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Franchise business models have seen huge growth in the market of Pakistan. Entrepreneurs choose this model because of the brand value and support. However, they must face a complex legal and tax framework. Taxation of franchises in Pakistan involves several different types of levies. Federal and provincial governments both collect taxes from these businesses. Business owners must understand these rules to avoid any legal issues. This guide explains the varying rates and requirements across the nation. Proper tax planning is essential for the success of any new venture. 

Federal Obligations and Taxes on Corporate Income 

Every franchise must register with the Federal Board of Revenue first. This registration is mandatory for all businesses operating within the country. The most significant federal tax is the tax on annual profit. Taxes on corporate income are a major part of the federal budget. The standard rate for a company is twenty-nine percent in 2026. This rate applies to net profit after deducting all valid expenses. Small companies may qualify for a lower tax rate of twenty percent. You must maintain accurate account books to justify your expenses. 

The federal board also requires the payment of a minimum tax. This tax is based on the turnover of the business during the year. If the normal tax is lower than this amount, you pay the minimum. This ensures that every active business contributes to national revenue. Filing the annual income tax return is a mandatory requirement. You must submit this return by the end of the tax year. Our firm helps you calculate the exact amount of profit and tax. We ensure that you take advantage of all available legal deductions. 

Tax on Royalty and Technical Fees 

Franchise agreements usually involve the payment of a royalty fee. This fee is paid for the use of the brand and systems. If the franchisor is a resident, the tax rules are different. If the franchisor lives outside Pakistan a withholding tax applies. This is known as a tax on royalty or technical fees. The standard rate for this withholding tax is fifteen percent. This tax is usually a final discharge of tax liability. You must deduct this amount before sending the payment abroad. 

 

Understanding Sales Tax on Franchise Services 

Provincial governments have the right to tax services within their borders. Sales Tax on franchise services is a key revenue source for provinces. The rate is not the same across all parts of Pakistan. You must pay tax to the authority of that province. This depends on where the service is provided or consumed. Each province has its own laws and registration procedures for businesses. Failure to register with the provincial body can lead to heavy penalties. It can also result in the sealing of business premises. 

Authority Name	Province or Territory	Standard Tax Rate
Punjab Revenue Authority	Province of Punjab	Sixteen Percent
Sindh Revenue Board	Province of Sindh	Fifteen Percent
Khyber Pakhtunkhwa Revenue Authority	Khyber Pakhtunkhwa	Fifteen Percent
Balochistan Revenue Authority	Province of Balochistan	Fifteen Percent
Federal Board of Revenue	Islamabad Capital Territory	Fifteen Percent

 

Punjab Revenue Authority Rules 

The Punjab Revenue Authority manages the tax collection in the Punjab province. The standard rate for franchise services in this region is sixteen percent. You must collect this tax from the customer or the service recipient. Then you must deposit it into the provincial treasury every month. The deadline for this payment is usually the fifteenth day of the month. You also must file a monthly sales tax return. This return shows the details of all the services you provided. Our team at tax solutions Pakistan manages these monthly filings for you. 

Sindh Revenue Board Regulations 

In Sindh, the Sindh Revenue Board is the governing body for services. The tax rate in Sindh has increased to fifteen percent recently. This rate applies to most services, including those related to franchises. The board is very active in monitoring the compliance of businesses. You must issue a proper tax invoice for every transaction. The invoice must clearly show the amount of tax collected. Sindh also has specific rules for the registration of the service providers. We help you navigate these rules to keep your business safe. 

 

Tax on Consultancy Services in Pakistan 

Many franchise agreements include a component for training and expert advice. This is often treated as a separate category of service. The tax on consultancy services in Pakistan is an important consideration. The provincial authorities’ tax these services at the standard rates mentioned above. However, the federal government also requires a withholding tax on payments. For residents, the withholding tax on services is now fifteen percent. This applies when a company pays for any consultancy or professional help. 

It is important to classify the services correctly in your contract. Incorrect classification can lead to a higher tax burden or double taxation. Technical services and consultancy services are often grouped together in the law. However, some specific sectors may have reduced rates of tax. You should consult with a professional before signing any franchise agreement. We analyze your contracts to ensure the best tax outcomes for you. Our firm provides specialized advice on the classification of various fees. 

 

List of Adjustable Taxes in Pakistan 

Business owners often pay several taxes in advance during the year. These payments are not always a final loss to the business. Many of these are part of the list of adjustable taxes in Pakistan. You can subtract these amounts from your final income tax bill. This helps in reducing the total amount of cash that you owe to the government. You must collect the tax certificates for all such payments. Without these certificates, you cannot claim the adjustment in your return. 

• Advance tax paid on the electricity bill. 

• Withholding tax on the bills of mobile and landline phones. 

• Tax paid at the time of purchasing a motor vehicle. 

• Advance tax collected by the bank on the profit of debt. 

• Tax paid on the import of raw materials or machinery. 

• Advance tax on the purchase or sale of a property. 

• Tax deducted on the payment of the rent for the office. 

These adjustments can save a significant amount of money for the franchise. Our firm keeps a record of all your advance tax payments. We ensure that every rupee is adjusted in your annual tax return. This careful tracking improves the cash flow of your business. Many businesses forget to claim these adjustments and lose their money. We make sure that does not happen to our valued clients. 

 

The Role of Tax Solutions Pakistan 

Our firm provides comprehensive support for the taxation of franchises in Pakistan. We understand the challenges of managing multiple tax registrations and filings. Our team consists of experts in both federal and provincial tax laws. We offer a one window solution for all your tax needs. From initial registration to the final audit, we are with you. Our goal is to minimize your tax risk and maximize your profits. We stay updated on the latest changes in the finance acts. 

Our services include the following key areas of support. We help you with the registration of the company and the brand. We manage the monthly filing of the provincial sales tax returns. Our experts prepare and file annual income tax returns. We also provide representation during any tax audit or legal notice. You can focus on growing your franchise while we handle the numbers. Our professional approach ensures that your business remains in good standing. We take pride in being a reliable partner for your growth. 

Conclusion 

Managing a franchise in Pakistan requires a lot of attention to detail. The tax system is complex because of the multiple levels of government. You must keep track of both the federal and provincial requirements. Taxation of franchises in Pakistan is a continuous process and not a onetime task. Regular compliance is the only way to ensure the longevity of the business. You should invest in professional tax services to avoid making mistakes. This investment pays for itself through the peace of mind it provides. 

Choosing between the two main tax systems in Pakistan is a big decision for any business owner. The Federal Board of Revenue (FBR) has updated the rules for the tax year 2026. These updates change how you calculate your tax liability. Understanding the fixed vs. normal tax regime is now more important than ever. Each system has unique benefits and drawbacks. Your choice depends on your business nature and profit margins. Our firm provides expert tax consultancy services to help you navigate these complex tax regimes in Pakistan. We ensure you stay compliant while saving as much money as possible.

 

What is the Normal Tax Regime in Pakistan

The Normal Tax Regime (NTR) is the standard way to pay income tax. Under this system, you pay tax on your net profit. You first calculate your total revenue for the year. Then you subtract all business-related expenses like rent and salaries. The remaining amount is your taxable income. The FBR applies progressive tax slabs to this amount. If your profit is low, your tax rate is also low.

 

Benefits of the Normal Tax Regime

One major advantage is the ability to claim business expenses. You can deduct costs for utility bills and marketing. You can also claim depreciation on assets like machinery. If your business faces a loss, you might not pay any tax at all. You can even carry forward these losses to future years. This flexibility makes it popular for startups with high initial costs.

 

Drawbacks of the Normal Tax Regime

The main disadvantage is the extensive record-keeping required. You must maintain detailed books of accounts. You need to keep every receipt and invoice for audit purposes. The FBR can also conduct an audit of your filings.

 

Understanding the Fixed Tax Regime

The Fixed Tax Regime is also known as the Final Tax Regime in Pakistan for many sectors. In this system, tax is calculated on your gross turnover. It does not matter how much expense you incurred. The FBR takes a small percentage of your total sales. This tax is usually collected at the source. For example, exporters often fall under this category. The tax they pay at the bank is their final liability.

Why Businesses Prefer Fixed Tax

This system is much simpler than the normal one. You do not need to maintain complex accounting books. There is no need to worry about which expense is allowed. Once you pay the fixed percentage, your obligation to the FBR ends. It provides great peace of mind and predictability for your cash flow. It is ideal for businesses with very high profit margins.

Latest FBR Updates for Tax Year 2026

The FBR has introduced new slabs for salaried and non-salaried individuals. For the tax year 2026, the threshold for zero tax remains 600,000 rupees. However, the rates for higher income brackets have seen adjustments. There is a push to move more retailers into the fixed system. This is done through various schemes. Exporters continue to enjoy a simplified tax structure under the final regime.

New Rules for Small Traders

Small traders now have an easier path to compliance. The FBR allows them to pay a fixed monthly amount. This amount is based on the location and size of their shop. It removes the need for filing complex annual returns. This move aims to document the informal economy.

Export Sector Taxation

Exporters of goods generally pay 1 percent of their export proceeds. This is treated as a final tax in most cases. However, service exporters like IT firms have different rules. They may need to meet certain conditions to stay in the fixed regime. We help these firms maintain their status to avoid higher taxes.

 

How to Choose the Best Regime for You

The choice between a fixed vs. normal tax regime in Pakistan depends on your math. You should calculate your expected profit margin first. If your profit margin is above 20 percent, the fixed regime is better. If your margins are very low, the normal regime saves more. You should also consider your ability to maintain financial records. If you cannot keep track of every penny, go for a fixed tax. 

Our Services and Professional Support

Navigating the FBR portal and laws is a difficult task. CBM Consultants specializes in tax planning and legal compliance. We analyze your business model to find the best tax path. We also represent clients during FBR audits and appeals. Let us handle the numbers while you grow your business.

Conclusion

The choice between the fixed vs. normal tax regime depends on your profit margin. If your profit margin exceeds twenty percent, the fixed tax regime usually saves you more money. This is because it taxes your total sales at a lower rate. However, businesses with high costs or low profits should choose the normal tax regime. This system allows you to deduct all business expenses and only pay tax on net profit.

Importing items into Pakistan is a vital part of the local economy in two thousand twenty-six. Business owners must navigate a complex landscape of taxes and duties. This guide provides a detailed look at the current tax rules for imports. You will learn about the main taxes that apply at the port. Knowing these costs helps you plan your business budget better. It also ensures that you stay compliant with the federal board of revenue. 

GST on Imported Goods 

The general sales tax is the most common tax for imports. The federal board of revenue manages this tax across the country. Currently the standard rate for GST on imported goods in Pakistan is eighteen percent. This rate applies to most types of commercial and industrial items. However, some luxury items face a much higher rate of twenty-five percent. This higher rate targets high-end cars and expensive electronics and jewelry. 

You must be a registered taxpayer to bring goods into the country. Registration allows you to claim the tax you pay as an input credit. This means you can subtract it from the tax you collect on sales. This system prevents double payment of taxes on the same item. Our firm provides full support for sales tax registration and monthly filing. We ensure that your business meets all the legal requirements of the government. 

The Role of Customs Duty and Sales Tax 

Customs duty is the first charge you will face at the import stage. The government uses this duty to protect local industries from foreign competition. The rate of duty varies depending on the type of goods you import. The customs office uses a system of codes called the harmonized system. Every item has a specific code and a corresponding duty rate. 

It is important to understand the concept of GST on customs duty. The sales tax is not calculated on the invoice price alone. The customs office adds the duty amount to the value of the goods first. Then they apply the sales tax to this combined total. This means you pay tax on duty as well as the goods. This method increases the total tax burden for the importer significantly. 

Calculating GST for imported goods 

The process of calculating GST for imported goods follows a specific set of steps. First, you must determine the cost of the goods in foreign currency. Convert this amount into Pakistani rupees using the current exchange rate. Then you must add the costs for insurance and sea freight to this value. This total amount is known as the cost of insurance and freight value. 

After finding this value you must apply the basic customs duty rate. Add the duty amount to the cost of insurance and freight value. You should also add any regulatory duties or additional customs duties. This final sum becomes the basis for the general sales tax. Apply the eighteen percent rate to this total to find your tax amount. Many importers find this math difficult, so they seek professional help. Our team can perform these calculations for you with perfect accuracy. 

 

Breakdown of Import Tax Components 

Tax Type	Current Rate for 2026	Application Base
Basic Customs Duty	Varies by item	Cost Insurance and Freight
Sales Tax GST	Eighteen percent	Duty Paid Value
Value Added Tax	Three percent	Commercial Imports Only
Income Tax WHT	Varies by status	Total Import Value

 

Additional Levies at the Import Stage 

Commercial importers often face a three percent value added tax. This tax is an extra charge on top of the standard sales tax. It applies because the government assumes you will sell the goods for a profit. Manufacturers can often get an exemption from this specific tax for their raw materials. You must provide a valid manufacturing license to the customs office for this. 

There is also a withholding income tax collected at the port. This is an advance payment of your annual income tax. The rate for this tax is much lower for active tax filers. Non-filers must pay a much higher rate as a penalty. This system encourages all business owners to become regular tax filers. You can adjust this advance tax against your final tax liability for the year. 

Navigating the Pakistan Single Window 

The Pakistan single window is a new digital platform for all trade. It connects various government departments to speed up the clearing process. You can pay your duties and taxes online through this system. This reduces the need for physical visits to the customs office. It also makes the whole process more transparent and efficient for everyone. 

Importers must create a profile on this platform before they start trading. You will need your tax registration and chamber of commerce membership for this. The system automatically calculates most of your taxes based on the item codes. However you still need to verify the data to avoid any errors. Any mistake in the digital form can lead to delays at the port. Our experts can manage your digital profile and ensure smooth clearance. 

 

How Our Firm Supports Your Import Business 

CBM Consultants specializes in tax and customs consultancy for businesses in Pakistan. We understand that tax laws can be very confusing for many owners. We provide a wide range of services to help you succeed. Our team handles the entire process from tax planning to final clearance. We ensure that you pay the minimum legal tax for your imports. 

• We calculate all duties and taxes before you place an order. 

• Our team helps with the classification of goods using correct codes. 

• We manage all communication with the federal board of revenue. 

• Our firm assists in claiming tax refunds and input credits. 

• We provide advice on trade agreements and duty exemptions. 

Working with  CBM Consultants saves you time and prevents legal issues. We stay updated on all new notifications and changes in the law. This allows you to focus on growing your business while we handle taxes. Our goal is to make importing as simple as possible for our clients. 

Common Pitfalls for New Importers 

A lot of novice traders do things that cost them a lot of money. The key mistake is that the wrong item code has been listed for the goods. This may result in substantial fines as well as severe sanctions against your shipment. Another mistake is neglecting extra responsibilities such as regulatory duty. These can increase your estimated tax bill twofold if you are not careful. 

You also have to make certain that your shipping papers are accurate, too. The goods have to correspond with the invoice and the packing list. Any discrepancy can lead to a full inspection by the customs office. An audit can hold up your shipment for weeks and run up port charges. We check all your papers up until the port to avoid such situations.  

Conclusion 

The tax system for imports in Pakistan is designed to generate revenue. It also aims to control the balance of trade by taxing luxury items. As a business owner, you must accept these taxes as a part of your costs. Proper planning and professional advice are the keys to managing these expenses. Always stay informed about the latest changes in the federal budget.