projects according to the new tax regime. However, the credit is only available to non-corporate sector.

Additional Information

Additional information regarding employment-related measures, economic stimulus measures and other measures.