Pakistan provides several incentives regimes aimed primarily at promoting rural development, exports, and key industries such as biotechnology and electronics. The following outlines the main regimes:

Rural Industrialization

Pakistan provides incentives for both domestic and foreign industrial investment in rural areas of the country. The incentives include:

Customs duty, sales tax and import surcharge exemption on imported machinery, as long as the machinery is not manufactured in Pakistan
Import license fee reduction from 6% to 2% for the import of such machinery
Corporate income tax holiday for up to 8 years

In addition to the above incentives, the rural industrialization scheme also provides specific incentives for private power plants, including exemption from corporate income tax, import duties, and sales tax.

Concessions for Industrial Estates

Pakistan has established nearly 60 industrial estates (industrial zones) throughout the country. Companies established in these estates can enjoy customs duties exemption or reduction., the amount of which depends on the estate.

The following exemptions/reductions are provided:

100% customs duties exemption from for approved industrial estates located in Hub, Mianwali, Bhakkar, Khushab, Tharparker and Dadu (excluding Taluka of Kotri)
50% reduction in customs duties for estates located in Islamabad, Rawalpindi, Gujranwala, Sialkot, Faisalabad, Lahore, Multan, Ferozwala, Taluka of Kotri and Hyderabad
75% reduction in customs duties for estates located in all other areas except Karachi

In addition, qualifying companies located in certain estates may also be eligible for income tax rebates on export income.

Specific Industry Incentives

Pakistan provides incentives in order to develop certain key industries, including:

Biotechnology
Electronics
Fertilizers
Fiber optics
Solar energy

The incentives for these industries include:

Customs duties and sales tax exemption on imported plant and machinery used by the business and not manufactured in Pakistan
Customs duties exemption for raw materials and components
4-year corporate income tax holiday

Export Processing Zones

Pakistan's export processing zones were implemented to encourage foreign investment in export-oriented industries. The benefits of the establishment in the zones include:

Import and export duty exemption for goods coming in and going out from the zone
5-year corporate income tax holiday
Up to 75% reduction in corporate income tax after the holiday
Certain other infrastructural benefits such as utilities and telecommunications access, and transit warehousing

Gwadar Free Zone

Effective 1 July 2015, investment in qualifying infrastructure projects in the in the Gwadar zone will be eligible for:

up to a 20 year tax holiday
Customs duties exemption for machinery and equipment for projects
Sales tax exemption for construction materials for projects

Online Marketplaces

Finance Act 2017 has introduced the concept of an online marketplace, an IT platform run by an e-commerce entity to facilitate transactions between buyers and sellers. Such online marketplaces are eligible for a 0.5% minimum tax instead of 1.25% and subject to reduced rate of withholding/ collection at 5% instead of 12% on brokerage and commission, which is a final tax.

Technology Start-ups

Finance Act 2017 has introduced a three-year tax exemption and certain other benefits for qualifying technology start-ups having annual turnover up to PKR 100 million, subject to certain conditions. The exemption is also available to existing undertakings that commenced operations on or after July 1, 2012.

Tax Credit for Enlistment on Stock Exchange

Pakistan provides a 20% tax credit to companies that list on any registered Pakistan stock exchange for two years. Effective from 1 July 2017, companies may avail a 20% tax credit for two years and a 10% credit for additional two years.

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