Corporate Tax Rates in Pakistan 2025-26: A Complete Breakdown

If you're deciding whether to incorporate your business, or you're already running a registered company, the corporate tax rate you actually pay depends heavily on what kind of company you are — not just your profit level.

The standard corporate rate

Most private and public limited companies registered with SECP pay corporate income tax at 29% of taxable profit for tax year 2025-26. This is a flat rate, unlike the progressive slabs applied to salaried individuals and business individuals — meaning your effective rate doesn't change as profit grows, once you're above the small company classification.

Small company relief

Companies that meet the definition of a "small company" under the Ordinance — generally based on paid-up capital, turnover, and employee count thresholds — qualify for a reduced rate of 20%, rather than the standard 29%. This relief exists specifically to encourage formal incorporation among smaller businesses rather than penalizing them with the same rate as large corporations.

Banking companies pay more

Banks and other companies engaged in the banking business are taxed at a considerably higher rate — 44% for tax year 2025-26 — reflecting the sector-specific rate structure that's applied to banking income for several years running under successive Finance Acts.

Minimum tax and alternate corporate tax

Beyond the standard rate, companies may also be subject to minimum tax calculated on turnover, applicable even in loss-making years, and Alternate Corporate Tax (ACT) provisions designed to prevent companies from using extensive deductions to reduce their effective liability below a minimum floor. These provisions interact with the standard rate in ways that require careful annual calculation, not a simple flat percentage on declared profit.

Comparing to unincorporated business tax

For business owners deciding between operating as a sole proprietor and incorporating formally, the comparison isn't as simple as "which rate is lower." Business individual slabs top out at 35%, while the standard corporate rate is 29% — but companies face additional compliance costs, minimum tax provisions, and different withholding treatment. Run both scenarios through our income tax calculator before committing to a structure, and consult a tax advisor for anything beyond a straightforward small business.

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