Tax Overview and Recommendations

Holding Rules Interest payments to non-residents (that have no permanent establishment in Pakistan) are subject to withholding tax of 10 percent. Payments to non-residents (that have no permanent establishment in Pakistan) are subject to withholding tax, in the case of specified contracts at 7 percent, in the case of insurance & reinsurance premiums at 5 percent and in the case of advertisement services by media persons relaying from outside Pakistan at 10 percent. Other payments to non-residents, for which a withholding tax rate is not specified in the Income Tax Ordinance, 2001, are subject to withholding tax of 20 percent. The withholding tax rates may be reduced under the terms of applicable tax treaties. Dividends distributed by a resident company are taxable at the rate of 12.5 percent. Dividends paid by a non-resident company are taxable at the corporate tax rate in the hands of resident company. Capital gains tax applies in Pakistan. However, the tax treatment of the capital gain depends on a range of factors including the industry and the holding period. For companies which are in the banking industry in Pakistan, gain on the sale of shares and dividend are taxable at the rate of 35 percent. Capital gain tax rates on securities are as follows: KPMG Held <12 months Held 12-24 months Held 24-48 months 15% 12.5% 7.5% © 2016 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 2

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