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Tag: withholding tax

New slab for withholding tax on motor vehicle purchase recommended

KARACHI: Regional Tax Office (RTO) – II Karachi has recommended revision in slab for withholding tax collection on purchase of new motor vehicles from next fiscal year.

The RTO-II Karachi in its proposals for budget 2020/2021 suggested revision in existing slabs for withholding tax collection on motor vehicles.

The RTO-II Karachi proposed to create a new rate of withholding tax on purchase of motor vehicle engine capacity below 850CC.

At present the FBR is collecting Rs7500 as withholding tax on registration of new motor vehicle engine capacity up to 850CC. The RTO-II Karachi proposed to exempt withholding tax on vehicles of engine capacity up to 250CC.

The tax office suggested to create slab of Rs3,000 for registration of new motor vehicles with engine capacity between 251CC to 650CC.

Similarly, the RTO-II Karachi also suggested to bring change slabs of withholding tax rate on transfer of ownership of motor vehicles.

At present motor vehicles up to 850CC is exempted from tax at the time of transfer first tax rate is applicable at Rs5000 on engine capacity between 851CC to 1000CC.

The RTO-II Karachi suggested that the withholding tax rate should be exempted on transfer of motor vehicle up to 650CC. The tax office suggested that the tax rate for first slab should be Rs5000 for the motor vehicle transfer of engine capacity between 651CC to 1000CC.

The regional tax office recommended change in slabs of motor vehicle tax. Whereas, at present the motor vehicle tax on engine capacity up to 1000CC is Rs800.

The tax office proposed that motor vehicle tax rate should be exempted on vehicle with engine capacity up to 250CC. Meanwhile, the motor vehicle tax should be Rs800 on engine capacity between 251CC to 1000CC.

May 25, 2020
FBR proposed to ensure CPR for deposited withholding tax

KARACHI: Federal Board of Revenue (FBR) has been advised to ensure Computerized Payment Receipt (CPR) for deposited withholding tax in order to avert chances of revenue leakages.

Pakistan Business Council (PBC) in its proposals for budget 2020/2021 submitted to the FBR, said that presently the taxpayer has to deposit the withholding tax deducted fortnightly, i.e. within seven days from the end of each week ending on every Sunday.

In addition, certain WHT agent do not deposit on time and some agents do not deposit at all. This also includes agencies/govt. organizations in respect of withholding tax, where CPR is not provided hence revenue leakages to government in the absence of withholding tax deposit.

On the other hand, where withholding tax is deducted by agencies/government organization, but do not provide system (IRIS) generated CPR as they do not enter in the system. Therefore assesse cannot get input benefit due to non-availability of CPR from IRIS system on account of withholding tax in spite of reminders.

The PBC recommended that timeline of 7 to 13 days should be extended to one week after the month.

Besides, IRIS system should be applicable for all with holding agent including agencies/government organizations and CPR in respect of withholding tax facing authority should be available from IRIS.

This will help in ease of doing business and facilitate withholding tax agents.

Furhter, the proposed amendment will help in controling revenue leakages as well as assesse can claim input tax properly.

Thus neither it is loss to authority nor the assesse. In the absence of non-availability of CPR , this is an extra cost for doing business.

May 18, 2020
FBR urged to abolish withholding tax on telecom services

KARACHI: Federal Board of Revenue (FBR) has been recommended to abolish withholding tax on telecom services considering the rate is too high and a large segment of people living below poverty line.

Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 said that currently, telecommunication services in Pakistan are subject to withholding tax at 12.5 percent, which is much higher as compared to other sectors.

Since approximately 30 percent of the population lives below the poverty line and the percentage of return filers is also nominal, imposition of withholding tax on the entire subscriber base is neither fair nor based on sound principle of proportionate taxation.

The OICCI recommended the FBR to abolish withholding tax to promote the accessibility of internet/data services to the low-income groups.

The OICCI also highlighted the issue of sales tax on services applicable in provinces.

In Punjab, KPK, Baluchistan and Sindh, GST on telecom sector is charged from all consumers at 19.5 percent. In the federal capital, this rate is 17 percent.

It is pertinent to mention that the provinces are levying a much lower rate of GST on other services – i.e. 13 percent – 16 percent.).

The OICCI recommended:

i. Reduce and harmonize GST across the country – i.e. a single rate for all services across all jurisdictions.

ii. Since GST is a consumption tax on usage, the decrease in GST/FED rate will result in increase in usage of telecom services and consequently drive tax collection upwards.

iii. A recent GSMA study1 concluded that harmonization of GST on mobile services to 17 percent would yield have an estimated PKR 62 billion positive impact on the GDP and exchequer. Additionally, we can expect 4.5 million more subscribers primarily on mobile broadband, which will be further stimulate GDP growth.

May 14, 2020

FBR proposed to eliminate distortion in withholding tax on dividends from equity investments

KARACHI: Federal Board of Revenue (FBR) has been proposed to rationalize of withholding tax on dividends as higher rate from equity investments discourage investment in the capital market.

Pakistan Stock Exchange (PSX) in its proposals for budget 2020/2021 submitted to Federal Board of Revenue (FBR) said that withholding tax on profit from debt instruments is currently charged a lower rate compared to the withholding tax charged on dividend from equity investments.

The difference ranges between 2.5 percent – 5 percent. This reduces the incentive to invest in the equity market.

Tax treatment on various asset classes should not be the primary driver of investment decisions, the PSX said, adding that the profit on debt and dividends should receive the same tax treatment.

At present, it is observed that corporate profits are first taxed at company level, and subsequently, the resulting profits which are distributed as dividends are taxed at the individual level.

This is essentially a form of double taxation, and result in the misallocation of capital in an economy by giving an upper hand to fixed income investments.

To remove this discrepancy, the government should introduce a mechanism to eliminate the distortion on the tax charged on dividends, and make the effective tax rate equal to that on debt.

Tax rate on investments	Profit paid is more than rupees five hundred thousand	Profit paid is rupees five hundred thousand or less
Profit on Debt u/s 151	15 percent	10 percent
Sukuk-holder (individual or an association of person), if the return on investment is more than one million U/S 150A	12.5 percent
Sukuk-holder (individual and an association of person), if the return on investment is less than one million U/S 150A	10 percent
Dividend U/S 150 & 236S	15 percent

The PSX submitted following proposals:

i. Government should introduce a mechanism to remove the double taxation of company’s profits – once in the hands of the company, and once in the hands of shareholders as dividends – such that the effective tax rate on dividends is on par with profit on debt.

ii. Rationalize the current tax rate on dividends to make it equal to the tax rate on profit from debt.

Provided that there should be no withholding tax on dividend up to Rs100,000 per annum.

Giving rationale to the proposals, the PSX said that a similar tax treatment on dividend from equity investment and debt instrument will provide a level playing field to equities and attract higher inflows in the stock market. Further, it would lead to increase in numbers of UINs.

The PSX proposed following proviso should be inserted in section 150 and Section 236S to the Income Tax Ordinance, 2001:

“Provided that there should be no withholding of tax where amount does not exceed Rs100,000 per annum.”

Clause (b) Division-I, Part III, First Schedule to the Income Tax Ordinance, 2001, for the word ’15 percent’ shall be substituted by ’10 percent.’

May 11, 2020

PSX proposes reduction of withholding tax on margin financing transactions

KARACHI: Pakistan Stock Exchange (PSX) has proposed to reduce the rate of withholding tax in the gross income earned on margin financing transactions to 2.5 percent from existing 10 percent.
(more…)

May 11, 2020
FBR proposed revamping withholding tax regime, reducing to five rates

KARACHI: Federal Board of Revenue (FBR) has been proposed to revamped withholding tax regime and reduced the number of withholding tax rates to maximum five.
(more…)

May 7, 2020
CEO Jazz says abolishing withholding tax to benefit consumers

Chief Executive Officer (CEO) of Jazz, Aamir Ibrahim, has emphasized that abolishing the withholding tax on mobile phone services would directly benefit consumers by making telecom services more affordable.
(more…)

May 7, 2020
Exemption from withholding tax at import stage suggested

KARACHI: Pakistan Business Council (PBC) has suggested the tax authorities to exempt withholding tax at import stage for avoiding generation of tax refunds and expansion of industry.

In its proposals for budget 2020/2021, the PBC recommended exemption from collection of withholding tax under section 148 at import stage and exemption for manufacturing concerns under Section 153.

It said that procedures and rules for obtaining exemption certificates for import of plant and machinery and raw material by tax payers have serious restrictions, which causes hardship.

Corporate manufacturing sector should be excluded from the purview of income tax withholding at import stage under section 148 as well as from tax deduction on local supply under section 153.

Similar exemption is already given to the greenfield industries through the Finance Supplementary Second Amendment Act 2019 announced in March 2019.

The same exemption, however, is not available, for the brownfield expansion.

Moreover, all the companies engaged in manufacturing should be exempt from withholding of tax under section 153.

Similar exemption is available for Sales Tax in the Sales Tax Special Procedure (Withholding) Rules, 2007 via SRO 586 dated July 1, 2017.

Alternatively, issuance of exemption certificate from withholding under sections 148 and 153 should automatically trigger on the FBR portal based on payment of quarterly advance tax under section 147 to avoid harassment of genuine taxpayers.

This will enable taxpayers to avoid creating huge tax refunds and focus on more expansion.

This would increase the investments for brownfield capacity expansion as well and would provide a meaningful relief (similar to greenfield expansion) with regard to BMR and extension / expansion. Further, it will also attract foreign direct investment in the form of new expansion ventures as well as partnerships and hence will also result in export growth.

May 5, 2020
Tax collection from phone services jumps up 630 percent

ISLAMABAD: The collection of withholding tax from phone subscribers registered a phenomenal increase of 630 percent to Rs27 billion during first half of the current fiscal year, according to data made available to PkRevenue.com

The sources in Federal Board of Revenue (FBR) told that the restoration of withholding tax on phone usage by the Supreme Court of Pakistan (SBP) helped the tax authorities to generate substantial amount during the period under review.

The data revealed that the FBR collected withholding tax to the tune of Rs27 billion during first six months (July – December) 2019/2020 as compared with Rs3.7 billion collection in the corresponding period of the last fiscal year.

The FBR collects withholding tax on telephone usage under Section 236 of Income Tax Ordinance, 2001 from telephone subscribers and internet.

The tax rate is zero percent on monthly bill up to Rs1,000. However the bill exceeding Rs1,000 shall liable to tax rate at 10 percent.

In case subscriber of internet, mobile telephone and pre-paid internet or telephone card the tax rate shall be 12.5 percent of the amount of bill or sales price of internet pre-paid card or prepaid telephone card or sale of units through any electronic medium or whatever form.

The phone companies preparing bills or selling prepaid cards are responsible to collect withholding tax on behalf of the FBR from telephone subscribers, internet subscribers, purchaser of internet prepaid cards.

The withholding tax collected from phone usage is adjustable against the taxpayers’ liability.

The FBR incurred a loss of Rs55 billion in 2018/2019 due to suspension of withholding tax on telecommunication services by the Supreme Court of Pakistan.

April 17, 2020
Withholding tax exemption for cellular consumers under consideration

ISLAMABAD: The Committee on Issues of Cellular Mobile Operators has agreed to prepare proposals for withdrawal of withholding tax as a relief for cellular consumers in the wake of coronavirus outbreak.

First meeting of the Committee on Issues of Cellular Mobile Operators was held here on Monday. Federal Secretary Ministry of IT Shoaib Ahmad Siddiqui chaired the meeting.

It was decided that proposals shall be prepared for withdrawal of withholding tax for 90 days as a relief for cellular consumers during this situation in addition to the tax harmonization between Federation and provinces regarding FED/GST.

In line with directions of the Prime Minister, Committee on Issues of Cellular Mobile Operators was formed to evaluate the issues of Cellular Mobile Operators and formulate recommendations for onward submission to the Prime Minister’s Office including settlement of license renewal matters with cellular mobile operators that shall help the government in valuable income generation in the current crisis situation.

Matters related to, additional spectrum allocation in Pakistan and AJK & GB, mutually agreed license renewal frameworks, tax rationalization, Right of Way (RoW) and reduction of NADRA Biometric Verification Charges were discussed during the meeting.

During the meeting, NADRA was requested to reduce charges of biometric verification of SIM especially in view of this situation resulted after COVID-19 in the country.

Representative of NADRA sought sometime to discuss the matter with its Chairman and Board. The Chair directed NADRA to give its version in this regard next week.

Ministry of Industries and Production agreed to the proposal that Telecom sector should be given functional Industry status.

The telecom operators shared serious interest in additional spectrum auction in Pakistan and AJK & GB to facilitate quality mobile broadband services necessary assist people especially students and professional to work from home and comply to COVID_19 related advisory.

The Chair emphasised the need for urgent availability of required spectrum in Pakistan and AJK & GB and that Ministry of Kashmir Affairs & Northern Areas has already been sensitized to take lead on the matter for their respective areas in line with applicable laws.

The Chair directed PTA and telecom industry to work together to firm up proposals regarding data pricing to avoid abuse of service.

The meeting was attended by senior officers of the Ministry of IT, Cabinet Division, Ministry Finance, Ministry of Industries & Production, Federal Board of Revenue, representatives from PTA, NADRA and Cellular Mobile Operators.

April 14, 2020