Services tax on forex companies under provincial ambit

Services tax on forex companies under provincial ambit

Islamabad, January 21, 2024 – The Federal Board of Revenue (FBR) issued a clarification in response to recent news reports, asserting that the tax collection on services provided by foreign exchange companies falls under the jurisdiction of provinces.

The FBR’s statement comes as a response to a news report that raised questions about the tax implications of services offered by foreign exchange dealers.

According to the FBR, services provided by foreign exchange dealers within provinces are not subject to Federal Excise under the Federal Excise Act of 2005. The clarification aims to address any confusion surrounding the taxation framework applicable to foreign exchange services and emphasizes the division of tax jurisdiction between federal and provincial authorities.

In particular, the FBR responded to concerns related to withholding tax on foreign exchange remittances out of Pakistan. The FBR clarified that notices have been issued to foreign exchange companies where neither proof of tax payment nor exemption certificates issued by the concerned Commissioner were available. The FBR maintains that these notices are in accordance with the legal framework and will be enforced as part of its efforts to ensure tax compliance.

The FBR reiterated its commitment to a transparent and reliable tax system designed to maximize revenue potential, minimize revenue leakages through technology utilization, and facilitate ease of doing business. The Board emphasized its dedication to creating an environment that encourages tax compliance and fosters economic growth.

The statement also highlighted the FBR’s recent initiatives involving digital interventions, which have contributed to substantial revenue growth. The FBR emphasized its ongoing efforts to enhance tax compliance through innovative measures and technology-driven solutions.

The clarification aimed to address any misinterpretation of the FBR’s stance and underscored the importance of accurate reporting and contextual understanding. The FBR encouraged stakeholders to engage in open communication and cooperate in the drive for effective tax compliance, contributing to the overall economic development of the country.

As the FBR continues its endeavors to modernize tax administration and foster a culture of compliance, the clarification serves as a reminder of the evolving landscape in which taxation operates, adapting to meet the challenges of a dynamic and interconnected global economy.