Pakistan: Income tax, sales tax, and customs developments

The KPMG member firm in Pakistan has prepared a May 2026 report that focuses on recent developments in income tax and customs, including clarifications on withholding tax, the withdrawal of concessions on sugar imports, and new temporary storage facilities for transshipment cargo.

• Withholding tax clarification for builders and developers: The Federal Board of Revenue (FBR) on April 15, 2026, clarified that builders and developers who have discharged their tax liability under Section 7F may seek an exemption from advance withholding tax on the sale of immovable property. The guidance provides for a case-by-case application process and automatic issuance of an exemption certificate if the Commissioner does not act on the application within seven working days.
• Withdrawal of tax concessions on sugar imports: The federal government on April 22, 2026, withdrew the concessional rates for income tax and sales tax, as well as the exemption from minimum value addition sales tax, on imported sugar. This change was made because the time period for these concessions, which was last extended to February 28, 2026, has expired.
• Withholding tax exemption for mutual funds and pension schemes: In a clarification dated March 27, 2026, the FBR confirmed that mutual funds and pension schemes are entitled to an exemption from the withholding tax specified under section 151A of the Ordinance. However, an exemption certificate from the Commissioner is required.
• Additional storage for transshipment cargo: The FBR has authorized additional temporary storage facilities at Karachi Port and Port Qasim for international transshipment cargo. This measure responds to logistical disruptions in the Gulf region by increasing storage capacity to handle diverted cargo flows.