After speculations of total ban on cryptocurrency owing to scams on a very large scale, the Pakistan government is looking into alternative ways. Crypto tax in Pakistan is still being pondered upon, but a 15% tax might be levied on the profits made from crypto trading. In 2021, $ 20 billion was traded in crypto and a profit of $ 650 million was realized in Pakistan. Such promising numbers have made a need for regulations and a tax regime very evident because people are interested in investing in crypto.
Over 9 million people in Pakistan own cryptocurrency, that is, a 4.1% of population hold crypto and the popularity is expected to increase over time with government’s potential regulations.
Do you have to pay crypto tax in Pakistan?
Crypto tax in Pakistan is a gray area as crypto trading is not illegal but there are also no regulations or taxes levied on them yet. Therefore, the risk of losing money is very high. Evident from the fact that the government almost banned crypto in 2021, a move opposed by industrial experts.
Although, a 15% tax on profits from crypto trading is being proposed.
When do you have to pay tax on crypto in Pakistan?
Under the proposed law, crypto gains will be charged as per the Section 37A of Income Tax Ordinance, 2001 and should be defined as “securities”.
What crypto transactions are taxable in Pakistan?
The crypto gains would be subject to taxation under the proposed law. Further, converting crypto into cash and kept as deposits in Foreign Exchange accounts or Roshan Digital Accounts would be taxed too.
What are the Crypto Tax Rates in Pakistan?
Currently there is no tax on holding or trading crypto assets in Pakistan. However, the proposed law envisages a tax rate of 15% on gains from sale of crypto, a 5% of tax on encashment and deposits in Foreign Exchange accounts and a 10% tax on if crypto assets are encashed and kept in Roshan Digital accounts.
Pakistan Income Tax Brackets (2023)
|INCOME BRACKET||TAX RATE (%)|
|LESS THAN 6,00,000||0|
|6,00,001 – 11,99,999||2.5|
|12,00,000 – 23,99,999||15,000 + 2.5% of amount exceeding 12,00,000|
|24,00,000 – 35,99,999||1,65,000 + 20% of amount exceeding 24,00,000|
|36,00,000 – 59,00,000||4,05,000 – 25% of amount exceeding 36,00,000|
|60,00,000 – 1,19,99,999||1,005,000 + 32.5% of the amount exceeding 6,000,000|
|1,20,00,000 AND ABOVE||Rs. 2,955,000 + 35% of the amount exceeding 12,000,000|
Pakistan Capital Gain Tax Rates (2023)
|Holding period||Tax (%)|
|Less than one year||15|
|From one year to two year||12.5|
|From two years to three years||10|
|From three years to four years||7.5|
|From four years to five years||5|
|From five years to six years||2.5|
|More than six years||0|
How is Tax Calculated on Cryptocurrency in Pakistan?
Although there is no tax on cryptocurrency currently in Pakistan, if the proposed law was to pass and take effect:
According to FIFO Method, you sell your oldest acquired coin first and cost is calculated according to the respective prices at which the coin was bought. Whereas, in ACB, time of buying doesnt matter and average cost is taken into account.
Let’s take an example,
Say you bought 2 BTC for PKR 20,000 in 2020 and 4 BTC for PKR 60,000 in 2021. Then you sold 4 BTC in 2022 for PKR 1,00,000:
- FIFO METHOD
You sell 2 BTC from 2020 and 2 BTC from 2021. So cost price is:
= 20,000 + (2/4)*60,000
= PKR 50,000
Profit = 1,00,000 – 50,000
Here, taxes are levied on PKR 50,000 .
- ACB METHOD:
All coins are of the same denomination. Therefore, cost price for one coin:
= (20,000 + 60,000)/6
= PKR 13,333
So, cost price of 4 coins:
= PKR 53,333
Profit = 1,00,000 – 53,333
Here, taxes are levied on PKR 46,666.
Is there any Crypto Tax Free in Pakistan?
Currently, all crypto transactions are tax free in Pakistan.
Crypto Tax in Pakistan – FAQs
Do you have to pay tax when you buy crypto in Pakistan?
No, there is no tax regime related to crypto transactions and thus no taxes on buying crypto in Pakistan.
Do you have to pay tax when you sell crypto in Pakistan?
No, there is no tax regime related to crypto transactions and thus no taxes on selling crypto in Pakistan.
Do you have to pay tax when transferring crypto in Pakistan?
No, there is no tax regime related to crypto transactions and thus no taxes on transferring crypto in Pakistan.
Do you have to pay tax when spending crypto in Pakistan?
No, there is no tax regime related to crypto transactions and thus no taxes on spending crypto in Pakistan.
Is swapping crypto taxable?
No, there is no tax regime related to crypto transactions and thus no taxes on swapping crypto in Pakistan.
How much tax on crypto gains in Pakistan?
Currently, crypto is not regulated and thus not subject to any taxes in Pakistan. If the proposed law was to pass, then the taxation would look like:
Holding period Tax (%) Less than one year 15 From one year to two year 12.5 From two years to three years 10 From three years to four years 7.5 From four years to five years 5 From five years to six years 2.5 More than six years 0
How do I avoid capital gains tax on crypto in Pakistan?
Since, there are no taxes on crypto in Pakistan, you do not need to avoid these.