We have divided this article into three different parts, including the intro to NGOs, What is the current taxation system for NGO, and the Tax exemption certificate for a Non-profit Organization under Pakistan Tax Laws.
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This article is according to the laws of Pakistan. If you are not able to fully consume the content, you can Message Scounts on WhatsApp for assistance/help or visit our office.
“Non-profit organization” means any person other than an individual, which is —
- Established for religious, educational, charitable, welfare 2[purposes for general public], or for the promotion of an amateur sport;
- Formed and registered 3[by or] under any law as a non-profit organization;
- Approved by the Commissioner for specified period, on an application made by such person in the prescribed form and manner, accompanied by the prescribed documents and, on requisition, such other documents as may be required by the Commissioner; and none of the assets of such person confers, or may confer, a private benefit to any other person;]
Taxation of Non-profit Organizations in Pakistan
Non-profit Organizations shall be allowed a tax credit equal to one hundred percent of their tax payable under any of the provisions of the Ordinance including minimum and final taxes in respect of incomes mentioned in sub-section (3) subject to the conditions and limitations laid down in subsection (4). (Refer to Section 100C of ITO, 2001)
Sub-section 4 of section 100C
Eligibility for tax credit shall be subject to the following conditions, namely:—
- Return has been filed;
- Tax required to be deducted or collected has been deducted or collected and paid;
- Withholding tax statements for the relevant tax year have been filed;
- The administrative and management expenditure does not exceed 15% of the total receipts:
Provided that clause (d) shall not apply to a nonprofit organization, if—
(i) charitable and welfare activities of the non-profit organization have commenced for the first time within the last three years; or
(ii) total receipts of the non-profit organization during the tax year are less than one hundred million Rupees; - Approval of Commissioner has been obtained as per the requirement of clause (36) of section 2: Provided that the condition of approval in respect of persons mentioned in Table-II of clause (66) of Part I of the Second Schedule to this Ordinance, shall take effect from the first day of July, 1[2023] and the requirements of clause (36) of section 2, shall not be applicable for earlier years;
- None of the assets of trusts or welfare institutions confers, or may confer, a private benefit to the donors or family, children or author of the trust or his descendants or the maker of the institution or to any other person: Provided that where such private benefit is conferred, the amount of such benefit shall be added to the income of the donor; and
- Total receipts of the non-profit organization during the tax year are less than one hundred million Rupees;
- A statement of voluntary contributions and donations received in the immediately preceding tax year has been filed in the prescribed form and manner.
Exemptions available for a Non-profit Organization under Pakistan Tax Laws
Non-profit Organizations may obtain an exemption certificate from the Federal Board of Revenue (FBR) regarding the taxes withheld under different sections by fulfilling the conditions mentioned in the relevant section.
Following are the commonly used sections where an NPO obtains the exemption certificates from FBR
- Dividend Income under section 150.
- Profit on debt under section 151.
- Payments for goods, services, and contracts – under section 153.
- Exports – under section 154.
- Export of Services – under section 154A.
- Rental income – under section 155.
- Advance tax at the time of registration of Motor Vehicle – under section 231B.
- Tax on motor vehicles – under section 234.
- Advance tax on Electricity Consumption – under section 235.
- Advance tax on Telephone and internet – under section 236.
(These are not the only, there might be other exemptions depending on the nature and transaction carried out by an NPO)
These exemptions can be obtained by applying through the FBR e-portal (IRIS), however, requirements must have fully complied otherwise the request may not be entertained or the FBR may ask for an inquiry.
For any guidance or for obtaining the exemption certificate from FBR, the taxpayers are suggested to contact Scounts Private Limited to get the job done.
Need help with your FBR exemption certificate or tax guidance? Scounts Private Limited has you covered. We make taxes easy, so you can relax. Get in touch with us for a hassle-free experience!
This blog post is a general answer to all the queries (Listed below) we received from our clients, related to Tax exemption certificate for a Non-profit Organizationcertificates
- How do I get an exemption certificate?
- How do I get the FBR Tax exemption certificate online
- Tax exemption certificate for non-profit organization in Pakistan
- Non Profit organization tax exempt in Pakistan
