In a move to streamline and regulate the process of money remittance through prepaid cards, Pakistan has unveiled the tax rates for 2024.
The new tax regulations, particularly focusing on credit, debit, and prepaid card transactions, are aimed at ensuring transparency and compliance with tax obligations.
According to the recent announcement, every banking company in Pakistan is mandated to collect advance tax at the time of transferring any sum remitted outside the country on behalf of individuals engaged in credit card, debit card, or prepaid card transactions with foreign entities. This tax will be levied in accordance with the rates specified in Division XXVII of Part IV of the First Schedule.
The applicable rate of tax under the newly introduced section 236Y is set at 5% of the gross amount remitted abroad. However, it is noteworthy that the rate increases to 10% for individuals who do not appear on the Active Taxpayers List (ATL). The Active Taxpayers List is a comprehensive record of individuals who are actively fulfilling their tax obligations, and those absent from this list will be subject to a higher tax rate.
The objective behind this taxation structure is to encourage individuals to become active taxpayers, thereby contributing to the country’s revenue and development. By offering a lower tax rate to those on the ATL, the government aims to incentivize tax compliance and discourage tax evasion.
It is important to highlight that the advance tax collected under this section is adjustable, providing flexibility for taxpayers to account for their overall tax liabilities. This adjustment mechanism ensures that individuals are not burdened with excessive taxation and can appropriately manage their financial obligations.
The implementation of these tax rates on money remittance through prepaid cards signifies a broader effort by the government to modernize its taxation system and align it with the evolving financial landscape. With the increasing prevalence of digital transactions, authorities are keen on establishing effective measures to track and regulate cross-border financial activities.
The government’s decision to focus on prepaid cards specifically acknowledges the growing popularity of these financial instruments in the country. By incorporating them into the tax framework, Pakistan aims to strike a balance between facilitating convenient financial transactions and ensuring that individuals fulfill their tax responsibilities.
While the introduction of these tax rates may prompt initial concerns among some individuals, the government’s emphasis on tax compliance and the adjustable nature of the advance tax should provide reassurance. The broader impact of these measures is expected to contribute positively to the country’s economic stability and growth, aligning Pakistan with international standards in financial regulation and taxation.
