KARACHI: Pakistan has imposed tax at 10 per cent on non-resident persons not having permanent establishment in the country deriving income for various financial services.
According to interpretation of Finance Act, 2022 by PwC A. F. Ferguson & Co., non-resident persons not having a Permanent Establishment in Pakistan deriving income in the form of fees for money transfer operations, card network services, payment gateway services, interbank financial telecommunications services will be taxed at 10 per cent.
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Enabling withholding provisions have also been introduced in section 152 as under:
a) The banking companies will be responsible to withhold tax while making payments on account of any transaction fee or licensing fee or service charges or commission or fee or interbank financial telecommunication services.
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b) The exchange company licensed by the State Bank of Pakistan (SBP) will be required to withhold tax while making payment to non-resident global money transfer operators, international money transfer operators or other persons on account of service charges or commission or fee in relation to international money transfers or other cross border remittances facilitating outward remittances.
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In case of retention of above amounts by the non-resident persons, the local banking or exchange company, will be required to collect the amount of advance tax from such persons. Non-residents protected by the double tax treaties may be entitled to invoke the business profits article to claim exemption from such tax.
The rate of tax on ‘fees for offshore digital services’ has also been enhanced from 5 per cent to 10 per cent.
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