Revised turnover-based minimum tax rates take effect from July 1, 2026, with concessional rates retained for selected industries and businesses.
ISLAMABAD: The Federal Board of Revenue (FBR) has notified the minimum tax rates in Pakistan applicable to various sectors and businesses 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 113 of the Income Tax Ordinance, require businesses to pay minimum tax based on their annual turnover, with different rates applying to specified industries while the standard rate remains unchanged for all other businesses.
Concessional 0.75% rate for gas utilities, PIA and poultry sector
The FBR has retained a concessional minimum tax rate of 0.75% of annual turnover for selected sectors.
The reduced rate applies to Sui Southern Gas Company Limited (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) where annual turnover exceeds Rs1 billion. It also applies to Pakistan International Airlines Corporation (PIA).
In addition, businesses operating in the poultry industry—including poultry breeding, broiler production, egg production and poultry feed manufacturing—will continue to pay minimum tax at 0.75% of annual turnover.
Oil sector and motorcycle dealers to pay 0.5%
The updated law prescribes a 0.5% minimum tax rate for oil refineries, oil marketing companies (OMCs) and motorcycle dealers registered under the Sales Tax Act, 1990.
These sectors will continue to benefit from a lower turnover-based tax rate compared with the general minimum tax applicable to other businesses.
Reduced 0.25% rate for specified businesses
The FBR has also maintained a 0.25% minimum tax rate for a number of specified sectors.
The reduced rate applies to petroleum agents and distributors registered under the Sales Tax Act, 1990, rice mills and rice dealers, Tier-1 retailers of fast-moving consumer goods (FMCGs) integrated with the FBR’s real-time sales reporting system, businesses generating turnover through e-commerce platforms, including operators of online marketplaces as defined under Section 2(38B) of the Income Tax Ordinance, persons engaged in the sale and purchase of used vehicles, and flour mills.
The concession is intended to provide a lower turnover-based tax burden for these sectors while encouraging compliance under the documented economy.
General minimum tax remains at 1.25%
For all businesses and persons not covered under the concessional categories, the FBR has retained the general minimum tax rate at 1.25% of annual turnover.
The standard rate will continue to apply across sectors that do not qualify for the reduced rates specified under Section 113 of the Income Tax Ordinance.
Applicable from Tax Year 2027
The notified minimum 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 taxpayers to determine their minimum tax liability by applying the relevant turnover-based rate according to the nature of their business or industry classification while preparing their tax returns and fulfilling their obligations for Tax Year 2027.