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Tag: money changers

  • Pakistan amends tax laws to legalize money transfers

    Pakistan amends tax laws to legalize money transfers

    ISLAMABAD: Pakistan has amended tax laws to grant approval of legal banking channels to money transfer by money transfer operators and bureaus.

    The country presented budget 2022/2023 on June 10, 2022 and amended tax laws to grant approval the money transfer made through operators, bureaus and exchange companies.

    Through Finance Bill, 2022 amendment made to Section 111 of the Income Tax Ordinance, 2001. The Section 111 is related to undeclared money and assets.

    An explanation has been proposed to sub-section 4 of Section 111 to the Income Tax Ordinance, 2001, which is as follow:

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    “Explanation.— For removal of doubt, it is clarified that the remittance through money service bureaus, exchange companies or money transfer operators shall be deemed to constitute foreign exchange remitted from outside Pakistan through normal banking channels as provided under this sub-section.”

    Previously, the Federal Board of Revenue (FBR) on September 24, 2021 said that tax authorities will not ask source of foreign exchange not exceeding Rs5 million remitted through exchange companies (ECs) or money transfer operators.

    READ MORE: Pakistan amends laws to hunt tax evaders living abroad

    The FBR issued explanation to the Tax Laws (Third Amendment) Ordinance, 2021.

    The revenue body said Section 111(4) of Income Tax Ordinance, 2001 provides exclusion from unexplained income or assets to any amount of foreign exchange remitted from outside Pakistan through normal banking channels not exceeding Rs5 million en-cashed into rupees by a scheduled bank.

    The amendment through insertion of an explanation has now also treated remittances through Money Service Bureaus (MCBs), Exchange Companies (ECs) and Money Transfer Operators (MT0s) or other similar entities as foreign exchange remitted from outside Pakistan through normal Banking channels.

    After a formal clarification from SBP, Circular No. 05 of 2022 was issued by the Board.

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    Through this amendment the FBR’s clarification has now been made part of legislation to facilitate foreign remittance and align the law with innovations that have taken place in the banking industry.

    Through the Circular No. 05 of 2022, the FBR has withdrawn all the appeals pertaining to income tax exemption on inward foreign remittances.

    “In order to win the trust of the taxpayers and spare the public resources for more productive use elsewhere, all departmental appeals filed on the strict sensu interpretation of the law, be withdrawn immediately, and no further appeals be filed if one all fours of this clarification,” according to the circular.

    Further, all circulars and instructions issued on the matter previously issued stand rescinded, the FBR added.

  • Sales tax rate on services provided by stock brokers

    Sales tax rate on services provided by stock brokers

    KARACHI: Sindh Revenue Board (SRB) has updated working tariff for tax year and notified tax rates for services provided or rendered by specified persons or businesses.

    According to updated working tariff, the sales tax rates shall be applicable for following services:

    Stock brokers and commodity brokers shall pay sales tax at 13 percent on services provided or rendered by them.

    Underwriters shall be sales tax at the rate of 13 percent on services.

    Indenters are also required to pay 13 percent sales tax on services. However, services provided by indenters are subject to reduced rate of three percent sales tax on:

    1. Services provided or rendered by an indenter from a place of business in Sindh for which the registered person receives the value of the services from a place outside Pakistan in foreign exchange through banking channels in the business bank account of the registered person in the manner prescribed by the State Bank of Pakistan.

    2. Input tax credit/adjustment shall not be admissible.

    The sales tax rate shall be 13 percent on services provided by commission agents.

    Similarly, the rate of sales tax shall e 13 percent on services provided or rendered by packers and movers.

    Money changers are required to pay 13 percent sales tax on services However, there is exemption available on service provided or rendered by money changers in consideration of ‘spread’ charges as permitted by the State Bank of Pakistan in relation to the buying and selling of foreign currencies.