Karachi, August 19, 2023 – Pakistan has officially released the income tax rates applicable to foreign shipping and air transport for the tax year 2023-24, which commenced on July 1, 2023.
These tax rates have been updated in accordance with the Income Tax Ordinance of 2001, issued by the Federal Board of Revenue (FBR).
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Under Section 7 of the Income Tax Ordinance, 2001, the taxation framework for income generated from shipping and air transport by non-resident individuals has been detailed. Here is a breakdown of the key provisions:
Sub-section (1): This sub-section stipulates that, in compliance with the Income Tax Ordinance, 2001, a tax shall be levied at the rates specified in Division V of Part I of the First Schedule. This tax applies to every non-resident individual engaged in the business of operating ships or aircraft as either the owner or charterer. It covers the following:
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(a) The gross amount received or receivable, whether within or outside Pakistan, for the transportation of passengers, livestock, mail, or goods embarked in Pakistan.
(b) The gross amount received or receivable within Pakistan for the transportation of passengers, livestock, mail, or goods embarked outside Pakistan.
Sub-section (2): This sub-section clarifies that the tax imposed on a non-resident individual under sub-section (1) will be computed by applying the relevant tax rate to the gross amount mentioned in sub-section (1).
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Sub-section (3): It is specified that this section shall not be applicable to any amounts that are exempt from tax under the provisions of this Ordinance.
The income tax rates imposed under Section 7 are as follows:
(a) In the case of income generated from shipping, a tax rate of 8% of the gross amount received or receivable shall be applied. (b) In the case of income derived from air transport, a tax rate of 3% of the gross amount received or receivable shall be applied.
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These tax rates aim to provide clarity and transparency in the taxation of income from foreign shipping and air transport activities in Pakistan for the tax year 2023-24. Non-resident individuals engaged in these businesses are urged to adhere to the specified rates and guidelines outlined in the Income Tax Ordinance, 2001, to ensure compliance with Pakistan’s tax regulations.
