Islamabad, June 9, 2023: Pakistan has introduced a withholding tax of up to 10 percent on individuals making foreign payments through debit and credit cards. Finance Minister Ishaq Dar announced the increase in tax rates during the presentation of the budget for the fiscal year 2023-24 on Friday.
The objective of this measure is to curb the outflow of dollars and improve the country’s foreign exchange reserves by addressing existing loopholes.
To achieve these goals, the government has decided to enhance the withholding tax rate on foreign payments made through banking channels using debit/credit cards.
For individuals appearing on the Active Taxpayers List (ATL), the withholding tax rate has been raised from one percent to five percent. On the other hand, individuals not listed on the ATL will be subject to a withholding tax rate of 10 percent.
The increase in tax rates aims to encourage individuals to utilize formal banking channels for foreign currency transactions, promoting transparency and accountability in financial transactions.
By imposing higher taxes on foreign payments made through cards, the government intends to discourage the outflow of dollars and strengthen the country’s foreign exchange reserves.
Minister Dar emphasized the importance of plugging loopholes and improving the country’s financial stability. This measure is part of broader efforts to manage the outflow of foreign currency and maintain a healthy balance of payments.
By implementing the withholding tax on foreign payments, the government seeks to ensure that individuals contribute their fair share to the national tax system and support the country’s economic growth.
The introduction of the withholding tax on foreign payments made via cards reflects the government’s commitment to maintaining a stable foreign exchange reserve and improving the overall financial health of Pakistan.