INDIVIDUAL TAXATION

Nonresident individuals are taxed only on their Pakistani-sourced income. Married couples are taxed separately, joint taxation is not allowed in Pakistan.

The tax year is the 12-month period ending on 30 June and is denoted by the calendar year in which it ends. The tax year 2012 is from 01 July 2011 up to 30 June 2012. The tax year 2013 is from O1 July 2012 up to 30 June 2013.

INCOME TAX

Rental Income Tax

As of 2007, income from property is subject to a presumptive tax regime. Income from leasing property is subject to a 5% final withholding tax levied on the gross rent.

Individuals earning rental income not exceeding PKR150,000 (US$1,581) are exempted from taxation if they have no other sources of income.

CAPITAL GAINS
Capital gains realized by individuals from selling real property are not taxed in Pakistan unless sales of real property are part of the individual’s business.

Capital gains in connection with a taxpayer’s business activities are considered as business income and taxed accordingly.

PROPERTY TAX

Property Tax

Property tax is a provincial tax levied on the value of property. It is generally levied at a flat rate of 10% but the tax rates vary, depending on the province.

Property tax is levied at progressive rates in the Punjab province.

In the province of Sindh, property tax is levied at a flat rate of 20% on the annual rental value of the land and building.

Capital Value Tax

Individuals who purchase real property in urban areas or acquire the right to use the real property for more than 20 years are liable to pay capital value tax. The tax is levied at 4% on the property’s recorded value. If no property value is recorded, the tax is levied at PKR50 (US$0.53) per square yard of the property.