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For Tax Year 2027, the reported withholding rate on an ordinary company dividend in Pakistan is 15% for an Active Taxpayer List (ATL) recipient and 30% for a recipient who is not on the ATL. That is not a universal dividend rate: mutual-fund distributions, qualifying power-project dividends, certain REIT-related payments and dividends from some companies with no tax payable have separate reported rates. Tax is calculated on the gross dividend, so the cash credited to you is generally lower after withholding. The applicable rate depends on the dividend category and your tax status, and withholding does not automatically settle every investor’s final tax liability.
What tax applies to cash dividends in Pakistan?
Section 5 of Pakistan’s Income Tax Ordinance, 2001, taxes dividends by applying the relevant rate to the dividend’s gross amount. In other words, the calculation begins with the dividend before tax is deducted—not just the amount that reaches your bank or brokerage account. The company, fund or other payer normally deducts withholding tax when paying the dividend.
Section 5(2) states: “The tax imposed under sub-section (1) on a person who receives a dividend shall be computed by applying the relevant rate of tax to the gross amount of the dividend.” That provision explains the calculation basis; the applicable rate still depends on the dividend’s legal category and the recipient’s circumstances.
The rates below are reported for Tax Year 2027, which runs from 1 July 2026 through 30 June 2027. The Federal Board of Revenue (FBR) lists a Tax Year 2027 withholding-tax rate card updated through 30 June 2026. Rates can change through a Finance Act, so confirm the relevant entry in the current FBR card and the payer’s dividend advice before relying on a rate for a particular payment.
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How much tax is deducted on dividends in Pakistan?
For Tax Year 2027, the reported ordinary rate is 15% for an ATL recipient and 30% for a non-ATL recipient. Several categories have different rates, as shown below. These are reported rates for the stated tax year, not a promise that every payment described informally as a “dividend” will be taxed at that percentage.
| Dividend source or statutory category | Reported Tax Year 2027 rate | What determines the treatment |
|---|---|---|
| Ordinary company dividend and REIT dividend, unless an exception applies | 15% ATL; 30% non-ATL | The general reported rate; check whether a specific exception applies. |
| Qualifying Independent Power Producer (IPP) pass-through dividend | 7.5% ATL; 15% non-ATL | A narrowly defined pass-through reimbursed under the relevant power agreements; not every dividend connected with a power producer qualifies. |
| Mutual-fund dividend | 25% on the portion linked to debt securities; 15% on the portion linked to equities | The fund’s income composition, rather than simply the investor’s description of the fund. |
| Distribution by a Special Purpose Vehicle under REIT Regulations | 0% to a REIT scheme; 35% to other recipients | The recipient and the specialized SPV/REIT structure. |
| Dividend from a company with no tax payable because of exempt income, carried-forward business losses or tax credits | 25% | Whether the company meets the statutory condition for this category. |
The listed categories are not interchangeable. In particular, the reduced IPP rate is tied to a qualifying pass-through arrangement, while the mutual-fund rates split the distribution according to the fund’s debt- or equity-linked income. A fund name, a company’s industry, or a payer’s description alone may not establish the tax category. Use the distribution statement or dividend advice and, if the classification remains unclear, obtain confirmation from the payer or a Pakistani tax adviser.
How to calculate the tax and the cash you receive
For a payment taxed at a single rate, the basic arithmetic is:
- Withholding tax = gross dividend × applicable rate
- Cash after withholding = gross dividend − withholding tax
For example, if an ordinary company dividend is PKR 10,000 and the reported 15% ATL rate applies, the withholding calculation is PKR 1,500 and the amount after that deduction is PKR 8,500. At the reported 30% non-ATL rate, the same gross dividend produces PKR 3,000 of withholding and PKR 7,000 after that deduction. These are arithmetic examples, not a determination of an individual’s final tax liability.
A mutual-fund distribution may be split across components rather than taxed at one rate. For example, if a fund statement identifies PKR 6,000 linked to debt securities and PKR 4,000 linked to equities, applying the reported rates gives PKR 1,500 on the debt-linked portion and PKR 600 on the equity-linked portion, for PKR 2,100 in total withholding. The example assumes those components and rates are correctly identified; it does not establish how a particular fund must classify its income.
For any payment, reconcile the gross dividend and the deduction rather than inferring the tax from the net credit alone. The net amount may also be affected by other entries on a statement, so use the dividend advice or fund/broker statement to identify the gross distribution and withholding as separate figures.
Why ATL status matters—and what “filer” does not tell you
The ordinary rates reported for Tax Year 2027 distinguish ATL recipients from non-ATL recipients. People often call this a “filer versus non-filer” difference, but for the rates in this guide the specific distinction is whether the recipient is on the Active Taxpayer List. Do not assume that a person’s general description of themselves as a filer, or the fact that they submitted a return at some point, proves their ATL status for a payment.
ATL status affects the reported withholding rates for ordinary dividends and qualifying IPP pass-through dividends. It does not erase the need to identify the dividend category: mutual funds, the specified SPV/REIT distribution and the company-with-no-tax-payable category have their own reported treatment. Check the current rate card and the relevant payer records for the payment in question.
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Are mutual-fund dividends taxed differently?
Yes. The reported Tax Year 2027 rates are 25% on the portion of a mutual-fund dividend linked to debt securities and 15% on the portion linked to equities. The division depends on the fund’s income composition; it is not determined solely by whether an investor calls the fund a debt fund, equity fund or income fund.
Look at the fund’s distribution statement for the gross dividend, any components and the tax withheld. If the statement does not show the composition or its tax treatment, ask the fund manager for the breakdown rather than applying one rate to the entire distribution based on the fund’s label. These dividend rates should not be confused with tax treatment of a capital gain on selling fund units or shares; a redemption or sale is a different transaction.
When do special dividend rates apply?
Qualifying IPP pass-through payments
The reported rate is 7.5% for ATL recipients and 15% for non-ATL recipients, but the concession is limited to a qualifying pass-through dividend reimbursed under the relevant power agreements. A payment from a company associated with power generation does not qualify merely because of that association. Verify that the legal and payment conditions apply before using the reduced rate.
REIT-related SPV distributions
A distribution from a Special Purpose Vehicle under the REIT Regulations is reported at 0% when paid to a REIT scheme and 35% when paid to other recipients. The recipient matters, so do not apply the 0% rate to an individual investor simply because the payment is linked to a REIT structure. Confirm the exact payer, recipient and distribution type.
Dividends from certain companies with no tax payable
A 25% rate is reported where a company has no tax payable because of exempt income, carried-forward business losses or tax credits. This category turns on the company’s tax position and the statutory condition, not merely on the fact that it paid little or no tax in a particular year. If the payer’s documents do not make the category clear, seek confirmation before treating the 25% rate as applicable.
Is dividend withholding tax final in Pakistan?
Not necessarily. FBR’s general guidance explains that withholding may be a final discharge of tax in some cases and adjustable against final tax liability in others. The answer depends on the applicable provision and dividend category. It is therefore unsafe to assume that every dividend deduction is refundable, always adjustable, or the investor’s complete tax obligation.
Keep the withholding record even when tax was deducted at source. Whether and how the dividend should be treated in a return depends on the relevant rules for that payment and the taxpayer. If you have multiple dividend types, foreign income, or a question about final versus adjustable treatment, identify each category separately rather than treating all dividend entries as one pool.
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How to check dividend withholding and prepare your records
- Collect the payment documents. Save the company dividend advice, broker statement or mutual-fund statement showing the gross dividend, payment date, tax deducted and, where relevant, income components.
- Check FBR withholding records. FBR says withholding information is available through the Maloomat portal or through the Tax Payments tab in IRIS. Compare the relevant entry with the payer’s document.
- Resolve differences before filing. If the gross amount, withholding entry or dividend category does not match, ask the payer or fund for a corrected statement or explanation. Do not silently substitute the net cash credited for the gross dividend.
- Apply the treatment for the specific category and tax year. Use the Tax Year 2027 rules for income in the period from 1 July 2026 to 30 June 2027, and distinguish dividends from share-sale gains or fund redemptions.
- Retain the calculation and evidence. Keep the statement, withholding record and any explanation of a special rate with your tax records so the return treatment can be traced back to the payment.
How are foreign dividends taxed for a Pakistan resident?
Residence is determined by statutory tests, not just citizenship, the country where a brokerage account is held, or the location of the company paying a dividend. FBR’s summary of section 82 says an individual is resident for a tax year if the individual is present in Pakistan for at least 183 days in that year; or is present for at least 120 days in that year and at least 365 days in the preceding four years. A government or provincial government employee posted abroad is also included in the stated residence rules.
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A resident taxpayer with chargeable foreign-source dividend income who has paid foreign tax may be eligible for a foreign tax credit. The credit is limited to the lower of the foreign income tax paid and the Pakistan tax payable on that foreign income. The statute also imposes conditions and timing requirements. This is a limited credit, not a guaranteed dollar-for-dollar refund, and the applicable facts and documentation matter.
Keep records of the foreign dividend, foreign tax paid and any documentation needed to support the claim. Establish residence for the relevant tax year first, then determine whether the dividend is chargeable and whether the statutory credit conditions are met. Where currency conversion, timing or foreign tax documentation is involved, get advice specific to the return rather than assuming the full foreign withholding can be reclaimed in Pakistan.
What to verify before relying on a dividend tax figure
- Tax year: match the payment and reporting period to the applicable year. The rates here are reported for Tax Year 2027, not a permanent schedule.
- Dividend category: distinguish ordinary company dividends, fund distributions, qualifying IPP pass-throughs and REIT/SPV payments.
- ATL status: verify the recipient’s status where the category’s rate changes based on ATL listing.
- Gross amount and withholding: reconcile the payer statement with FBR records rather than relying only on the net amount received.
- Final or adjustable treatment: establish the treatment under the provision applicable to that category before deciding how to report the deduction.
- Residence and foreign tax: for an overseas dividend, apply the residence test and assess foreign-credit eligibility separately.
These checks keep the main distinctions in view: a dividend is taxed on its gross amount, the withholding rate depends on category and sometimes ATL status, and a deduction at payment does not by itself prove that the investor’s final tax obligation has been met.
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