Karachi, May 25, 2024 – The Large Taxpayers Office (LTO) Karachi has reported a significant fiscal milestone, collecting Rs 4 billion in withholding tax from foreign payments made through debit and credit cards.
This remarkable collection spans the first ten months (July to April) of the current fiscal year 2023-24.
As the premier revenue-collecting entity of the Federal Board of Revenue (FBR), LTO Karachi has demonstrated its efficacy in tax administration and compliance. The tax was collected under Section 236Y of the Income Tax Ordinance, 2001, which mandates an advance tax on amounts remitted abroad via credit, debit, or prepaid cards.
The tax rates applied are tiered based on the taxpayer’s status. For individuals listed on the Active Taxpayers List (ATL), the rate is set at 5 percent. Conversely, those not on the ATL are subject to a 10 percent tax rate on their foreign transactions. This dual-rate system is designed to incentivize taxpayer registration and compliance, while also ensuring equitable tax collection.
The imposition and diligent collection of withholding tax on card payments abroad represent a substantial revenue stream for the FBR, contributing significantly to the overall tax revenue. The strategy underscores the LTO’s role in bolstering the nation’s fiscal health through robust tax enforcement mechanisms.
The Rs 4 billion collected by LTO Karachi not only underscores the volume of foreign transactions conducted by Pakistani residents but also reflects the increasing reliance on digital payment methods for international expenses. This trend is indicative of a broader shift towards digital finance, which the tax authorities have adeptly harnessed to augment revenue collection.
The proactive approach adopted by LTO Karachi in tracking and taxing foreign card payments highlights the office’s commitment to expanding the tax base and enhancing revenue generation. This initiative is pivotal in ensuring that the country’s tax framework keeps pace with evolving financial behaviors and technological advancements.
Looking ahead, the FBR and LTO Karachi are likely to continue refining their strategies to maximize tax compliance and collection. Stakeholders within the financial sector, as well as taxpayers, are urged to remain cognizant of these regulations to ensure smooth and compliant financial transactions.
In conclusion, the successful collection of Rs 4 billion in withholding tax on foreign payments via cards is a testament to LTO Karachi’s strategic efficiency and its crucial role in supporting Pakistan’s economic infrastructure.
