KARACHI – The Federal Board of Revenue (FBR) has introduced a streamlined procedure for taxpayers to apply for the reduced rate of withholding income tax on the import of raw materials through the online system, Iris.
This initiative aims to simplify the application process, making it more efficient and accessible for businesses.
Under the new procedure, taxpayers are required to file a single application (Application u/s 159(1) / 148 for reduced rate of withholding tax on Import) for quota allocation for the entire year. This application will include critical information such as the taxpayer’s overall annual requirement of raw materials, including HS Code(s), the quantity of raw material consumed during the previous year, and the quantity of raw material required during the current year, with a limit of up to 110 percent of the previous year’s consumption.
Notably, the system no longer necessitates the inclusion of additional import details, such as LC No., LC date, LC Value, etc., within this initial application. This simplification is expected to make the process faster and more user-friendly for taxpayers.
The Iris system will provide the taxpayer with data related to their import of raw materials during the previous year under the “Import History” tab. This information will be instrumental in assisting taxpayers with their annual application and ensuring that the quota allocation matches their requirements.
Once the application is submitted, the Commissioner Inland Revenue (IR) will review it and, after due diligence, grant approval for the import of specific HS Code(s) and quantity(s) at a reduced rate of withholding tax through an official order. This process ensures that the taxpayer qualifies for the reduced rate of withholding tax, and the validity period of this exemption is automatically determined by the system.
In the future, as businesses need to import additional raw materials not included in their original application, they can e-file new applications (Application u/s 159(1) / 148 for reduced rate of withholding tax on Import) for these supplementary imports. These new applications must include the previously omitted import details, such as LC No., LC date, LC Value, and others.
The Iris system will automatically process these applications based on the quota allocation previously granted by the Commissioner IR without requiring their direct involvement. This efficient approach ensures that the reduced rate of withholding tax is applicable to all eligible imports.
It is important to note that the system does not permit the repetition of HS Code(s) included in the original application in these supplementary applications. This restriction is in place to prevent any misuse of the system.
The FBR’s introduction of this online system for applying for a reduced rate of withholding tax on the import of raw materials represents a significant step towards digitalization and simplification of tax procedures. It not only streamlines the application process but also promotes transparency and efficiency in managing the import of essential raw materials for businesses.
The initiative is expected to be well-received by taxpayers, as it reduces the administrative burden associated with the application process and aligns with the government’s broader efforts to create a more business-friendly environment in Pakistan. By using the Iris system, the FBR aims to encourage compliance and facilitate economic growth by supporting businesses in their essential operations.
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110 percent of previous year’s consumption has been changed to 125%