Revised advance income tax rates on imported goods take effect from July 1, 2026, with concessional rates for EV CKD kits and selected pharmaceutical imports.
ISLAMABAD: The Federal Board of Revenue (FBR) has notified the advance income tax rates applicable to imports into Pakistan for Tax Year 2027, effective from July 1, 2026, following the release of the updated Income Tax Ordinance, 2001 incorporating amendments introduced through the Finance Act, 2026.
The revised rates, prescribed under Section 148 of the Income Tax Ordinance, require advance income tax to be collected by the Collector of Customs at the time of import. The applicable rate varies according to the classification of imported goods under the Twelfth Schedule and the status of the importer.
Advance tax rates based on import category
The FBR has retained different advance income tax rates for goods falling under Parts I, II and III of the Twelfth Schedule.
Imports of goods classified under Part I of the Twelfth Schedule will attract 1% advance income tax on the import value plus customs duty, sales tax and federal excise duty.
For goods listed in Part II, the advance tax rate has been fixed at 2%. However, where such goods are imported by commercial importers, the applicable rate increases to 3.5%.
Imports of goods falling under Part III of the Twelfth Schedule will be subject to 5.5% advance income tax, while commercial importers of these goods will pay 6% on the import value plus customs duty, sales tax and federal excise duty.
Concessional rates for selected imports
The updated law also provides reduced advance income tax rates for certain categories of imports.
Manufacturers previously covered under the rescinded SRO 1125(I)/2011, as it stood on June 28, 2019, will continue to pay 1% advance tax on imports of items specified in that notification.
The FBR has also prescribed a concessional 4% advance income tax rate on imports of finished pharmaceutical products that are not manufactured in Pakistan, provided the imports are certified by the Drug Regulatory Authority of Pakistan (DRAP).
Lower tax for electric vehicle CKD kits
To encourage the growth of Pakistan’s electric vehicle industry, the FBR has fixed the advance income tax at 1% on imports of Completely Knocked Down (CKD) kits for electric vehicles.
The concession applies to CKD kits for electric cars and sport utility vehicles (SUVs) with battery capacities of up to 50 kWh, as well as CKD kits for electric light commercial vehicles (LCVs) with battery capacities of up to 150 kWh.
The reduced rate is intended to support local assembly of electric vehicles by lowering the tax burden on eligible imports.
Effective from Tax Year 2027
The notified advance income tax rates form part of the updated Income Tax Ordinance, 2001, as amended through the Finance Act, 2026, and are applicable for Tax Year 2027 beginning July 1, 2026.
The FBR has advised importers, customs authorities and tax practitioners to apply the prescribed rates under Section 148 when calculating advance income tax on imported goods, taking into account the relevant classification under the Twelfth Schedule and the importer’s status.