Companies to pay 25% tax, while individuals and AOPs will face rates of 10% or 12.5% depending on investment returns

ISLAMABAD: The Federal Board of Revenue (FBR) has notified the income tax rates applicable to returns on investments in Sukuk issued through Special Purpose Vehicles (SPVs) for Tax Year 2027, effective from July 1, 2026.

The tax rates have been prescribed under Section 5AA of the updated Income Tax Ordinance, 2001, incorporating amendments introduced through the Finance Act, 2026.

Tax rates on Sukuk investment returns

Under the updated provisions, different tax rates will apply depending on the category of the Sukuk holder and the amount of return on investment received during the tax year.

The notified rates are as follows:

Sukuk Holder	Tax Rate
Company	25%
Individual or Association of Persons (AOP) with return on investment exceeding Rs1 million	12.5%
Individual or Association of Persons (AOP) with return on investment of less than Rs1 million	10%

Companies subject to 25% tax

The FBR has prescribed a 25% income tax on returns received by companies from Sukuk investments issued through a Special Purpose Vehicle.

The rate will apply to corporate investors receiving income from eligible Sukuk structures under the provisions of Section 5AA of the Income Tax Ordinance.

Lower tax rates for individuals and AOPs

Individuals and Associations of Persons (AOPs) will benefit from lower tax rates based on the amount of investment return received during the tax year.

Where annual returns on Sukuk investments exceed Rs1 million, the applicable tax rate will be 12.5%.

However, if the annual return is less than Rs1 million, the income will be taxed at a concessional rate of 10%.

Applicable from Tax Year 2027

The notified rates form part of the updated Income Tax Ordinance, 2001, as amended by the Finance Act, 2026, and are applicable from July 1, 2026, for Tax Year 2027.

The FBR has advised withholding agents, financial institutions and taxpayers to apply the prescribed tax rates when calculating tax on returns from Sukuk investments received through Special Purpose Vehicles, in accordance with Section 5AA of the Income Tax Ordinance.

The notification provides clarity for corporate and individual investors in Sukuk, ensuring consistent taxation of investment returns under Pakistan’s updated tax framework for Tax Year 2027.