FBR advised to amend withholding tax on prize winnings

FBR advised to amend withholding tax on prize winnings

KARACHI: Federal Board of Revenue (FBR) has been advised to amend the income tax law related to withholding tax deduction on prize winnings.

Pakistan Business Council (PBC) in its budget proposals for 2020/2021 submitted to the FBR said that under Section 156 of the Income Tax Ordinance, 2001 requires a company to deduct 20 percent tax on “prize offered by companies for promotion of sale”.

The PBC suggested amended in the Section 156 that every person paying prize of prize bonds, or winning from a raffle, lottery, prize on winning a quiz, prize offered by companies for promotion of sale to end consumers, or cross-word puzzle shall deduct tax.

The PBC said that the clear intention of this section is to capture tax through withholding at source from persons who are recipients of these prizes or winnings; the intention is not to tax any person who belongs to the supply chain of the companies who offer prize for promotion of sales.

The income of the supply chain i.e. dealers, distributors is subjected to withholding tax in the shape of withholding taxes imposed under separate withholding regimes.

It is therefore suggested that to clear any ambiguity in law regarding application of this section, it may be amended to add the term “end consumers” to oust any person in the supply chain from the ambit of this section.