New TY2027 rates under Section 153 impose substantially higher withholding tax on non-ATL taxpayers across goods, services, contracts and e-commerce.
ISLAMABAD: The Federal Board of Revenue (FBR) has updated its withholding tax card for Tax Year (TY) 2027, setting out tax deduction rates applicable to payments for goods, services and contracts under Section 153 of the Income Tax Ordinance, 2001.
The updated rates distinguish between taxpayers on the Active Taxpayers List (ATL) and non-ATL persons, with non-ATL taxpayers generally facing withholding tax rates twice as high as those applicable to ATL taxpayers.
Withholding tax on goods
Under the updated withholding tax card, the rate on the sale of rice, cotton seed and edible oils has been set at 1.5% for ATL taxpayers, compared with 3% for non-ATL taxpayers.
For companies engaged in toll manufacturing, withholding tax on supplies will be deducted at 9% for ATL taxpayers and 18% for non-ATL taxpayers. For companies other than toll manufacturers, the applicable rates are 5% and 10%, respectively.
For persons other than companies, supplies involving toll manufacturing will attract withholding tax at 11% for ATL taxpayers and 22% for non-ATL taxpayers. Supplies other than toll manufacturing will be subject to rates of 5.5% and 11%, respectively.
Withholding tax on services
The FBR has set the withholding tax rate for certain services at 7% for ATL taxpayers and 14% for non-ATL taxpayers.
For IT and IT-enabled services as defined under Section 2 of the Income Tax Ordinance, the applicable rates are 4% for ATL taxpayers and 8% for non-ATL taxpayers.
Independent professionals, including doctors, lawyers, architects, accountants and software engineers or developers working independently, will face withholding tax at 15% of the gross amount payable for ATL taxpayers and 30% for non-ATL taxpayers.
Payments by persons to electronic and print media for advertising services will attract withholding tax at 1.5% for ATL taxpayers and 3% for non-ATL taxpayers.
For companies providing terminal and port operating services, the rates have been prescribed at 12% for ATL taxpayers and 24% for non-ATL taxpayers.
Other services not covered by the specified categories will be subject to withholding tax at 14% of the gross amount payable for ATL taxpayers and 28% for non-ATL taxpayers.
Contract payments
For payments to sportspersons, the withholding tax rate has been set at 15% for ATL taxpayers and 30% for non-ATL taxpayers.
The rate applicable to contracts with companies is 7.5% for ATL taxpayers and 15% for non-ATL taxpayers.
In other cases, contract payments will attract withholding tax at 8% for ATL taxpayers and 16% for non-ATL taxpayers.
Export-related services
The FBR has prescribed a relatively lower withholding tax rate of 1% for ATL taxpayers and 2% for non-ATL taxpayers on payments for rendering or providing specified services to exporters or export houses.
The lower rates are intended to apply to qualifying export-related services under the relevant provisions of the withholding tax framework.
E-commerce payments
The updated TY2027 withholding tax card also covers payments for digitally ordered goods and services through e-commerce platforms, including websites.
Where payments are made through digital means or banking channels by a payment intermediary, the withholding tax rate is 1% of the gross amount payable for ATL taxpayers and 2% for non-ATL taxpayers.
For cash-on-delivery transactions handled by courier services, the applicable rates are 2% for ATL taxpayers and 4% for non-ATL taxpayers.
Higher tax burden for non-ATL taxpayers
The updated withholding tax card highlights a substantial difference between ATL and non-ATL taxpayers across goods, services and contract payments.
The FBR has prescribed the rates under Section 153 of the Income Tax Ordinance, 2001, read with the relevant divisions of Part III of the First Schedule and Rule 1 of the Tenth Schedule.
The TY2027 framework covers a wide range of commercial transactions, including supplies, professional services, IT services, contracts, export-related services and e-commerce payments, with non-ATL persons generally subject to significantly higher withholding tax deductions.