Karachi, December 22, 2023 – The Federal Board of Revenue (FBR) took a significant step on Friday by unveiling draft rules aimed at digitalizing tax deduction and collection processes through the introduction of SWAPS (Synchronized Withholding Administration and Payment System).
The FBR issued SRO 1846(I)/2023, amending the Income Tax Rules, 2002, and proposing SWAPS Rules to revolutionize the withholding tax deduction and collection through digital means.
SWAPS RULES
Rule 46. Applicability:
(1) The provisions of this Chapter shall apply to all SWAPS agents as defined in clause (628) of section 2 of the Income Tax Ordinance, 2001, from such date, and to the extent notified by the Board. (2) The notified SWAPS agents shall fulfill requirements and obligations as prescribed in this Chapter.
Rule 47. Definitions:
(a) “Digital invoice” means an invoice generated from FBR’s web-based portal or computerized system integrated in the manner prescribed by the Board from time to time; (b) “SWAPS” means FBR’s web-based portal or any computerized system of the notified SWAPS Agents integrated with the Board as notified from time to time for the purpose of processing payments for goods and services; (d) “SWAPS Payment Receipt” means proof of payment relating to transactions carried out by a SWAPS Agent.
Rule 48. Registration:
Every SWAPS Agent shall update its IRIS profile upon notification under Sub-rule (1) of Rule (1).
Rule 49. Obligations and Requirements:
(1) A notified SWAPS Agent shall install and integrate such fiscal electronic device and software as approved by the Board for carrying out any transactions liable to withholding tax in the mode and manner prescribed in this Chapter. (2) From the date to be notified by the Board, no SWAPS Agent shall carry out any transactions specified in sub-rule (1), otherwise than through SWAPS. (3) From the date to be notified by the Board, no SWAPS Agent shall carry out any transaction specified in sub-rule (1) without receiving a digital invoice. (4) From the date to be notified by the Board, no SWAPS Agent shall carry out any transaction specified in sub-rule (1) unless the CNIC, NTN, and IBAN of the withholdee bear the same title. (5) The Board may prescribe additional requirements for integration, registration, or the mode and manner of carrying out transactions under this chapter. (6) Simultaneous digital payment is now required.
Rule 50. Payments Receipt:
The SWAPS Payment Receipt (SPR) shall include such particulars as may be prescribed by the Board, including: (a) SWAPS-ID, and SPR number; (b) name, address, NTN, and STRN of SWAPS Agent and the supplier; (c) quantity, and description of goods, contract or service; (d) for partial payments, number, date, and amount of partial payments; (e) vendor number, where applicable; (f) digital invoice number of the withholdee; (g) total amount of transaction, including and excluding taxes and duties; (h) withholding income tax section, and amount; (i) sales tax section, withholding sales tax schedule, chargeable and charged amount; (j) FED section, duty chargeable, and charged amount; (k) provincial sales tax section, chargeable, and charged amount, and (l) any other data field as prescribed from time to time.
Rule 51. Certificate of payment of tax:
The SWAPS Payment Receipt (SPR) shall be the only proof of collection or deduction of tax, including for claiming a refund, or tax credit.
Rule 52. Extension of time for integration as SWAPS Agents:
(1) A notified SWAPS Agent may request the Commissioner Inland Revenue through IRIS for an extension in time for registration or integration as a SWAPS Agent, stating the reasons for such delay. (2) The Commissioner Inland Revenue may allow the request in sub-rule (1), if deemed appropriate, for a period not exceeding thirty days, and not exceeding 90 days in aggregate.
Rule 53. Consequences of non-compliance:
A SWAPS Agent found to have contravened any of the provisions of this chapter shall be subjected to penal provisions prescribed under the Income Tax Ordinance, 2001.
The introduction of SWAPS rules by the FBR signifies a proactive step towards modernizing tax deduction processes, emphasizing the adoption of digital practices for a more streamlined and transparent taxation system. Stakeholders and businesses are encouraged to familiarize themselves with the proposed rules, as they could potentially reshape the landscape of tax compliance in Pakistan.
