How to Pay Tax on Cryptocurrency ?
How much Tax to Pay on Cryptocurrency ?
How to calculate Tax on Crypto in Pakistan ?

Crypto Tax in Pakistan

In Pakistan, where cryptocurrency remains unregulated but not illegal, the tax implications on crypto transactions are governed by existing tax laws under the Federal Board of Revenue (FBR). Here’s an overview:

Tax Treatment of Crypto in Pakistan

1. Current Regulatory Stance:
   • Crypto exists in a legal gray area, with no dedicated regulations. However, the FBR has indicated that crypto transactions are taxable under general provisions of the Income Tax Ordinance 2001. As we are required to work out are taxation based on existing regulatory framework.
2. Probable Applicable Tax Categories:
   • Capital Gains Tax (CGT):
     • If crypto is treated as a capital asset (e.g., held for investment), gains may fall under CGT which is slabbed as per holding period and starts at 12.5% and reduces to 5% for assets held upto 5 years..
     • For listed securities, short-term gains (held <1 year) are taxed at 15%, while long-term gains are exempt. However, crypto is not classified as a “security,” so standard tax slabs (0–35%) may apply unless specified otherwise.
   • Business Income:
     • Professional Business Trading or mining activity might classify crypto as business income, taxed at individual/business tax rates (up to 35%).
   • Other Income:
     • Earnings from crypto (e.g., staking, rewards) could be taxed as “other income” under Section 39 of the Income Tax Ordinance.
3. Withholding Taxes:
   • Cross-border crypto transactions (e.g., remittances for trading) might attract withholding taxes under Section 7 (foreign payments) or Section 236P (non-filers), but clarity is lacking on the subject for taxation.
4. Reporting Obligations:
   • Taxpayers must disclose crypto gains in annual returns, even without explicit guidelines. Non-compliance risks penalties or audits if the FBR later enforces stricter oversight. Taxpayers may file their returns and include crypto under “other income” / “other profit” category while declaring crypto profits, with no need of mentioning the word “crypto” as that may do more harm.

Practical Considerations

• Ambiguity: The absence of specific rules creates uncertainty. For instance, the distinction between “investment” (CGT) and “trading” (business income) hinges on transaction frequency and intent.
• Compliance Risks: Underreporting or non-reporting could lead to legal exposure if the FBR formalizes crypto taxation retroactively.
• Professional Advice: Consult a tax expert to assess individual circumstances and ensure alignment with evolving FBR expectations especially those who have business activities related to crypto.

Future Outlook

• The FBR may issue formal guidelines as global pressure for crypto regulation grows. Pakistan’s National Blockchain Policy and Virtual Asset Bill signals potential future frameworks, but no timeline is confirmed as it has been barred from being presented once already.

Conclusion

While no dedicated crypto tax rules exist, taxpayers should proactively declare gains under existing categories (CGT or business income) and monitor regulatory updates. Prudent compliance minimizes risks in Pakistan’s evolving crypto landscape.

TL;DR : Pay 12.5% on your crypto gains as CGT. For individuals who are running paid groups / merchants or have other commercial endeavours related to crypto may consult a lawyer.