FBR launches fixed tax rate scheme for small shop owners: Here’s what we know

Finance Minister Muhammad Aurangzeb on Friday announced a fixed tax rate scheme for small shop owners aimed at widening the tax base and bringing more businesses into the formal economy.

The scheme will apply to businesses with annual earnings of less than Rs20 million. According to the minister, the Federal Board of Revenue (FBR) is introducing the Fixed Tax Scheme after consultations with relevant stakeholders, with an emphasis on reducing and rationalising the overall tax burden.

Shopkeepers who opt into the scheme will be issued FBR plaques featuring a unique QR code to be displayed outside their shops, along with a point-of-sale system installed inside their premises.

Key Features

1. The scheme targets small traders and shopkeepers with an annual turnover of up to around Rs20 million.
2. Eligible applicants must generally have at least three years of business operations and maintain a physical business premises.
3. Existing taxpayers who were already filing returns before 2025 may also qualify if they meet the eligibility criteria.
4. Registration can be completed via the FBR IRIS portal, mobile app, or through authorised tax practitioners and facilitators.
5. Participation in the scheme is voluntary, but participants must maintain accurate and transparent financial records.
6. Tax liability is generally triggered only when annual income exceeds the prescribed minimum threshold.
7. Participants are subject to fewer audits unless discrepancies, unusual transactions, or unexplained income are detected.
8. Taxpayers are advised to maintain basic records of sales, expenses, and transactions for smooth compliance.
9. Certain withholding tax rules and statutory obligations may still apply under existing FBR regulations.
10. Non-compliance, including underreporting income or filing failures, may result in penalties and legal action.
11. Some small businesses may be exempt from mandatory POS systems or advanced digital integration requirements.
12. Registered taxpayers benefit from ATL status, lower withholding taxes, and improved financial credibility.