Tax laws (modification), 2021 – II – Enterprise & Finance



In December 2020, the Special Technology Zone Ordinance 2020 (STZO) was enacted to ensure the development of the scientific and technological ecosystem and accelerate technology development in Pakistan.

A Special Technology Zone Authority (Authority) will be set up under STZO. The agency was empowered to appoint zone developers under a development agreement and license zone operators for the reported zones. The term "zone" was defined as follows and specifies the economic activities that are permitted for the zone companies:

“Zone” includes any defined geographic area reported by the Authority under such a name, including, but not limited to, specific technology zones, information technology parks, high-tech industrial areas, software technology parks, hardware technology parks, technology export zones, free technology zones, science and technology parks, information technology zones , Science and Technology Zone, R&D Zone, Opportunity Zone, Innovation Zone, Technology Development Zone, Knowledge Parks, Smart City, Knowledge City, Technology Incubation Zone or any sector zone that may require technology interventions such as biotechnology, chemical technologies, agricultural technology, fin-tech, robotics, nanotechnology etc. and other zones having any combination or combination of the above areas.

STZO provides tariff and tax incentives for the zone developer and the zone company. In addition, the authority has been empowered to provide zone developers and zone operators with additional benefits if this is considered justified on the basis of an economic impact assessment. STZO also provides that the concessions allowed under STZO are independent of the concessions (if any) that zone developers / zone companies are allowed under other applicable legislation, and that the provisions of STZO do not limit the authority of ZZO government to provide additional services to grant. STZO has also taken the necessary precautions to protect investments. In particular, it is also provided that these incentives are not withdrawn prematurely and retrospectively and that a change can only be beneficial for the investor and not otherwise.

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STZO provides the following incentives:
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(i) Exemption from all taxes on income incurred in relation to (i) Exemption from all income
on the development and operation of the zones for a tax (withholding tax,
Ten years from the date the alleged tax was signed) for a period
the development agreement (only for zone developers) of ten years from the date of
Issuance of the license by the
(ii) Exemption from all duties and taxes for a period of time (ii) Exemption from all duties
for a period of ten years from the date of signature of the development duties and taxes
Capital Goods Agreement including, but not limited to ten years from the date
Materials, equipment, machinery, hardware, equipment and licensing by the
Software imported into Pakistan for consumption within the Capital Goods Authority
Zones by the authority and zone developer; and including, but not limited to
Materials, plant,

Machines, hardware,
Equipment and software
imported into
Pakistan for consumption
within zones by the authority
and zone companies.
(iii) General Sales Tax (GST) exemption on goods; and (iii) GST exemption on goods
Services in the import of plants, machines, equipment and services in the import of plants,
Raw materials for the consumption of these items in machines, devices and
Zones of the authority, zone developers and zone raw materials for consumption
Companies. of these items within zones
the authority as well as zone
(iv) Exemption from
Property tax for ten years
the date of issue of the license
from the authority.
(v) Dividend Tax Exemption
Income and long-term capital
Profits from investing in a
Venture capital (VC)
Commitment for a period of ten
Years from the date of issue
the license by the authority.
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It is believed that tax exemptions / concessions introduced by the enactment of a special law such as STZO override the relevant tax laws as they are equally backed by constitutional provisions with a specific purpose. Nonetheless, procedural changes in the relevant tax laws are critical in order for the tax authorities that govern tax laws to be geared to practically allowing and implementing such incentives.

The 2021 Amending Ordinance provided tariff incentives provided by STZO for zone authorities, developers and businesses under (ii) above in the 1969 Customs Act in the following manner.

“(I) Capital goods, including but not limited to materials, plants, machinery, hardware, equipment and software for a period of often years as required by the Special Technology Zones Authority Order of 2020 (Order No. XIII of 2020) unless manufactured locally imported from the date of the signature of the development contract for intra-zone consumption by the Special Technology Zones Authority and zone developers, subject to the terms, restrictions, and restrictions that the Federal Board of Revenue may from time to time impose ; and

(ii) capital goods, including but not limited to materials, plants, machinery, hardware, equipment and software for a period of ten years as prescribed in the Special Technology Zones Authority Order of 2020 (Order No. XIII of 2020), if not manufactured, locally imported as of the date of issue of the license by the Special Technology Zones Authority for intra-zone consumption by that authority and zone companies, subject to the terms, restrictions and restrictions that the federal authority may from time to time impose. "

There seems to be little contradiction between the tariff incentives allowed under the STZO and those introduced in the Customs Act of 1969, as the former did not impose any condition / restriction in order to qualify for the concession.

For the remaining incentives under the STZO, it is expected that appropriate procedural changes will be made in accordance with the respective tax laws.


Due to the approval of the electric vehicle policy by the federal cabinet, the discount rates (previously allowed for two-wheel and three-wheel electric vehicles) have now been extended for four-wheel vehicles CBU, CKD and certain specific parts until June 30, 2026.


(a) The following are the categories of 4-wheel electric vehicles introduced in CBUs that are eligible for discounted tariffs.

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Description of the customs conditions of the vehicle PCT code
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Electric vehicles 4-wheel 8703.8090 25% The concession is permitted until
June 30, 2026.
Electric vehicles 4-wheelers 8703.8090 12.5% ​​The license is permitted up to
June 30, 2026 on the import of electricity
Vehicles 4 wheels (CBU) per
Company of the same variant
assembled or manufactured for
Scope of 100 units per company, properly
approved / certified by engineering
Development Committee (EDB). EBD
monitors compliance with the EV
Politics 2020 and intimate FBR
immediately in the event of a violation of
every manufacturer continues to stop
Release at preferential prices.
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(b) The following are the categories of 4 wheel electric vehicles that have been introduced into CNI, as well as certain parts for which reduced rates are allowed:

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Description of the description of the duty rate
Vehicle & PCT import goods customs
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Electric vehicles 4 (i) EV-specific 1% (regardless of the license is permitted
Wheeler (PCT components for the tariff to manufacturers of electrical appliances
Code 8703.8090) Assembly / obligation for these items as vehicles with four wheels until June 30th
Manufacturer specified in the first 2026, subject to certification and
Any kit form schedule for the EDB's quota determination.
(CKD) Customs Act, 1969).
(ii) Components for 10% The concession is permitted
Meeting / until June 30, 2026 subject to
Production under the conditions mentioned in paragraph 2 of
each kit from SRO.656 (I) / 2006 from
Not located June 22, 2006.
(iii) Components for 25% The concession must be fallible
Meeting / until June 30, 2026 subject to
Production under the conditions mentioned in paragraph 2 of
each kit from SRO.656 (I) / 2006 from
Localized parts. June 22, 2006.
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(c) In addition, the concession for the import of CBU chargers with CKD kits for electric vehicles has been extended to 4-wheel vehicles that were previously available for 2 and 3-wheel vehicles.


(a) Local manufacturers / installers who import and supply electric vehicles of the prescribed categories have received exemptions and reduced the VAT rates listed below:

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Entry reference description exemption / exemption
Concession phase
Sales tax rate
================================================== ================================================== ============ 157 of Table I Import of CKD kits for the following exempt import
from 6. Schedule electric vehicles (4 wheels) from local
Manufacturer up to the 30th day of
June 2026:
(a) Small cars and SUVs with 50
kWh battery or less; and
(b) Light commercial vehicles
(LCVs) with 150 kWh battery
or below 71 of 8. According to locally produced or 1% local supply
Plan assembled electric vehicles
(4 bikes) up to the 30th day of
June 2026:
(a) Small cars and SUVs with 50
kWh battery or less; and
(b) Light commercial vehicles
(LCVs) with 150 kWh battery
or below
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(b) The import of CKD, SUV and LCV was also promoted by the exclusion from the area of ​​minimum value added (MVAT) at the time of import. For this purpose, the following vehicle classes have been added to the exclusion section of the 12th Appendix to the Sales Tax Act 1990:

  • Electric Vehicle CKD Kits (4 Wheels) for Small Cars or SUVs with a battery of 50 kWh or less and Light Commercial Vehicles (LCVs) with a battery of 150 kWh or less by June 30, 2026.

  • Electric vehicles (4 wheels), small cars or SUVs with a battery of 50 kWh or less and light commercial vehicles (LCVs) with a battery of 150 kWh or less in the CBU state until June 30, 2026.

  • Electric vehicles (2-3 wheels and heavy duty vehicles) in CBU condition until June 30, 2025.


The FED is levied on locally manufactured / assembled and imported motor vehicles, SUVs, at a rate of 2.5% ad val. However, there were certain exemptions for rickshaws designed to carry people. The amending ordinance also granted an exemption for 4-wheel electric vehicles (under tariff items 87.03) until June 30, 2026.


The reduced rate of 1% would now apply to the import of CKD kits from electric vehicles for small cars or SUVs with a battery of 50 kWh or less and LCVs with a battery of 150 kWh or less.



The collection of the super tax was introduced by the Finance Act 2015.

For banking companies, the tax of 4 percent applied until the tax year 2021. This tax has now been extended to the tax year 2022 and beyond.

For companies other than banking, the super tax levy has been reduced to zero percent from the 2020 tax year. There is no change in super tax for any other than banking company.


As part of a 1994 circular, a license scheme for cotton ginning was introduced. This now also applies to the provisions of the Income Tax Ordinance of 2001, according to which the tax liability of cotton ginning on their income may not amount to more than 1% of their turnover from cotton fluff, cottonseed, cottonseed oil and cottonseed cake. The tax so payable is the final tax only on their ginning and oil milling activities.


Profits and profits from a transmission line project established in Pakistan on or after July 1, 2015 are exempt from income tax for a period of 10 years, subject to certain conditions set out in Part I Section (126M) of the Second Annex to the Regulation are set. One such condition is that such a project is set up by June 30, 2018. The date has now been extended to June 30, 2022.


Every vehicle registration authority of the excise and tax authority was now obliged to collect input tax at the following rates from buyers of locally manufactured vehicles who then sell them within 90 days of delivery of such a vehicle (before or after registration):

See engine control
Capacity (in rupees)
1 to 1000cc 50,000
2 1000cc to 2000cc 100,000
3 2000cc and over 200,000

The input tax levied would be adjustable in the hands of the buyer. This change was introduced for the period ending June 30, 2021.

The collection of input tax under this new provision applies in addition to input tax that is collected by the manufacturer (at the time of sale) or by the vehicle registration authority (provided the manufacturer does not levy any tax).

If a person buys and then sells the motor vehicle within 90 days of delivery after registration, input tax will be levied on that person under both the new destination and the existing destination. However, the exact mechanism for collecting new taxes after registration needs to be clarified by the Board of Directors.


According to the Pakistan Telecommunication (Reorganization) Act of 1996, the National Telecommunication Corporation (NTC) receives a license from the Pakistan Telecommunication Authority to non-exclusively provide telecommunication services within Pakistan only for armed forces, defense projects and the federal government, state governments or other government agencies specified by the federal government or government institutions.

It is envisaged that Section 153 withholding tax will not be applicable to payments NTC receives for the provision of such telecommunications services. Accordingly, such income would no longer be subject to minimum taxation under Section 153.


The Finance Act of 2015 included Section 56A in the Sales Tax Act of 1990, which empowered the federal government to conclude bilateral or multilateral agreements with the state government or governments abroad on the exchange of information, including the electronic exchange of information on the sales tax law or another law of the country. These provisions are similar to the relevant information exchange provision under the Income Tax Ordinance of 2001.

The Amending Ordinance now empowers the FBR to share data or information, including real-time data videos, images obtained under the provisions of the Sales Tax Act 1990, with the ministries or departments of federal and state governments, provided such restrictions and conditions apply as from FBR specified.


The duty has been reduced to 0% for the temporary importation of professional and technical equipment or equipments or instruments imported by foreigners, experts and athletes, etc., participating in an international event (including but not limited to sporting events) or in the framework an international agreement intended for participation use only during such an event or agreement:

(a) It is noted on the importer's passports.

b) The goods admitted for temporary admission must be indicated at the time of import and subsequent re-export

The requirement that such foreigners enter into an obligation or guarantee has not been made applicable.

Goods that were temporarily imported into Pakistan by international athletes or athletes and were then taken back by them within 120 days were exempt from sales tax and income tax during the import phase.


Copyright Business Recorder, 2021