Pakistan Plans Mineral Incentives for Investors
The Pakistan mineral incentive package is set to offer tax breaks to foreign investors as the government tries to tap copper and gold reserves estimated at $8 trillion. The package will form part of the National Mineral Policy 2026, and the government plans to present it at the Pakistan Minerals Investment Forum on 12 and 13 November.
A model of the package, drawn up by consultancy firm Wood Mackenzie, includes reduced withholding tax rates on local goods and services: 4 per cent for local goods and 8 per cent for local services, with payment deferred until mine production begins.
Pakistan mineral incentive package: the headline offers
The most striking proposal is a 30-year exemption from general sales tax (GST) on the import and local purchase and supply of goods and services for mining projects during the exploration and development phase, until commercial production begins.
Another proposal says the exemption may continue after production begins, since much production is export-oriented and input sales tax may remain unadjusted.
Import duties on capital goods and equipment may also be exempted during exploration, development, and construction, which the model treats as an important part of the package.
Withholding tax on contractors and suppliers may also be reduced during exploration and development, with payment deferred until production.
A simpler tax on exports
A major proposal would replace the conventional corporate income tax with a 1 per cent presumptive tax on export proceeds, together with a 0.5 per cent development surcharge.
Wood Mackenzie identifies corporate income tax treatment as the single largest driver of improvement in an investor’s internal rate of return.
The firm has also proposed fiscal stability clauses to protect the terms that apply when a concession is awarded, broadly following the oil and gas framework. Stability matters because mine development can span several years.
Mining projects may also be exempted from super tax for at least 30 years, to improve project economics and keep Pakistan competitive with other mineral-producing jurisdictions. Withholding tax on dividends distributed by mining projects may be exempted for 15 years from commercial production, and inter-corporate dividends within mining project structures may also be exempted to avoid tax cascading within project structures.
Losses, depreciation, and the long wait for production
Exploration is long and uncertain, and the package reflects that. Exploration losses may be carried forward perpetually, recognising that spending can precede production by several years and can be spent on unsuccessful programmes.
Losses from failed projects may be adjusted against successful projects in the same group, subject to safeguards. Depreciation carry-forward may run for 10 years after production begins, with accelerated depreciation of up to 100 per cent, lifting the standard rate from 15 per cent to 30 per cent.
The model also proposes aligning the mining fiscal regime, where appropriate, with the oil and gas framework under the Fifth Schedule of the Income Tax Ordinance, 2001, given shared exploration risk, capital intensity, and long gestation.
Why the package was delayed, and what happens next
The package had been submitted to the Finance Division during the current year’s budget, but a comprehensive programme could not be introduced then, reflecting major challenges in finalising an investment-oriented policy.
The prime minister had directed the Petroleum Division to finalise the policy. Sources said the document was ready, but without a fiscal package it may not achieve its objectives.
The Finance Division alone can approve fiscal packages, so the Petroleum Division has asked it to prioritise the proposals for early approval. The measures may be announced at the forum.
Pakistan held a minerals investment forum last year and has set a target of $8 billion in mineral exports. The test will be whether investors see terms they can bank on. Reko Diq’s production timeline, already pushed to 2030, shows how long the gap between promise and production can run.
What is the Pakistan mineral incentive package?
It is a proposed set of tax breaks for foreign investors in mining, including GST and duty exemptions, reduced withholding tax, and a presumptive tax on exports, under the National Mineral Policy 2026.
How large are Pakistan’s copper and gold reserves?
The government estimates the reserves at $8 trillion, according to the report on the package.
What is the proposed GST exemption?
A 30-year exemption from GST on the import and local purchase and supply of goods and services during exploration and development, until commercial production begins, with a possible extension afterwards.
What would replace corporate income tax for miners?
A 1 per cent presumptive tax on export proceeds, plus a 0.5 per cent development surcharge.
When will the package be presented to investors?
The government plans to offer the incentives to foreign investors at the Pakistan Minerals Investment Forum on 12 and 13 November.
