Pakistan to collect advance tax from retailers in 42 cities

Pakistan has decided to expand a fixed tax regime for retailers to 42 cities from six previously.

According to a Statutory Regulatory Order issued by Pakistan’s Federal Board of Revenue (FBR) on July 22, retailers will now pay between Rs100 and Rs20,000 per month effective July 1 depending on the fair market valuation of their shops.

Any person owning a shop of 50 square-feet or less in a commercial area, or owning a makeshift shop, ‘khoka’ or kiosk, or small shop measuring not more than 5×3 square feet, will have to pay Rs1,200 per year.

However, the fixed tax regime is not applicable to shopkeepers with a shop size of 100 square feet or less in a residential area, or those whose income is exempt under any provisions of the Income Tax Ordinance.

It is also not applicable to retailers or shopkeepers who filed their income tax returns for the tax year 2023 before March 30, 2024, and whose advance tax liability exceeds the computed advance tax under the Special Procedure for the tax year 2025 and onwards.

Initially, the FBR’s Tajir Dost (Special) Procedure, 2024 was applicable to retailers in Karachi, Lahore, Islamabad, Rawalpindi, Quetta, and Peshawar.

According to the latest SRO, it is now applicable to Abbottabad, Attock, Bahwalnagar, Bahawalpur, Chakwal, Dera Ismail Khan, Dera Ghazi Khan, Faisalabad, Ghotki, Gujrat, Gujranwala, Gwadar, Hafiz Abad, Haripur, Hyderabad, Islamabad, Jhang, Jhelum, Karachi, Kasur, Khushab, Lahore, Larkana, Lasbela, Lodhran, Mandi Bahauddin, Mansehra, Mardan, Mirpurkhas, Multan, Nankana, Narowal, Peshawar, Quetta, Rahim Yar Khan, Rawalpindi, Sahiwal, Sargodha, Sheikhupura, Sialkot, Sukkur, and Toba Tek Singh.

Pakistan has committed to expanding the tax net and increasing tax revenue by 1.5% of GDP in the current fiscal year under an agreement with the International Monetary Fund.