Govt reduced the Super Tax and Corporate Tax. Finance Minister, Miftah Ismail unveiled PKR 5.246 trillion “tax-free” budget for the fiscal year 2018-19 in the National Assembly on Friday. In which the government has announced regular decrease in corporate tax rate to 25 % by 2023 and plans to eradicating super tax in next 3 to 4 years.
Super tax reduced by 1%
Talking about the tax, government has decreased the super tax by 1% per year from financial year 2018-19 for both banking and non-banking companies.
Dr. Miftah Ismail said during his budget speech for fiscal year 2018/2019 that Super-tax was imposed in 2015 for treatment of internally displaced persons. It was continual in 2016 & 2017. Many organizations have insisted its eradication to cut the effective tax rate.
On the other hand, currently it is being charged at the rate of 4% for banking companies & 3% for non-banking companies who have income more than Rs. 500 million. Hence, in next three to four years, public will get rid of this tax.
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Corporate Tax reduced to 25%
In agreement to the policy to reduce tax rates for individuals and AOPs, the Government has planned to equally reduce corporate tax rates from 30% in tax year 2018 to 25% in tax year 2023.
As a result, the corporate tax rate will be 29% in tax year 2019 and will be reduced by 1% each year up to tax year 2023.
Reduction in Tax Rate of Undistributed Profits
Different professional bodies have demanded to give relaxation on the requirements to smooth the progress of businesses in maintaining earnings for investments. For that reason, it is proposed that tax may be reduced from 7.5% to 5% and the condition of distributing 40% after-tax profits may be reduced to 20%.
Tax on undistributed profits is charged at the rate of 7.5% on accounting profit if at least 40% of after-tax profits are not distributed within 6 months of the end of the year.
Reduction in Tax Rate on REIT Dividends
Real Estate investment is getting boost in recent times. So, in order to support Real Estate Investment Trust, the rate of tax on dividends given to the unit holders by REIT is proposed to be decreased from 12.5% to 7.5%.