Withholding tax rate card: Tax Year 2027 working reference

Withholding is where most compliance failures start, because the person who gets it wrong is rarely the person who owes the tax. Deduct too little and the withholding agent carries the shortfall, the default surcharge and the penalty — not the supplier. This is the complete Tax Year 2027 card, section by section, with the active and inactive columns and the character of each deduction.

Rates are for 1 July 2026 to 30 June 2027, taken from the First Schedule to the Income Tax Ordinance 2001 as it stands for TY2027.

The five checks before any deduction

A rate card is a navigation aid, not the law. Five things decide the number, and skipping any of them is how a wrong rate gets into a payment run:

1. The section. A single invoice can engage 153(1)(a), 153(1)(b) or 153(1)(c) with materially different rates.
2. The recipient type. Company, AOP, individual, or permanent establishment of a non-resident — each has its own row, and the PE rows differ from the resident rows.
3. ATL status on the transaction date. Not today's status. Not last quarter's certificate.
4. The nature of the payment. Goods versus services versus contract; toll versus non-toll; specified service versus professional service versus "other".
5. The character of the deduction. Adjustable, minimum or final — this decides whether the money is recoverable.

The ATL multiplier, and its one exception

Persons whose names do not appear on the Active Taxpayers List are subject to 100% increased withholding rates as prescribed in the First Schedule — except for the specified exclusions in the Tenth Schedule. That is why almost every row below is written as a pair: active rate, then inactive rate at double.

Three areas break the simple doubling and are worth memorising because they are where the largest sums sit:

On a Rs 150,000,000 property purchase the active buyer pays Rs 1,875,000 and the inactive buyer Rs 27,750,000 — a Rs 25,875,000 difference on one transaction. Filing a return is the cheapest tax planning available in Pakistan.

Salary and directors — section 149

All adjustable. Two further rows under the same section are routinely missed:

The director fee row catches companies that run board fees through the ordinary payroll slabs. It is a flat 20% of gross, not a slab computation, and it is deducted by the payer of the fee. A Rs 2,000,000 annual board fee attracts Rs 400,000 regardless of the director's other income.

Section 153(1)(a) — supply of goods

The toll manufacturing distinction is the expensive one. Where the principal supplies the material and the manufacturer only converts it, the rate roughly doubles: 9% instead of 5% for a company, 11% instead of 5.5% for a non-company. On a Rs 20,000,000 conversion charge that is Rs 1,800,000 against Rs 1,000,000 — and if the supplier is inactive, 18% or Rs 3,600,000.

The 0.25% row is worth engineering towards. It requires appearance on the ATL for income tax and sales tax, and for Tier-1 retailers, integration and configuration with FBR for real-time reporting of sales and receipts. A distributor moving from the 5% general row to 0.25% on Rs 500,000,000 of supplies moves from Rs 25,000,000 withheld to Rs 1,250,000.

Section 153(1)(b) — services

This is the most misquoted table in Pakistani tax practice, because there are five distinct service rates and the published secondary sources disagree. The categories are:

The specified services at 7% / 14% are: transport; freight forwarding; air cargo; courier; manpower outsourcing; hotel; security guard; software development; tracking; advertising other than print or electronic media; share registrar; engineering including architectural; warehousing; services rendered by non-banking finance companies; data services under a PTA licence; telecommunication infrastructure (tower); car rental; building maintenance; services rendered by Pakistan Stock Exchange Limited and Pakistan Mercantile Exchange Limited; inspection; certification; testing and training; oilfield; telecommunication; collateral management; travel and tour; REIT management; and services rendered by National Clearing Company of Pakistan Limited.

The classification decision worth the most money is 7% versus 14% versus 15%. A service that is on the specified list attracts 7%. A service that is not on it falls into "other services" at 14% — double. And an independent professional attracts 15%.

Worked: one invoice, three possible rates

Take a Rs 5,000,000 annual engagement with an active recipient.

The same technical work spans Rs 200,000 to Rs 750,000 depending on how the engagement is characterised and who contracts. Note the interaction: "software development services" sits in the specified list at 7%, "IT services and IT-enabled services as defined in section 2" attracts 4%, and a software engineer or developer working independently is a professional at 15%. Whether your vendor is a company delivering ITeS or an individual professional is therefore a rate question, not just a contracting preference.

Because these are minimum tax in most cases, the recipient cannot recover an excess by showing a loss. That is what makes misclassification permanent rather than merely a timing cost.

Section 153(1)(c) — execution of contracts

The goods-versus-contract line matters because 5% and 7.5% are different numbers on the same money. A supply of manufactured items against a purchase order is generally goods; a composite obligation to build, install and commission is generally a contract. Where an agreement covers both, split the invoice by reference to what is actually being delivered rather than applying one rate to the whole.

Section 153(2A) — e-commerce

Adjustable or final subject to conditions. Note that cash on delivery carries double the digital rate, so the payment method a marketplace seller offers now has a direct tax cost.

Imports — section 148

Generally minimum tax — but not minimum in the hands of an industrial undertaking importing for its own use, where it is adjustable. That distinction decides whether an importer can recover an excess, and it turns on use rather than on the goods.

Dividends — section 150

All final tax. The 35 / 70 SPV row and the 29 / 58 corporate debt-fund row are the two that most often surprise investors, and neither is recoverable.

Profit on debt — sections 151, 151A and sukuk

For individuals and AOPs the deduction is final — or minimum where profit exceeds Rs 5 million. For companies it is adjustable. The Rs 5 million line is the one to watch: it changes the character of the tax, not the rate.

Life insurance and takaful pay-outs — section 151B

A charge many policyholders have not yet encountered. It applies to payments by life insurance companies and takaful operators to an individual under a life insurance policy, family takaful certificate, plan or arrangement:

Where payment is made to a non-resident person, the rate remains 10% or 15% as the case may be. The structure is a holding-period test: a pay-out in year one costs 15%, in years two and three 10%, and the table is silent beyond four years. Anyone considering surrendering a policy early should compute this before assuming the proceeds are tax-free.

Payments to non-residents — section 152

The offshore digital services row carries a carve-out worth knowing: the 15% does not apply where the recipient is also liable under the Digital Proceeds Levy Act, 2025 and that levy has been collected. Deducting both is a real risk for finance teams paying overseas platforms.

The 1.4% cohesive-business rate is arithmetic, not a concession: it is 20% of 7.

Payments to a permanent establishment — section 152(2A)

Compare the specified-services rows: a resident provider attracts 7% under 153(1)(b); the permanent establishment of a non-resident attracts 8% under 152(2A). One percentage point, entirely determined by the counterparty's residence status, and easily missed by a payment run keyed only to service type.

Exports — sections 154, 154A and 154B

Because export withholding is minimum tax, a profitable exporter computes normal taxable income and pays the higher figure. On Rs 200,000,000 of realised proceeds the withholding is Rs 2,500,000; an exporter whose normal computation yields Rs 6,000,000 pays Rs 6,000,000. A loss-making exporter still bears the Rs 2,500,000.

The gap between 0.25% and 1% on service exports is the entire value of PSEB registration. On Rs 100,000,000 of IT export proceeds that is Rs 250,000 against Rs 1,000,000 — a Rs 750,000 annual difference, and it is a registration question rather than a structuring one.

Section 154B is deducted by banking and non-banking financial institutions on revenue received from social media platforms, so creators do not have the option of treating it as undeclared income.

Rent of immovable property — section 155

Annual rent includes rent of furniture and fixtures and amounts for services relating to the property. Splitting a tenancy into "rent" plus a separate "service charge" does not reduce the base.

Property transactions — sections 236C and 236K

Note the asymmetry: the active buyer rate is flat at 1.25% across all values, while the inactive rate escalates with value from 10.5% to 18.5%. This is the sharpest ATL penalty in the Ordinance, and it is banded specifically so that larger transactions carry more of it.

Worked: a Rs 80,000,000 transaction

Both collections are advance tax, not the tax on the gain. Compute the capital-gain position separately from acquisition date, cost and holding period.

Motor vehicles — sections 231B and 234

Where engine capacity is not applicable and vehicle value is Rs 5 million or more, registration tax is 3% of import value increased by customs duty, sales tax and federal excise duty (imported) or invoice value (locally manufactured), and the transfer amount is Rs 20,000. Transfer tax reduces by 10% each year from first registration in Pakistan.

Tax collectible is increased by 200% for persons not on the ATL — a tripling, not a doubling. A 1,800cc car at a Rs 8,000,000 value costs an active buyer Rs 400,000 at 5% and an inactive buyer Rs 1,200,000.

That last block is an anti-flipping measure: selling a new car before registering it carries a fixed charge that reaches Rs 1,200,000 for an inactive person on a large engine.

Utilities, telecom and everyday collections

The 75% internet rate under section 114B is not a typo. It applies to persons named in an FBR general order for failing to file, and it is designed to be unbearable rather than merely expensive.

Commission, brokerage and auctions

Advance tax along the supply chain — 236G and 236H

The non-fertilizer 236G spread is the widest proportionate gap in the card: 0.1% active against 2% inactive is twentyfold. A manufacturer selling Rs 200,000,000 to an inactive distributor collects Rs 4,000,000 instead of Rs 200,000.

Reduced rates worth claiming

Part II of the Second Schedule reduces several rates where conditions are met. The ones that come up most:

Exemptions worth knowing before you deduct

Part IV of the Second Schedule switches withholding off entirely in defined cases. Deducting where an exemption applies is as much an error as under-deducting, and it is harder to unwind because the money has left.

• Clause 115 — section 153: traders being individuals with turnover up to Rs 200 million.
• Clause 12 — 153(1)(a): agricultural produce purchased directly from the grower, on production of the prescribed forms and certificates.
• Clause 47A — section 153: a resident person supplying goods that the same person imported and on which tax was paid under section 148.
• Clause 46AA (the erstwhile SRO 586(I)/91 list) — recipients including a provincial government; a local authority; residents of Azad Kashmir executing contracts only in AJK with the requisite certificate; companies supplying electricity, gas or crude oil; hotels and restaurants receiving cash for accommodation or food; shipping companies and air carriers on passenger tickets and cargo charges; individuals not registered under section 181 supplying sand, bricks, grit, gravel, crushed stone, soft mud or clay; and artisans, plumbers, electricians, surface finishers, carpenters, painters or daily wagers providing services to the construction sector, subject to recording name, CNIC and address and paying the individual directly.
• Clause 11B — section 150: inter-corporate dividend within group companies entitled to group taxation under section 59AA, where the group return for the latest completed tax year has been filed.
• Clause 43F — section 153: a start-up as defined in section 2(62A).
• Clause 45 — 153(1): manufacturer-cum-exporter, subject to conditions.
• Clause 9AA — 153(1)(a): ship breakers for ships imported after 1 July 2014.

The construction-sector row in clause 46AA is the one most often ignored on site: payments to an unregistered plumber or electrician need the name, CNIC and address recorded and payment made directly to that individual. Get the documentation and no deduction arises; skip it and the exemption is unavailable.

Adjustable, minimum or final — why it decides everything

This is the column most rate cards omit and it is worth more than the rate itself. A Rs 5,000,000 deduction that is adjustable is a cash-flow event; the same amount as minimum tax on a loss-making business is a permanent cost. Under section 153 most service rows are minimum tax, while goods rows can be adjustable for a manufacturer or listed company — so the same 5% means different things to different suppliers.

Withholding agent obligations

1. Verify ATL status on the transaction date and keep the evidence. A stale check is the withholding agent's exposure, not the supplier's.
2. Apply the right section and row, splitting mixed invoices between goods, services and contracts rather than applying one rate.
3. Deposit the tax deducted by the prescribed date in the following month via a PSID generated in IRIS. Failure to deposit tax actually deducted is an offence that can reach company officers personally.
4. File the monthly withholding statement through IRIS on its own cycle.
5. Issue withholding certificates on request; suppliers need them to claim credit in their returns.
6. Hold exemption and lower-rate certificates on file before applying a reduced rate, not after.

Confirm current deposit and statement dates on the FBR withholding pages before setting your compliance calendar — the dates are procedural and move more often than the rates.

Ten recurring errors

1. Applying 6% to specified services. The rate is 7 / 14; the widely circulated 6% figure is out of date.
2. Treating an independent professional as a specified service — 15% not 7%.
3. Missing the toll-manufacturing row and deducting 5% instead of 9% or 11%.
4. Using the resident 7% for the permanent establishment of a non-resident, where 152(2A) gives 8%.
5. Running director fees through the salary slabs instead of the flat 20%.
6. Applying a single 236K rate. The inactive rate is banded 10.5 / 14.5 / 18.5 by fair market value.
7. Deducting 15% on offshore digital services where the Digital Proceeds Levy has already been collected.
8. Deducting on payments covered by clause 46AA or clause 115 because the file was never checked.
9. Treating minimum tax as recoverable in a loss year.
10. Relying on an ATL check from a previous month.

Related: section 153 in depth, filer versus non-filer rates, what the Finance Act 2026 changed, section 236K and checking ATL status.

Sources

This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.

• Withholding Tax Rate Cards (FBR)
• Tax Year 2027 withholding rate summary (KPMG Pakistan)
• Finance Act 2026 (FBR)
• Income Tax Basics (FBR)

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