Pakistan Reduces Tax Liability for Women Entrepreneurs

Pakistan Reduces Tax Liability for Women Entrepreneurs

Karachi, January 16, 2024 – In a progressive move, Pakistan has taken a significant step to empower women entrepreneurs by reducing tax liability under the category of income from business.

The Federal Board of Revenue (FBR), the country’s premier tax agency, has recently issued amendments to the Income Tax Ordinance of 2001, aiming to foster a more inclusive and supportive business environment for women.

According to the updated tax regulations, women entrepreneurs will benefit from a substantial reduction in their tax liability on profits and gains derived from business activities chargeable under the head “Income from Business.” The FBR has implemented a 25 percent reduction in the tax payable by women-owned enterprises, reflecting a commitment to encouraging and facilitating the growth of businesses led by women.

The amended Income Tax Ordinance introduces a clear definition for “woman enterprise” under the new tax provision. According to the clause, a woman enterprise is defined as a startup established on or after the first day of July 2021. It can operate as a sole proprietorship concern owned by a woman, an Association of Persons (AOP) with all members being women, or a company where 100 percent of the shareholding is held or owned by women.

However, the government has taken precautionary measures to ensure the integrity of the program. The benefit of the reduced tax liability will not be extended to businesses formed through the transfer, reconstitution, reconstruction, or splitting up of an existing business. This safeguard aims to prevent misuse of the incentive by businesses attempting to exploit the provision through restructuring without genuine expansion or new establishment.

This initiative aligns with broader efforts by the Pakistani government to promote gender inclusivity and support women in their entrepreneurial endeavors. By reducing the financial burden on women-led businesses, the government hopes to encourage more women to enter the business landscape, foster innovation, and contribute to economic growth.

The move is also expected to address gender disparities in the entrepreneurial sector, promoting equal opportunities and creating a level playing field for women in business. The FBR’s decision recognizes the potential of women entrepreneurs to drive economic development and innovation, and this tax incentive serves as a tangible acknowledgment of their contribution to the nation’s business landscape.

Pakistan’s reduction of tax liability for women entrepreneurs marks a positive and forward-thinking step towards creating a more inclusive and equitable business environment. By providing financial incentives, the government is actively supporting women in their entrepreneurial pursuits, contributing to the overall growth and diversity of the country’s business sector.