Getting a tax exemption certificate in Pakistan can significantly reduce your import costs—especially if you’re setting up or expanding an industrial undertaking. Under Section 159 of the Income Tax Ordinance, 2001 (updated for Tax Year 2026), eligible taxpayers can apply for exemption from collection of tax at source on imports.
This guide walks you through eligibility, documents, application format, and step-by-step procedure, plus FAQs to make things easy.
📌 What Is a Tax Exemption Certificate?
A Tax Exemption Certificate allows eligible taxpayers to import specific goods without deduction of income tax at source by Customs. The certificate is issued by the Commissioner Inland Revenue (CIR) and addressed to the Collector of Customs.
It is mainly used for:
• Industrial undertakings
• Hotels
• Manufacturing and expansion projects
✅ Eligibility Criteria (Tax Year 2026)
You may apply if:
✔ You are a Company, AOP, or Individual Proprietor
✔ You own an industrial undertaking (including hotel)
✔ Imported goods include:
• Plant & machinery
• Fixtures and fittings
• Allied equipment
✔ Imports are for:
• Setting up a new industrial undertaking, or
• Installation/utilization in an existing industrial undertaking
📜 Legal basis:
• Section 159 – Income Tax Ordinance, 2001
• Clause (v) of Para 1 of S.R.O. 947(I)/2008 dated 05-09-2008
🧭 Step-by-Step: How to Apply for a Tax Exemption Certificate
Step 1: Prepare the Prescribed Application
The application must be submitted under Income Tax Rules, 2002 to your respective Commissioner Inland Revenue.
Step 2: Draft the Application (Prescribed Format)
Use the following format carefully:
📄 Application Format – Tax Exemption Certificate (2026)
To,
The Commissioner of Inland Revenue
________________________________________
I, _______________________________
Principal Officer / Member of AOP / Individual Proprietor of
M/s. _______________________________
hereby declare that I am entitled to import goods without collection of tax at source on the following basis, in accordance with the provisions of clause (v) of paragraph 1 of Notification No. S.R.O. 947(I)/2008 dated 05-09-2008 for the tax year ___________:
(i) The goods imported consist of plant, machinery, fixtures, fittings, or allied equipment for the purpose of setting up an industrial undertaking (including hotel) owned by me.
OR
(ii) The goods imported consist of plant, machinery, fixtures, fittings, or allied equipment for installation/utilization in an existing industrial undertaking (including hotel) owned by me.
I therefore request that a certificate may kindly be issued to the Collector of Customs _____________________ not to collect tax at source on the value of imports.
Necessary details are as under:
(a) Copy of Memorandum & Articles of Association (in case of Company/AOP)
Registration No.: ___________________
(b) NTN: ___________________
(c) Location address of industrial undertaking:
________________________________________
(d) Nature of business:
________________________________________
(e) Copy of balance sheet for latest tax year: ______
(f) Description of goods imported:
________________________________________
(g) L.C. No.: ___________________
(h) Value of goods: ___________________
(i) Port of clearance: ___________________
I hereby declare that the information provided above is true and correct to the best of my knowledge and belief.
Signature: ___________________
Name: _______________________
Address: ____________________
Dated: ______________________
________________________________________
Step 3: Attach Required Documents
📎 Document Checklist (Interactive Quick View)
✔ NTN Certificate
✔ Memorandum & Articles (Company/AOP only)
✔ Latest audited balance sheet
✔ Import documents / LC copy
✔ Description & value of goods
✔ Business address proof
Step 4: Submit to Commissioner Inland Revenue
Submit the application physically or through IRIS (if required by your RTO/LTU) to the concerned CIR.
Step 5: Issuance to Collector of Customs
Once approved, the tax exemption certificate is issued directly to the concerned Collector of Customs, allowing import without tax deduction.
⏳ How Long Does It Take?
⏱ Typically 7–14 working days, subject to:
• Completeness of documents
• Verification by CIR
• Nature/value of imports
❓ Frequently Asked Questions (FAQs)
🔹 Is the exemption automatic?
No. You must apply and receive approval from the Commissioner Inland Revenue.
🔹 Is this certificate valid forever?
No. It is issued for a specific tax year and import transaction.
🔹 Can traders apply?
❌ No. This exemption is only for industrial undertakings, not commercial traders.
🔹 Does this apply to sales tax?
No. This guide covers income tax exemption at import stage only, not sales tax or customs duty.
⚠️ Disclaimer: This article is published for general informational purposes only. It does not constitute legal, tax, or professional advice. Tax laws, rules, and procedures are subject to change, and their application may vary based on individual circumstances. Readers are advised to consult the Federal Board of Revenue (FBR), relevant notifications, or a qualified tax professional before taking any action based on the information provided. The publisher shall not be liable for any loss or damage arising from reliance on this content.