How to Handle Taxes in Pakistan as a Startup and Freelancer (2025)
Struggling with Taxes in Pakistan? Here’s What Startups & Freelancers Need to Know
Handling taxes in Pakistan as a startup or freelancer isn’t just about compliance—it’s about unlocking business credibility, funding eligibility, and lower tax deductions. Whether you're earning from Upwork or building a SaaS product, this guide will walk you through how to manage taxes in Pakistan efficiently, from FBR registration to annual return filing.
1. Understand Your Tax Status
For Freelancers: Freelancers are considered individual taxpayers under Pakistani law. Your income is taxable under the head of "Income from Business or Profession". You must register with the FBR and file an income tax return annually, even if your income is below the taxable threshold. Filing helps you remain an Active Taxpayer, which comes with benefits (like lower withholding tax rates). For Startups: Startups registered as companies (Private Limited, LLP, etc.) are corporate entities. They need: - NTN (National Tax Number) - Sales tax registration (if selling goods/services subject to sales tax) - To file annual corporate income tax returns under the Income Tax Ordinance, 2001. 2. FBR Registration: Start Managing Taxes in Pakistan Legally Whether you’re freelancing solo or running a tech startup: - Register for NTN via the IRIS portal of FBR. - Use your CNIC (for freelancers) or company documents (for startups). - If offering taxable services, register for Sales Tax as well—especially for digital services, consultancy, software development, etc. Documents needed: - CNIC or incorporation documents - Business address & utility bills - Bank account maintenance certificate - Letterhead and contact info  3. Maintain Financial Records All Year Round Don’t wait until tax season. Instead: - Track income and expenses monthly - Maintain receipts, invoices, bank statements - Use accounting software like QuickBooks, Xero, or local tools like Befiler For startups: - Maintain proper books of accounts - Reconcile your sales tax, income tax, and payroll (if any) monthly 4. Know Which Taxes Apply to You Tax TypeFreelancersStartupsIncome TaxYes (as individuals)Yes (corporate rate applies)Sales Tax (Services)Yes (if providing taxable services)Yes (usually mandatory)Advance TaxYes (e.g., on payments via banks)Yes (withheld by clients/vendors)Super TaxNo (unless exceptionally high income)Yes (if taxable income > threshold)Withholding TaxYes (deducted by clients/banks)Yes (deduct and deposit for vendors)  5. File Tax Returns on Time Freelancers: - Annual Income Tax Return: Due by Sept 30 (unless extended). - Use the IRIS portal to submit. Startups: - Income Tax Return + Financial Statements (Audited) - Sales Tax Returns (Monthly by the 18th) - Payroll-related statements (if employees exist) 6. Manage Tax Deductions & Credits Startups and freelancers can reduce taxable income by deducting: - Business expenses (software, rent, equipment, marketing) - Utility bills, internet expenses - Travel and transport (if business-related) - Depreciation on fixed assets - Salaries paid to employees Pro Tip: Keep all proof in case of audit. 7. Why ATL Matters When Filing Taxes in Pakistan Filing your return ensures your name stays on FBR’s Active Taxpayer List (ATL). Benefits include: - Lower tax on bank transactions - Eligibility for government contracts - Trust & credibility in business Check ATL status here: https://www.fbr.gov.pk/ATL
8. Common Tax Filing Mistakes in Pakistan You Must Avoid
- Missing deadlines - Not registering for sales tax - Ignoring advance tax deductions on banking transactions - Underreporting income from foreign platforms (Upwork, Fiverr, Payoneer) - Not claiming allowable expenses 9. Consider Using a Tax Filing Platform or Consultant If you're unsure or overwhelmed: - Use platforms like Befiler, TaxDost, or hire a tax consultant. - A good consultant helps you optimize tax savings, file on time, and avoid penalties. 10. Stay Informed on Tax Laws in Pakistan as a Freelancer or Founder Tax laws evolve. As a founder or freelancer: - Subscribe to FBR updates - Join tax awareness sessions - Follow credible tax consultants or platforms Conclusion: Handling taxes may seem daunting, but with proper planning, registration, and timely filing, freelancers and startups in Pakistan can manage taxes efficiently and focus on growing their business. Being tax compliant isn’t just a legal requirement it’s a badge of credibility that builds trust with clients, investors, and regulators. Everything You Need to Legally Launch and Run a Business in Pakistan - SECP Registration Guide: Your journey starts with registering your business entity with the Securities and Exchange Commission of Pakistan this is the legal foundation of your company. - NTN Registration Guide: Without an NTN, you can’t open a business bank account or file taxes. Learn exactly how to get your National Tax Number via FBR’s IRIS system. - FBR Business Registration Explained: This critical step ensures you’re recognized as a tax-paying business and can operate lawfully under FBR regulations. - PSEB Registration Guide: Registering with the Pakistan Software Export Board boosts your IT business’s credibility, unlocks tax incentives, and enhances global visibility and we’ve provided a complete step-by-step guide to make it easy. Skipping any of these steps puts your business at risk of penalties, shutdowns, or lost credibility. Follow this complete path to register, comply, and grow with confidence. FAQ 1). Do freelancers and startups need to pay taxes in Pakistan? Yes. Both freelancers and startups are legally required to register with the FBR, file tax returns, and pay applicable taxes if their income exceeds the taxable threshold. 2). What taxes apply to freelancers? Freelancers may be subject to income tax and, in some cases, sales tax on services depending on the nature of their work and province. 3). What’s the tax rate for freelancers? Tax rates for individuals (including freelancers) are progressive, ranging from 0% to 35%, depending on annual income. Export of IT services may qualify for tax concessions. 4). What taxes apply to startups? Startups typically pay corporate income tax (standard rate is 29%), unless registered as a small company or availing startup exemptions under Section 100F of the Income Tax Ordinance. 5). How can I register with the FBR? Create an account on the IRIS portal, get your NTN, and register for income tax (and sales tax if applicable). Freelancers can register as individuals; startups register as companies or AOPs 6). Do I need a tax consultant? It’s recommended, especially for startups to hire a tax advisor for compliance, filing, and maximizing deductions, but freelancers can also file independently via the FBR IRIS portal. 7). What happens if I don’t file taxes? Non-filing can lead to penalties, loss of filer status, and higher withholding taxes on payments, contracts, and bank transactions. Read the full article
