ICMA Pakistan Business Taxation Syllabus

What is the difference between a 'deductible allowance' and a 'tax credit' under the Income Tax Ordinance 2001?

A deductible allowance is subtracted from total income to arrive at taxable income (reduces the base); a tax credit is subtracted directly from the tax payable (reduces the tax).

Name two deductible allowances available to individuals under the Income Tax Ordinance 2001.

Zakat paid under the Zakat & Ushr Ordinance, and (where applicable) deductible allowance for education expenses and for profit on debt on a house loan (subject to prescribed limits and conditions).

Give two examples of tax credits available under the Income Tax Ordinance 2001.

Tax credit for charitable donations (to approved institutions), tax credit for investment in shares/insurance/pension funds, and tax credit for persons employing fresh graduates or for point-of-sale machine integration (as per current law).

How is a tax credit for charitable donations to an approved non-profit generally computed?

As: (tax assessed before credit / taxable income) x amount of eligible donation, where the eligible donation is capped (e.g., 30% of taxable income for individuals/AOPs, 20% for companies).

What is the general rule for carrying forward a business loss under the Income Tax Ordinance 2001?

A business loss (other than speculation/capital loss) not set off in the year may be carried forward and set off against business income of the following six tax years.

How long can an unabsorbed depreciation/amortization allowance be carried forward?

Unabsorbed depreciation and amortization can be carried forward indefinitely (no time limit) until fully set off against income.

How may a capital loss be set off and carried forward under the Ordinance?

A capital loss can be set off only against capital gains; if unabsorbed, it is carried forward for up to six tax years and set off only against capital gains of those years.

What is the rule for setting off a speculation business loss?

A loss from a speculation business can be set off only against the income of another speculation business, and any unabsorbed amount is carried forward for up to six years against speculation income only.

Outline the basic order of computing taxable income for an individual.

Compute income under each of the five heads, add them to get total income, deduct deductible allowances to get taxable income, apply the relevant tax rates, then subtract tax credits and taxes already paid/withheld to find tax payable/refundable.

What is an 'Association of Persons' (AOP) under the Income Tax Ordinance 2001?

A firm, Hindu undivided family, an artificial juridical person and any body of persons formed under a foreign law, but not an incorporated company; e.g., a partnership firm. It is taxed as a separate taxpayer at slab rates.

How is a member's share of AOP profit treated in the member's individual return?

The share of profit from an AOP that has been taxed at the AOP level is exempt in the hands of the member, but it is included for rate purposes (to determine the slab on the member's other income).

How are companies taxed differently from individuals and AOPs in Pakistan?

Companies are taxed at a flat corporate rate (not progressive slabs), e.g., 29% for most companies; they are also subject to minimum tax, super tax, and tax on distributed/undistributed profits, and must file on an accrual basis.

What is 'super tax' in the context of company taxation in Pakistan?

An additional tax levied on high-income persons/companies (under section 4C) at graduated rates based on income thresholds, charged in addition to normal corporate tax.

What is the 'minimum tax on turnover' under section 113 of the Income Tax Ordinance 2001?

A minimum tax (commonly 1.25% of turnover, with sector-specific rates) payable by certain companies/individuals/AOPs even where they have no taxable income or where normal tax is less than this minimum.

Define the 'final tax regime' (FTR) under the Income Tax Ordinance 2001.

A regime where tax deducted/collected at source (or paid) is the full and final discharge of tax liability on that income; such income is not included in normal taxable income and no further tax is charged on it.

How does the final tax regime differ from the normal (net income) tax regime?

Under the normal regime, tax is computed on net taxable income at applicable rates with withholding adjustable against the final liability; under FTR, the withheld/collected amount itself is the final tax, with no deductions or further computation.

What is a withholding (withholding agent) obligation under the Income Tax Ordinance 2001?

The duty of a payer (withholding agent) to deduct/collect tax at source from specified payments (e.g., salary, dividends, profit on debt, supplies, services, contracts), deposit it with the FBR, and file withholding statements.

Who is responsible for deducting tax on salary, and on what value?

The employer must deduct income tax at source from salary on the estimated annual taxable salary at the average rate, spread over the months of payment, and deposit it monthly.

When must withholding tax deducted at source generally be deposited with the government?

Tax deducted/collected must be deposited within the prescribed time — generally within seven days of the end of each week (or by the specified monthly date), and a periodic withholding statement must be filed.

What is the difference between an 'adjustable' and a 'final' withholding tax?

Adjustable withholding tax is credited against the taxpayer's final assessed liability (excess is refundable); final withholding tax discharges the liability fully and cannot be claimed back or adjusted against other income.

What is advance tax under section 147 of the Income Tax Ordinance 2001?

Tax that companies, AOPs and certain individuals must pay in quarterly instalments during the tax year on estimated taxable income, adjustable against the final tax liability assessed in the return.

When are the quarterly advance tax instalments under section 147 due for a company?

By the 25th of the month following each quarter — 25 September, 25 December, 25 March, and 15 June (for the last/June quarter).

How is a company's advance tax instalment under section 147 broadly computed?

Based on the formula (A x B/C) - D, where A is turnover for the quarter, B is tax assessed for the latest tax year, C is the turnover for that latest year, and D is tax already paid/collected for the quarter.

Which law governs sales tax on goods at the federal level in Pakistan, and what is the standard rate?

The Sales Tax Act 1990; the standard rate of sales tax on taxable supplies is currently 18%.

What is a 'taxable supply' under the Sales Tax Act 1990?

A supply of taxable goods made by a registered person in the course or furtherance of any taxable activity, other than an exempt supply, including a supply of goods chargeable to tax at zero rate.

Distinguish between 'exempt' supplies and 'zero-rated' supplies under the Sales Tax Act 1990.

Exempt supplies bear no output tax and no input tax can be reclaimed; zero-rated supplies are taxed at 0%, so no output tax is charged but the related input tax is recoverable/refundable.

Define 'output tax' and 'input tax' under the Sales Tax Act 1990.

Output tax is the sales tax charged by a registered person on taxable supplies (sales) it makes; input tax is the sales tax paid by that person on taxable goods/services it acquires (purchases).

How is the net sales tax payable for a tax period calculated, and what is the input-tax adjustment limit?

Net sales tax payable = Output tax for the period minus admissible Input tax; input tax that may be deducted is generally capped at 90% of output tax for the period, with the excess carried forward.

Who is required to register under the Sales Tax Act 1990?

Persons making taxable supplies in the course of taxable activity — including manufacturers, importers, wholesalers, distributors and retailers — who meet the prescribed thresholds/conditions must register with the FBR.

What is the due date for filing the monthly sales tax return, and what records must a registered person keep?

The monthly sales tax return is generally filed by the 18th of the following month (payment by the 15th); registered persons must keep records of sales/purchases, tax invoices, debit/credit notes, and import/export documents for six years.