Karachi, November 30, 2024– The Federal Board of Revenue (FBR) has issued the applicable tax rates for brokerage and commission in Pakistan under Section 233 of the Income Tax Ordinance, 2001, for the tax year 2024-25. These rates outline the responsibilities of principals in deducting advance tax on payments to agents, with the specifics detailed in the official notification.
Applicable Tax Rates
The tax rates for deduction under Section 233 are as follows:
| S. No. | Category | Rate of Tax |
| 1 | Advertising Agents | 10% |
| 2 | Life Insurance Agents (commission < Rs. 0.5 million per annum) | 8% |
| 3 | All Other Persons | 12% |
Key Provisions of Section 233
Sub-Section (1): Deduction by Principals
Any payment made by the Federal Government, a Provincial Government, a Local Government, a company, or an individual with an annual turnover exceeding Rs. 100 million (the “principal”) to a broker or agent must have advance tax deducted at the specified rates. This ensures tax compliance at the source.
Sub-Section (2): Retention by Agents
If an agent retains their commission or brokerage from payments remitted to the principal, it will be considered as having been paid by the principal. In such cases, the principal must collect advance tax from the agent on the retained amount.
Sub-Section (2A): Advertising Agents
When payments are made to advertising agents through electronic or print media, the principal must deduct an additional tax on top of any other tax required under Section 153. The tax is calculated on the payment amount for advertising services (excluding commission).
Sub-Section (2B): Minimum Tax for Advertising Agents
Tax deducted under Sub-Section (2A) will serve as the minimum tax on the income of advertising agents, ensuring that their tax liability is met even if no further taxable income is reported.
Sub-Section (3): Minimum Tax for Others
For other agents or brokers, the tax deducted under Sub-Section (1) will also act as the minimum tax on their income.
Clarifications
The FBR has clarified that income subject to tax under Sub-Sections (2B) and (3) refers to the amounts on which tax is deductible. These measures aim to simplify tax collection and ensure equitable contribution from all sectors.
Taxpayers are encouraged to comply with these regulations to avoid penalties and ensure smooth financial operations.
