This article explores strategies for businesses to reduce their tax burden in Pakistan.
Key Concepts:
- Minimum Tax: A fixed minimum tax based on a percentage of turnover (currently 1.5%).
- Taxable Income: Profit after adjustments like business losses and depreciation.
- Minimum Tax Credit: The difference between previously paid minimum tax and regular tax liability.
The Strategy:
- Calculate Taxable Income: Consider business losses, depreciation, and unabsorbed depreciation.
- Compare Taxable Income with Minimum Tax: The higher figure determines your tax liability.
- Utilize Minimum Tax Credit: If your minimum tax exceeds regular tax, the credit is carried forward for future adjustments.
Benefits:
- Reduces current tax liability.
- Optimizes tax payments across multiple years.
Planning Tips:
- Don’t automatically claim the entire Minimum Tax Credit.
- Consider advance taxes and other adjustments that may reduce your current liability.
- Carry forward any unused credit for future tax optimization.
Disclaimer:
This article provides a simplified overview. Consult a tax professional for specific guidance applicable to your business situation.
