Written by Akhter Syed in Taxation Section 113 requires specified taxpayers to pay a minimum tax based on turnover when their normal tax liability falls below the prescribed threshold. ISLAMABAD: The Income Tax Ordinance, 2001 sets out the minimum tax regime applicable to certain taxpayers in Pakistan for Tax Year 2027, requiring them to pay a minimum amount of tax based on turnover where their normal tax liability falls below the prescribed threshold. The Federal Board of Revenue (FBR) has issued the Income Tax Ordinance, 2001 updated up to June 30, 2026, applicable to Tax Year 2027, covering the period from July 1, 2026 to June 30, 2027. Section 113 of the Income Tax Ordinance, 2001 sets out the minimum tax provisions applicable to specified taxpayers. Who is subject to minimum tax? Under Section 113(1), the minimum tax provisions apply to: • A resident company; • A permanent establishment of a non-resident company; • An individual having turnover of Rs100 million or above in Tax Year 2017 or any subsequent tax year; and • An association of persons (AOP) having turnover of Rs100 million or above in Tax Year 2017 or any subsequent tax year. The provision applies where, for any reason permitted under the Income Tax Ordinance or any other law, the taxpayer has no tax payable or paid for a tax year, or the tax payable or paid is lower than the minimum tax calculated at the prescribed percentage of turnover. When does minimum tax apply? Section 113 can apply where a taxpayer’s normal tax liability falls below the prescribed minimum because of factors including: Loss: Where the taxpayer incurs a loss during the year. Previous-year losses: Where a loss from an earlier tax year is set off against current-year income. Tax exemption: Where income is exempt from tax. Tax credits or rebates: Where available credits or rebates reduce the tax liability. Allowances and deductions: Where allowances or deductions, including depreciation and amortisation, reduce taxable income to the extent that the resulting tax is below the prescribed minimum. In these circumstances, the minimum tax is determined with reference to turnover rather than simply taxable profit. What is…