In Pakistan, withholding tax is an essential part of the income tax system, regulated by the Federal Board of Revenue (FBR). It is deducted from a wide range of payments, including salaries, dividends, interest, imports, and exports. Importantly, higher withholding tax rates are often applied to individuals or businesses that are not registered with the tax authorities, encouraging tax registration and compliance.
The government frequently adjusts withholding tax rates in the annual budget, based on revenue needs and economic conditions. Businesses are required to maintain accurate records of withholding tax deductions and deposits to ensure compliance with FBR regulations.