Karachi, December 5, 2024 – The Federal Board of Revenue (FBR) has updated advance income tax rates for retailers, distributors, dealers, and wholesalers applicable for the tax year 2025. These tax rates are governed by Sections 236G and 236H of the Income Tax Ordinance, 2001, and aim to enhance tax compliance and streamline revenue collection.
Advance Tax on Sales to Distributors, Dealers, and Wholesalers (Section 236G)
Under Section 236G, manufacturers and commercial importers must collect advance tax at the specified rates when selling to distributors, dealers, or wholesalers. This tax, collected at the time of sale, is adjustable against the final tax liability of the recipient for the tax year.
The updated rates are as follows:
• For fertilizer supplies:
o ATL-listed recipients (Active Taxpayers List for both Sales Tax and Income Tax): 0.25%.
o Non-ATL recipients: 0.7%.
• For non-fertilizer supplies:
o ATL-listed recipients: 0.1%.
o Non-ATL recipients: 2%.
These provisions encourage businesses to ensure their inclusion in the Active Taxpayers List (ATL) to benefit from significantly reduced tax rates.
Advance Tax on Sales to Retailers (Section 236H)
Section 236H applies to sales made by manufacturers, distributors, dealers, wholesalers, or commercial importers to retailers. It also extends to distributors or dealers selling to other wholesalers within the same sectors. Like Section 236G, this tax is adjustable against the taxable income of the retailer in the same tax year.
The advance tax rates under Section 236H are as follows:
• ATL-listed recipients: 0.5%.
• Non-ATL recipients: 2.5%.
Promoting Compliance and Efficiency
The updated tax measures aim to improve compliance and provide an equitable taxation framework for businesses. The FBR emphasizes the benefits of being listed on the ATL, such as lower tax rates and a smoother compliance process. These adjustments also encourage businesses to fulfill their tax obligations and maintain transparency in their operations.
The FBR has called on all stakeholders to review these updated rates and ensure compliance to avoid penalties. These advance taxes are expected to bolster revenue collection and foster a transparent and efficient taxation system in Pakistan, paving the way for better resource management and economic stability.