Reduced Effective Tax Rate by 38% for National Retail Chain
Background
A prominent retail chain operating 60+ outlets across Pakistan was paying an effective corporate tax rate significantly above the standard rate due to an inefficient group structure and missed exemption opportunities. With annual turnover exceeding PKR 8 billion, the tax burden was a material drag on profitability.
The Challenge
The business had grown rapidly through acquisitions, leaving a fragmented group structure with multiple entities generating intercompany transactions subject to unnecessary tax leakage. The management team suspected they were overpaying but lacked the specialist expertise to quantify and address the issue.
Our Approach
Conducted a comprehensive tax health check across all group entities, mapping every intercompany transaction and identifying tax inefficiencies.
Analysed applicable exemptions under the Income Tax Ordinance 2001, including provisions for retail sector businesses and distributable profit structures.
Designed a group restructuring plan that consolidated entities, eliminated unnecessary intercompany transactions, and optimised the distribution of taxable income across the group.
Represented the client in FBR advance ruling applications to confirm the tax treatment of the proposed restructuring before implementation.
Managed the complete implementation of the restructuring over a 6-month period, including all regulatory filings and documentation.
The Outcome
The restructuring reduced the group's effective tax rate from 38% to approximately 23% — a 38% reduction in tax burden. Annual tax savings of PKR 180 million were achieved from the first year of implementation, with the one-time restructuring cost recovered within 4 months. The cleaner group structure also simplified reporting and reduced compliance costs.
Services Used
Ready to achieve similar results?
Schedule a free consultation with our advisory team.