Pakistan: Direct and indirect tax measures in Finance Bill, 2026

The Finance Bill, 2026, which was presented to the National Assembly on June 12, 2026, includes various proposed direct and indirect tax measures, including:

Income tax

• Reduced withholding tax on both sale and purchase of immovable property
• Reduced withholding tax (from 5% to 0.5%) on foreign remittances via credit/debit cards
• Repeal of tax on deemed income from capital assets (Section 7E)
• New 5% withholding tax on revenue from social media platforms
• Withdrawal of reduced minimum tax rate for distributors of pharmaceuticals, fast-moving consumer goods (FMCGs), and cigarettes, making them subject to the standard 1.25% rate
• 10% tax credit for businesses that integrate with the tax authority's real-time reporting systems
• Extension to tax year 2029 of reduced 0.25% tax rate on export of information technology (IT) and IT-enabled services

Sales tax

• Electronic system for the adjustment of debit and credit notes
• Expanded powers for tax authorities to suspend or blacklist businesses that fail to integrate with the e-invoicing system
• Extension until June 30, 2027, of reduced 1% sales tax rate for locally assembled electric vehicles

Federal excise duty

• New special excise duty of 40-41% on imported luxury vehicles with engine capacities over 2000cc
• Reduction in federal excise duty on acetate tow (a raw material for cigarette filters) and e-liquids for electronic cigarettes, and on international air travel tickets

Customs duties

• Reduction of customs duties on a wide range of industrial inputs and tariff lines (e.g., from 20% to 10% on specialized construction vehicles)
• Exemption from customs duties for critical cancer-related active pharmaceutical ingredients and agricultural machinery

Read a June 2026 report prepared by the KPMG member firm in Pakistan