Rate of tax on exports during Tax Year 2022

Rate of tax on exports during Tax Year 2022

The Federal Board of Revenue (FBR) has provided clarity on the tax rates applicable to exports for the tax year 2022, as outlined in the First Schedule of the Income Tax Ordinance, 2001.

The FBR, in its commitment to transparency, issued an updated version of the Income Tax Ordinance, 2001, incorporating amendments introduced through the Finance Act, 2021, up to June 30, 2021.

The prescribed rates of tax on exports are delineated as follows:

1. Tax Deduction under Section 154:

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

2. Tax Deduction under Section 154 (Sub-section 2):

• For deductions made under sub-section (2) of section 154, the applicable rate of tax shall be 5 per cent.

3. Tax Deduction under Section 153 (Sub-section 2):

• The rate of tax to be deducted under sub-section (2) of section 153 shall be 1 per cent.

Provided: In the case of immovable property sold by auction, the rate of tax collection under this section shall be 5 per cent of the gross sale price.

4. Tax Deduction under Section 154A:

• The rate of tax to be deducted under section 154A shall be one percent of the proceeds of the export.

These tax rates on exports provide a structured framework for businesses and individuals engaged in export activities, offering clarity on the deductions applicable at various stages of the export process. The FBR’s proactive approach in communicating these rates ensures that taxpayers are well-informed and can adhere to the prescribed tax obligations.

The 1 per cent deduction on proceeds of export under sub-sections (1), (3), (3A), (3B), or (3C) of section 154 reflects a balanced approach, aiming to contribute to government revenue while not placing an undue burden on exporters. Similarly, the 5 per cent deduction under section 154 (Sub-section 2) provides a clear guideline for cases where a higher rate is deemed appropriate.

The inclusion of a 1 per cent deduction under section 153 (Sub-section 2) indicates the government’s commitment to a standardized approach in tax deductions related to export transactions. The provision for a higher rate in the case of immovable property sold by auction recognizes the specific nature of such transactions.

The introduction of section 154A, outlining a 1 per cent deduction on export proceeds, is a notable addition that contributes to the comprehensive approach of the tax framework. This provision, alongside the existing sections, provides a nuanced and well-defined structure for tax deductions in the realm of exports.

As businesses gear up for the tax year 2022, these rates will serve as a benchmark for compliance, ensuring that the export community is aligned with the tax regulations and contributing to the overall economic stability of the country. The FBR’s dedication to transparency and providing updated information is expected to facilitate a smoother tax filing process for taxpayers involved in export activities.