Tax Overview and Recommendations

R&D Incentives Other incentives 100 percent deduction is allowed for research and development expenditure incurred in Pakistan but is restricted to the extent of research which has been undertaken in Pakistan. Non-residents operating through a branch in Pakistan can claim a deduction for head office expenses (including regional head office costs) which should be in the nature of executive and general administration expenses. Such expenses can be remitted to the head office without payment of withholding taxes, subject to approval from the State Bank of Pakistan. Hybrid Instruments Hybrid entities Other tax incentives include: 25 percent initial allowance (tax depreciation / capital allowances) on plant and machinery 90 percent first year allowance (tax depreciation / capital allowances) for specified companies 90 percent accelerated tax depreciation for alternative energy projects Tax credit of 10 - 20 percent of the investment made for balancing, modernization and replacement Tax credit of 100 percent of tax payable for five years to newly established industrial undertakings Tax credit of 100 percent of tax payable for five years attributable to expansion projects or new projects by an existing industrial undertaking Tax credit of up to 10 percent of tax payable for new manufacturing entities for employment generated subject to specified conditions. Tax exemptions, subject to meeting specified criteria, may be available in following sectors: Power generation Information Technology Agriculture No special rules for hybrid instruments. No special rules for hybrid entities. KPMG © 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. 6

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