Karachi, September 11, 2024 – The Federal Board of Revenue (FBR) has announced the withholding tax rates for car purchases in the tax year 2024-25, with updated guidelines regarding the tax rates applicable to individuals on the Active Taxpayers List (ATL) and non-ATL individuals.
This new tax card is designed to streamline the taxation process for both imported and locally manufactured vehicles.
The FBR is tasked with collecting withholding tax on car purchases and registrations under section 231B of the Income Tax Ordinance, 2001. The withholding tax serves as an advance tax that is either refundable or adjustable against an individual’s total tax liability.
Breakdown of Withholding Tax Rates
The FBR’s updated tax rates apply based on the engine capacity of vehicles, ranging from smaller cars up to those with engines exceeding 3000cc. These rates are applied differently for taxpayers registered in the ATL and non-ATL.
1. Cars with engine capacity up to 850cc:
o ATL: 0.5% of the vehicle’s value
o Non-ATL: 1.5% of the vehicle’s value
2. Cars with engine capacity from 851cc to 1000cc:
o ATL: 1% of the value
o Non-ATL: 3% of the value
3. Cars with engine capacity from 1001cc to 1300cc:
o ATL: 1.5% of the value
o Non-ATL: 4.5% of the value
4. Cars with engine capacity from 1301cc to 1600cc:
o ATL: 2% of the value
o Non-ATL: 6% of the value
5. Cars with engine capacity from 1601cc to 1800cc:
o ATL: 3% of the value
o Non-ATL: 9% of the value
6. Cars with engine capacity from 1801cc to 2000cc:
o ATL: 5% of the value
o Non-ATL: 15% of the value
7. Cars with engine capacity from 2001cc to 2500cc:
o ATL: 7% of the value
o Non-ATL: 21% of the value
8. Cars with engine capacity from 2501cc to 3000cc:
o ATL: 9% of the value
o Non-ATL: 27% of the value
9. Cars with engine capacity above 3000cc:
o ATL: 12% of the value
o Non-ATL: 36% of the value
These rates are applicable for both imported and locally assembled vehicles, with the FBR defining how the value is calculated for tax purposes.
Taxation Basis for Vehicles
The FBR clarified that for the purpose of calculating withholding tax:
• For imported vehicles, the value will be determined based on the import value assessed by customs, along with any customs duty, federal excise duty, and sales tax payable at the import stage.
• For locally manufactured or assembled vehicles, the tax will be levied based on the invoice value, which includes all applicable duties and taxes.
• For auctioned vehicles, the tax will be calculated based on the auction value, which also includes all applicable taxes and duties.
This comprehensive approach ensures that all vehicle categories are taxed fairly, based on their import, assembly, or auction status.
Special Conditions for High-Value Vehicles
The FBR has also introduced a special taxation rule for vehicles where engine capacity is not the main factor. For vehicles with a value exceeding PKR 5 million, a tax rate of 3% will be applied. This rule is aimed at luxury or high-value vehicles, ensuring that expensive cars are taxed appropriately, regardless of their engine size.
For imported vehicles exceeding this value, the rate will be based on the increased value after including customs duty, sales tax, and excise duty. For locally manufactured or assembled vehicles, the invoice value will serve as the basis for tax calculation.
Encouraging ATL Compliance
This year’s withholding tax card encourages individuals to be on the ATL by providing significantly lower tax rates for those on the list. This policy aligns with the FBR’s broader strategy of improving tax compliance and increasing the number of registered taxpayers in the country. Non-ATL individuals face steep penalties in the form of higher tax rates, as evidenced by the difference between the 0.5% rate for ATL individuals and the 1.5% rate for non-ATL individuals on smaller cars, and even larger differences for high-end vehicles.
With these updates, the FBR hopes to create a more transparent and fair system of taxation for car owners, while motivating non-registered taxpayers to formalize their status. The new rates are expected to generate significant revenue for the government in the upcoming fiscal year.
