Advance tax on domestic, international air tickets adjustable

Advance tax on domestic, international air tickets adjustable

The Federal Board of Revenue (FBR) has recently introduced revised advance tax rates on both domestic and international air tickets to be collected from purchasers.

These updated rates, outlined in the withholding tax card for Tax Year 2019, represent an effort to streamline tax collection in the aviation sector.

Under the new regulations, air travel agencies or individuals responsible for issuing air tickets are obligated to deduct an advance tax of 5 percent from the gross amount of the ticket. This tax is adjustable against the purchaser’s total tax liability for the year, providing a mechanism to account for the tax already paid.

For domestic air travel within Pakistan, the advance tax is collected under Section 236B of the Income Tax Ordinance, 2001. This means that individuals purchasing domestic air tickets will be subject to the prescribed advance tax.

However, the regulations for international air travel are more detailed. On the sale of international air tickets, the airline issuing the ticket is responsible for collecting advance tax. The rates vary based on the ticket class, with distinctions for first/executive class and other classes other than economy.

For international air tickets in the first/executive class, an advance tax of Rs16,000 per ticket will be collected. Meanwhile, for other ticket classes apart from economy, an additional Rs12,000 per ticket will be collected as advance tax. Importantly, there is no advance tax imposed on the purchase of economy class international air tickets.

The advance tax on international air tickets is collected in accordance with Section 236L of the Income Tax Ordinance, 2001, ensuring that tax collection is carried out as per legal provisions.

This update in advance tax rates serves the dual purpose of enhancing tax collection while simplifying the process for both the aviation industry and passengers. Passengers are now subject to varying rates based on the class of ticket purchased, allowing for a more equitable distribution of tax liability. As a result, these revisions are expected to bring more clarity and efficiency to the taxation system for air travel in Pakistan.