Dividends are a form of income that is paid to shareholders by companies. In Pakistan, dividends are subject to tax. The amount of tax that is payable on dividends depends on the type of shareholder and the amount of dividend that is received.
Types of Shareholders
There are two types of shareholders in Pakistan: resident shareholders and non-resident shareholders. Resident shareholders are individuals or companies that are resident in Pakistan for tax purposes. Non-resident shareholders are individuals or companies that are not resident in Pakistan for tax purposes.
Resident shareholders are subject to tax on all dividends that they receive, regardless of the source of the dividend. The tax rate on dividends for resident shareholders is currently 15%.
Non-resident shareholders are subject to tax on dividends that they receive from Pakistani companies. The tax rate on dividends for non-resident shareholders is currently 25%.
Calculating the Amount of Tax Payable
The amount of tax that is payable on dividends is calculated by multiplying the amount of the dividend by the applicable tax rate. For example, if a resident shareholder receives a dividend of Rs. 100,000, the amount of tax that is payable is Rs. 15,000.
Filing a Tax Return
To claim the deductions that are available for dividends, taxpayers must file a tax return with the Federal Board of Revenue (FBR). The tax return must include the amount of the dividend, as well as the relevant documentation to support the claim.
The FBR will review the tax return and determine whether the deductions are valid. If they are valid, the FBR will reduce the amount of tax that is payable.
Tax on dividends is an important source of revenue for the government of Pakistan. However, there are a number of deductions that can be claimed, which can significantly reduce the amount of tax that is payable. Taxpayers who receive dividends should be aware of these deductions and should claim them when filing their tax returns.