Karachi, December 23, 2024 – The Federal Board of Revenue (FBR) has reported an impressive 95% increase in tax collection from dividend payouts during the first five months of the current fiscal year 2024-25. This significant surge reflects the FBR’s enhanced efficiency and the impact of recent tax policy changes.
According to data shared by the Large Taxpayers Office (LTO) Karachi, tax revenue under the category of dividend payouts surged to Rs 28 billion between July and November 2024, compared to Rs 14.25 billion collected during the same period last year.
FBR officials have attributed this remarkable growth to the amendments introduced through the Finance Act, 2024, which revised tax rates on dividends across various sectors. The updated rates under Section 150 of the Income Tax Ordinance are as follows:
• 7.5% for dividends paid by Independent Power Producers (IPPs) where the payment is a pass-through item under agreements with the Central Power Purchasing Agency (CPPA-G).
• 15% for mutual funds, Real Estate Investment Trusts (REITs), and other entities, except for specific exceptions. Notably, dividends from mutual funds deriving over 50% of income from profit on debt are taxed at a higher rate of 25%.
• 0% for dividends received by a REIT scheme from a Special Purpose Vehicle (SPV). However, other entities receiving dividends from SPVs are taxed at 35%.
• 25% for dividends received from companies where no tax is payable due to exemptions, carried-forward losses, or tax credits.
The FBR emphasized that these changes are part of its broader strategy to strengthen revenue generation and promote compliance. By implementing differentiated tax rates, the FBR aims to align the tax regime with economic realities and encourage equitable tax contributions.
This growth in tax collection is a testament to the FBR’s efforts to enhance transparency and efficiency in tax administration. Officials believe the upward trend will continue as the agency refines its processes and enforces tax policies more effectively.
The FBR’s achievement underscores its critical role in Pakistan’s economic framework, with rising collections helping to address fiscal challenges and support developmental initiatives. The revenue boost from dividends is expected to contribute significantly to the country’s overall tax base.