Government rejects proposal to withdraw tax on inter-corporate dividends

The federal government has rejected a proposal to withdraw tax on inter-corporate dividends in the upcoming federal budget for 2026-27, according to sources familiar with the budget review process, Business Recorder reported. 

Sources said the proposal was discussed during a budget review meeting on Wednesday but was not approved. Sources said the International Monetary Fund had also opposed the proposal.

The Tax Policy Office of the Ministry of Finance had examined the proposal as part of broader consultations on corporate taxation and dividend treatment.

The proposal, which had been drafted as a relief measure for the corporate sector, sought the restoration of tax neutrality for dividend distributions within corporate group structures to reduce multiple layers of taxation.

According to officials, the proposal aimed to address concerns regarding repeated taxation on inter-corporate dividend flows within business groups.

“There are no chances of the proposal materialising,” sources said following the meeting.