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To keep Pakistan competitive in international markets and support the viability of investments in the country, the following incentives are available to both foreign and local investors:
Priority Manufacturing/Industrial activities have been designated as follows:
Category A: Value Added or Export Industries;
Category B: Hi-Tech Industries;
Category C: Priority Industries; and
Category D: Agro-based Industries.
Units that annually export a minimum average 50% of their production or more in the first ten (10) years or are included in positive list of value added industries are classified as Export or Value Added Industries. In case of expansion of existing units they should export minimum 50% of additional capacity created under expansion to avail the incentives of export industries.
The lists giving details of the industries falling in Categories A, B, C and D are presented in Annexes-V, VI, VII respectively. The Cabinet Committee on Investment (CCOI) may review these lists as and when deemed necessary for the benefit of investors. Copies of relevant Govt. Notifications (SRO-28 (I) 98 dated 17-01-1998, and SRO 43 7 (1) 2001 dated 18/6/2001 are at Annexure VIII and IX and SRO NO. 439(1)/2001, dated 18-6-2001 is at Annexure X
(i) Tariff
Manufacturing/Industrial Sector |
Customs Duty |
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Zero Rated |
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Customs duty leviable on imports of plant, machinery and equipment (which is not manufactured locally) for the industries falling under Categories 'A' and 'B', i.e. Value-Added, Export and Hi-Tech Industries.
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5% Rated |
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10% |
Other Sectors (Non-manufacturing) |
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10% |
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Zero Rated |
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(ii) Fiscal (Tax Relief)
First Year Allowance (FYA)
For new investments, a First Year Allowance (FYA) on investment in plant, machinery and equipment (PME) is available. The FYA can be set-off against statutory income in the year of assessment. Any unutilised allowance can be carried forward to subsequent years until the whole amount is used up. The FYA is available at the following rates:
(a) Manufacturing/Industrial Sector |
Categories A and B: |
@ 90% of the Cost of Plant, Machinery and Equipment. |
Categories C and D: |
@ 75% of the Cost of Plant, Machinery and Equipment. |
Other Industries: |
@ 50% of the Cost of Plant, Machinery and Equipment. |
| (b) Other Sectors |
Infrastructure, and Agriculture: |
@ 75% of the cost of Plant, Machinery and Equipment |
Service and Social: |
@ 50% of the cost of Plant, Machinery and Equipment. |
Re-investment Allowance (RA)
To encourage investors to re-invest their earnings by expanding existing manufacturing facilities and improving technology or diversifying product lines, a Re-investment Allowance (RA) of 50% of the cost of Plant, Machinery and Equipment is allowed in case of Balancing, Modernisation and Replacement (BMR) projects, and Expansion projects.
Industrial Building Depreciation Allowance
To encourage the establishment of Small and Medium Industries (SMIs), companies constructing industrial sheds/structures for sale or lease to SMIs are granted an enhanced Depreciation Allowance (DA) at 30% (in the first year) of the cost of the development of these sheds/structures.
Normal Tax Rates
(i) Corporate Tax Rates |
(Assessment Year 2002-2003) |
Public Companies |
35% Including Surcharge |
Other Companies |
45% Including Surcharge |
Banking Companies |
50% Including Surcharge |
(ii) Personal Income Tax Rates
(Applicable to Assessment Year 2002-2003) (in Rupees)
Sr. No. |
Income Range |
Tax Rate |
1 |
Up to Rs.60,000 |
No tax |
2 |
Rs.60,001-Rs. 150,000 |
7.5 % of income |
3 |
Rs.150,001-300,000 |
Rs. 6750 + 12.5 % of excess over Rs. 150,000 |
4 |
Rs.300,001-400,000 |
Rs.25,500 + 25% of excess over Rs.300,000 |
5 |
Rs.400,001-700,000 |
Rs.40,500 + 30% of excess over Rs.400,000 |
6 |
Over Rs.700,001 |
Rs.120,000+ 35% of excess over Rs.700,000 |
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