Exemption from withholding tax on foreign remittances may not practical for banks

Exemption from withholding tax on foreign remittances may not practical for banks

KARACHI: The government has granted withholding tax exemption on transfer of foreign remittances to Pak Rupee accounts. But tax experts said that bifurcating transactions for banks may not be practical.

Overseas Investors Chamber of Commerce and Industry (OICCI) said that currently withholding tax is applicable on certain banking transactions executed by the persons not appearing on the Active Taxpayers List.

The Finance Bill proposes to render such withholding inapplicable to Pak Rupee Account for the whole tax year to the extent of foreign remittance credited in such account.

“A customer can deposit funds in their PKR accounts through cash or clearing cheques also and it’s impractical for a Financial Institution to bifurcate the subsequent debit transactions executed by the customer between foreign remittance and local deposits.”

It is recommended that either the proposed clause (101AA) be omitted before the Finance Act 2020 is passed or relevant amendment be introduced in the said clause that it is only applicable on PKR accounts where no domestic credit transactions is executed by a taxpayer.

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