Pakistan Unveils $8 Trillion Mining Investment Plan with Major Tax Incentives

The Pakistani government is preparing a fiscal incentive package aimed at unlocking an estimated $8 trillion in copper and gold reserves, as part of its National Mineral Policy 2026. The proposed measures, developed using a model by consultancy Wood Mackenzie, include tax reductions, exemptions, and deferred payments designed to improve the economics of mining projects and attract foreign investors.

The package is expected to be presented at the Pakistan Minerals Investment Forum (PMIF) scheduled for November 12 and 13. However, the proposals still require approval from the Finance Division, which the Petroleum Division has asked to prioritize. The incentive proposals were initially submitted during the current year’s budget process but were not fully incorporated, and sources indicate that without a corresponding fiscal package, the mineral policy may struggle to attract investment and address sector challenges.

Key proposals include a 30-year exemption from General Sales Tax (GST) on imported and locally purchased goods and services used during exploration and development, extending until commercial production begins. The government is also considering continuing the exemption after production starts, particularly for export-oriented projects where input sales tax may remain unadjusted. Under the Wood Mackenzie model, withholding tax rates on local goods and services would be reduced to 4% and 8%, respectively, with payment deferred until mining production begins.

The package also proposes exemptions from import duties on capital goods and project-related equipment during exploration, development, and construction. A major proposal would replace conventional corporate income tax with a 1% presumptive tax on export proceeds, alongside a 0.5% development surcharge. This measure is intended to create a simpler and more predictable tax framework for investors.

Wood Mackenzie’s analysis identifies corporate income tax treatment as the largest factor influencing an investor’s internal rate of return (IRR). The proposed package also includes a 30-year exemption from super tax for mining projects and a 15-year exemption from withholding tax on dividends distributed after commercial production begins. Inter-corporate dividends within mining project structures may also be exempted to prevent tax cascading.

The consultancy has proposed fiscal stability clauses to protect the tax terms applicable when an exploration concession or agreement is awarded, broadly following the stability provisions available to the oil and gas sector. Fiscal stability is particularly important for mining projects because development can take several years and investment decisions depend on long-term assumptions about taxation and government revenue.