Pakistan Taxation

Income Tax

An income tax is a tax that governments impose on financial income generated by all entities within their jurisdiction. By law, businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are eligible for a tax refund. The resulting revenue is usually one of the chief sources of cash for a government entity. Income tax is a key source of funds that the government uses to fund its activities and serve the public. It is considered one of the more fair forms of taxation, since it is only imposed if a person or business has been successful enough to generate taxable income. Thus, its impact on the poor or unprofitable is minor to nonexistent.

Most tax rates are progressive, which means that the tax rate increases as the level of income increases. The reasoning behind this tax structure is that the poor are less able to pay taxes, while the rich have more excess cash with which to pay taxes.

The amount of income tax paid can be reduced by a number of deductions, which are allowed as the result of legislation by the relevant government entity. These deductions are usually intended to foster certain types of behavior by taxpayers.

Sales Tax

A sales tax is a tax imposed on retail goods and services at the point of sale. The tax is collected by the entity selling the product or service to a third party, and is remitted to the applicable government entity at regular intervals. Sales taxes are a key form of revenue for state, county, and local governments.

The imposition of this tax affects the consumer directly on each purchase for nonexempt goods and services. Some consumers may find it advantageous to “cross the border” to pay less taxes than in their home state for larger purchases.

The Organization for Economic Cooperation and Development (OECD) has found that sales taxes are one of the least harmful types of taxes for the economy; they minimally hinder growth and investment. Because the rate of a sales tax does not change based on a person’s income or wealth, sales taxes are generally considered regressive. However, it has been suggested that any regressive effect of a sales tax could be mitigated, e.g., by excluding rent, or by exempting “necessary” items, such as food, clothing and medicines. A regressive tax is generally a tax that is applied uniformly. This means that it hits lower-income individuals harder”.

Many consider sales tax to be regressive, as it is a larger burden and percentage of income for low-income earners.

Federal Excise Tax

An excise or excise tax is any duty on manufactured goods which is levied at the moment of manufacture, rather than at sale. Excises are often associated with customs duties (which are levied on pre-existing goods when they cross a designated border in a specific direction); customs are levied on goods which come into existence – as taxable items – at the border, while excise is levied on goods which came into existence inland.

Withholding Tax

Withholding tax is income tax withheld from employees’ wages and paid directly to the government by the employer, and the amount withheld is a credit against the income taxes the employee must pay during the year. It also is a tax levied on income (interest and dividends) from securities owned by a nonresident as well as other income paid to nonresidents of a country.

A withholding tax, also called a retention tax, is a government requirement for the payer of an item of income to withhold or deduct tax from the payment, and pay that tax to the government. In most jurisdictions, withholding tax applies to employment income. Many jurisdictions also require withholding tax on payments of interest or dividends. In most jurisdictions, there are additional withholding tax obligations if the recipient of the income is resident in a different jurisdiction, and in those circumstances withholding tax sometimes applies to royalties, rent or even the sale of real estate. Governments use withholding tax as a means to combat tax evasion, and sometimes impose additional withholding tax requirements if the recipient has been delinquent in filing tax returns or in industries where tax evasion is perceived to be common.

Typically the withholding tax is treated as a payment on account of the recipient’s final tax liability, when the withholding is made in advance. It may be refunded if it is determined, when a tax return is filed, that the recipient’s tax liability to the government which received the withholding tax is less than the tax withheld, or additional tax may be due if it is determined that the recipient’s tax liability is more than the withholding tax. In some cases the withholding tax is treated as discharging the recipient’s tax liability, and no tax return or additional tax is required. Such withholding is known as final withholding.

The amount of withholding tax on income payments other than employment income is usually a fixed percentage. In the case of employment income the amount of withholding tax is often based on an estimate of the employee’s final tax liability, determined either by the employee or by the government.

Trade Mark

A trademark is a brand name. A trademark or service mark includes any word, name, symbol, device, or any combination, used or intended to be used to identify and distinguish the goods/services of one seller or provider from those of others, and to indicate the source of the goods/services.

PROCEDURE TO FILE THE APPLICATION FOR REGISTRATION OF TRADE MARK

Basic information on the steps to be taken for the registration of a trademark in Pakistan is as under:_

  1. Filing of Application
  2. Preliminary Examination
  3. Final Order for Publication
  4. Publication In Trademarks Journal
  5. Opposition procedure
  6. Issuance of Registration Certificate
  7. Renewal

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