Income tax
Dividend withholding tax in Pakistan: section 150
Section 150 governs withholding tax deducted by a company at the time of paying a dividend to its shareholders. The rate depends on the type of company and recipient.
Standard rates
- Standard dividend rate: 15% for Active Filers, 30% for Non-Filers, treated as final tax
- Independent Power Producers where dividend tax is a pass-through item under specified agreements: 7.5% / 15%
- Companies with no tax payable due to income exemption, carried-forward losses, or tax credit claims: 25% / 50%
- Real Estate Investment Trusts (REITs): 15% / 30%
Mutual funds
| Income derived from average annual investment in debt securities | 29% / 58% for corporate recipients, 25% / 50% for others |
|---|---|
| Income derived from average annual investment in equities | 15% / 30% |
Why this matters for investors
Dividend withholding tax is final, meaning once it's deducted, the recipient generally has no further tax liability on that dividend income (subject to specific conditions). Because the non-filer rate is double the filer rate across most categories, staying on the Active Taxpayers List meaningfully improves your net return on dividend-paying investments.
If you hold shares, mutual fund units, or REIT investments and want to confirm the exact rate applicable to your situation, our team can help – reach out via the contact page.