Alternative Corporate Tax on accounting income versus normal tax.
Tax payable
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Alternative Corporate Tax
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Normal tax
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Your breakdown
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The floor that stops profitable companies from paying nothing
A company can show a healthy profit in its audited accounts and still report a tiny taxable figure once exemptions, accelerated depreciation, brought-forward losses and incentive deductions have done their work. Alternative Corporate Tax exists to close that gap. It is a parallel calculation: the company also works out tax as a flat percentage of its accounting income, the profit shown in the financial statements before all the tax-only adjustments, and pays whichever number is higher. Normal corporate tax on taxable profit remains the default, but ACT sets a floor underneath it so the headline profit cannot melt away to a near-zero bill. The mechanism is durable, but the two rates that drive it are set by the Finance Act and move from year to year, so treat the percentages here as the figures this calculator applies and confirm the live rates with the FBR.
This comparison tool is for company finance teams, directors and their advisers who want a quick read on which regime bites before the detailed return is built. You enter two numbers, accounting income and taxable profit, and it shows both computations side by side along with the amount actually payable.
Reading the two columns against each other
The arithmetic is deliberately simple so the comparison stays transparent. The tool multiplies accounting income by the ACT rate this calculator applies, currently 17 percent, and separately multiplies taxable profit by the normal company rate, modelled here at 29 percent. It then reports the larger of the two as your liability and tells you which one won. When taxable profit is a healthy share of accounting income, normal tax usually comes out on top and ACT never bites. ACT only takes over when deductions have pushed taxable profit far below the accounting figure, which is exactly the situation the rule was written to catch.
A useful way to think about it: divide your taxable profit by your accounting income. The lower that ratio, the more likely ACT overtakes normal tax. There is a crossover point where the two are equal, and below it the floor kicks in.
A worked comparison: PKR 50 million of book profit
Imagine a company with PKR 50,000,000 of accounting income whose taxable profit, after exemptions and deductions, has been brought down to PKR 20,000,000. Using the rates this calculator applies, ACT comes to 17 percent of PKR 50,000,000, which is PKR 8,500,000. Normal tax is 29 percent of PKR 20,000,000, which is PKR 5,800,000. Because the ACT figure is higher, the company pays PKR 8,500,000, an extra PKR 2,700,000 above what the normal computation alone would have demanded. That difference is the floor doing its job.
ACT, minimum turnover tax and super tax are not the same thing
Pakistan stacks several anti-avoidance and high-income charges that are easy to confuse. Minimum turnover tax under section 113 is a percentage of gross turnover and bites when a company makes a loss or a very thin profit, regardless of accounting income. Super tax under section 4C is an extra charge layered on the income of large companies and high earners, climbing through bands as income rises. ACT sits between them conceptually: it keys off accounting profit specifically. A company can find that minimum turnover tax, ACT and normal tax all produce different numbers in the same year, and the final liability is driven by whichever framework the law makes prevail. This tool isolates the ACT-versus-normal question; run the turnover and super tax checks separately.
Is any ACT I pay above normal tax lost forever?
Not necessarily. The design intent of ACT has generally allowed the excess paid over normal tax to be carried forward and adjusted against normal tax in later years, within a statutory window, when the company's taxable profit recovers. The carry-forward rules and the number of years they run for are exactly the kind of detail that gets adjusted, so confirm the current carry-forward position with the FBR or your tax adviser before relying on it in your planning.
Does ACT apply to every company?
No. ACT is aimed at companies and there have historically been carve-outs, for example certain insurance, banking, oil and gas, and specific exempt or specially-taxed sectors that compute tax under their own schedules. Small companies also face a different headline rate. If your company sits in one of those special regimes, the plain ACT-versus-29-percent comparison modelled here may not be the test that applies to you, so check your sector's treatment with the FBR.