Rate of income tax on export proceeds

Rate of income tax on export proceeds

ISLAMABAD: Federal Board of Revenue (FBR) has updated rate on income tax on export proceeds for tax year 2021 (July 01, 2020 to June 30, 2021).

The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendments brought through Finance Act, 2020.

The FBR updated rate of income tax on export proceeds under Section 154 of Income Tax Ordinance, 2001.

(1) The rate of tax to be deducted under sub-sections (1), (3), (3A), (3B) or (3C) of section 154 shall be 1 percent of the proceeds of the export.

(2) The rate of tax to be deducted under sub-section (2) of section 154 shall be 5 percent.

(3) The rate of tax to be deducted under sub-section (2) of section 153 shall be 1 percent:

Provided that in case of immovable property sold by auction, the rate of collection of tax under this section shall be 5 percent of the gross sale price.

The rate of income tax on export proceeds is applicable under Section 154 of the Ordinance as follow:

Section 154. Exports. — (1) Every authorized dealer in foreign exchange shall, at the time of realization of foreign exchange proceeds on account of the export of goods by an exporter, deduct tax from the proceeds at the rate specified in Division IV of Part III of the First Schedule.

(2) Every authorized dealer in foreign exchange shall, at the time of realization of foreign exchange proceeds on account of the commission due to an indenting commission agent, deduct tax from the proceeds at the rate specified in Division IV of Part III of the First Schedule.

(3) Every banking company shall, at the time of realization of the proceeds on account of a sale of goods to an exporter under an inland back-to-back letter of credit or any other arrangement as prescribed by the Board, deduct tax from the amount of the proceeds at the rate specified in Division IV of Part III of the First Schedule.

(3A) The Export Processing Zone Authority established under the Export Processing Zone Authority Ordinance, 1980 (VI of 1980), shall at the time of export of goods by an industrial undertaking located in the areas declared by the Federal Government to be a Zone within the meaning of the aforesaid Ordinance, collect tax at the rate specified in Division IV of Part III of the First Schedule.

(3B) Every direct exporter and an export house registered under the Duty and Tax Remission for Exports Rules, 2001 provided in Sub-Chapter 7 of Chapter XII of the Customs Rules, 2001 shall, at the time of making payment for a firm contract to an indirect exporter defined under the said rules, deduct tax at the rates specified in Division IV of Part III of the First Schedule.

(3C) The Collector of Customs at the time of clearing of goods exported shall collect tax from the gross value of such goods at the rate specified in Division IV of Part III of the First Schedule.

(4) The tax deductible under this section shall be a final tax on the income arising from the transactions referred to in this section.

(5) The provisions of sub-section (4) shall not apply to a person who opts not to be subject to final taxation:

Provided that this sub-section shall be applicable from tax year 2015 and the option shall be exercised every year at the time of filing of return under section 114:

Provided further that the tax deducted under this sub-section shall be minimum tax.

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