Karachi, September 7, 2024 – The Federal Board of Revenue (FBR) has released the updated withholding tax rates for exports, effective from the tax year 2024-25.
This announcement marks a significant shift from the previous final tax regime, under which exporters were required to pay a 1% withholding tax as their final tax liability.
The FBR’s recent update to the withholding tax card outlines the new tax rates under Section 154 of the Income Tax Ordinance, 2001. These changes apply to all exporters, whether they are listed on the Active Taxpayers List (ATL) or not.
Under the new regime, the withholding tax rate for export proceeds is set at 1% as stipulated in sub-section (1) of Section 154. This rate is consistent across various categories of exports, including those specified in sub-sections (3), (3A), (3B), and (3C) of the same section.
For exports of services, however, there is a notable reduction in the withholding tax rate. According to Section 154A, the withholding tax on the export of services is set at 0.25%. This reduced rate applies specifically to export proceeds from computer software, IT services, or IT-enabled services. To benefit from this lower rate, exporters must be registered with the Pakistan Software Export Board (PSEB). This concession is available for tax years 2024 through 2026.
In contrast, for IT exports that do not fall under the PSEB registration, the withholding tax rate remains at 1%. This distinction aims to provide targeted support to the IT sector while maintaining a uniform rate for other export categories.
The FBR’s decision to adjust the withholding tax rates reflects a broader effort to align tax policies with current economic conditions and industry needs. By offering a reduced rate for IT-related services, the FBR aims to foster growth in the technology sector, which has been a key area of focus for economic development.
Exporters and industry stakeholders are advised to review the updated tax rates and ensure compliance with the new regime. The FBR’s updated withholding tax rates are expected to streamline the tax process for exporters and provide clarity on tax obligations under the new system.
As the new tax year begins, it is crucial for exporters to stay informed about any further updates or changes in tax regulations that may impact their operations. The FBR’s latest update represents a significant shift in export taxation, reflecting the government’s ongoing efforts to support and enhance Pakistan’s export sectors.
