Tax rates on exports of goods, services for 2021-2022

Tax rates on exports of goods, services for 2021-2022

The Federal Board of Revenue (FBR) has issued updated rate of withholding income tax on exports of goods and services for fiscal year 2021-2022.

The FBR collects withholding tax on exports under Section 154 of the Income Tax Ordinance, 2001.

The revenue body issued the updated withholding tax after incorporating amendments made to Income Tax Ordinance, 2001 through Finance Act, 2021.

WITHHOLDING TAX CARD 2021-2022

The tax rate under Section 154(1) of the Income Tax Ordinance, 2001 shall be one per cent of gross value of export of goods. Every authorized dealer in foreign exchange shall deduct the tax from exporter at the time of realization of the export proceeds.

The tax rate under Section 154(2) of the Income Tax Ordinance, 2001 shall be on realization of proceeds on account of commission to:

i. non-export indenting agents: the tax rate shall be 5 per cent of gross value

ii. export indenting agent/exporting buying house: the tax rate shall be 5 per cent of gross value

The tax shall be collected by every authorized dealer in foreign exchange from non-export indenting agent, export indenting agent/export buying house at the time of realization of foreign exchange proceeds or indenting commission.

The tax rate under Section 154(3) of the Income Tax Ordinance, 2001 shall be 1 per cent on realization of proceeds on account of sale of goods to an exporter under inland back to back LC or any other agreement as may be prescribed by the FBR. Every banking company shall collect the tax from exporter at the time of realization of proceeds on account of sale of goods to an exporter.

The tax rate under Section 154(3A) of the Income Tax Ordinance, 2001 shall be 1 per cent of gross value on exports of goods located in Export Processing Zone (EPZ). EPZ authority is required to collect the tax from industrial undertaking located in the EPZ at the time of export of goods.

The tax rate under Section 153(3B) of the Income Tax Ordinance, 2001 shall be one per cent of gross value on payment to indirect exporters as defined in DTRE (Duty and Tax Remission for Exporters) Rules, 2001. The tax shall be collected by direct exporters/export house registered under DTRE Rules, 2001 from indirect exporters (defined under sub-chapter 7 of the chapter XII of the Customs Rules, 2001) at the time of payment against a firm contract.

The tax rate under Section 154(3C) of the Income Tax Ordinance, 2001 shall be 1 per cent of gross value on clearance of goods exported. Collector of Customs shall be responsible to collect the tax from exporter of goods at the time of export of goods.

The tax rate under Section 154A of the Income Tax Ordinance, 2001 shall be 1 per cent of the proceeds of the export and the rate shall be 2 per cent if the person is not on the Active Taxpayers List (ATL) issued by the FBR. The section requires:

Every authorized dealer in foreign exchange shall, at the time of realization of foreign exchange proceeds on account of the following, deduct tax from the proceeds at the rates specified in Division IVA of Part III of the First Schedule –

a. exports of computer software or IT services or IT enabled services in case tax credit under section 65F is not available;

b. services or technical services rendered outside Pakistan or exported from Pakistan;

c. royalty, commission or fees derived by a resident company from a foreign enterprise in consideration for the use outside Pakistan of any patent, invention, model, design, secret process or formula or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided to such enterprise;

d. construction contracts executed outside Pakistan; and

e. other services rendered outside Pakistan as notified by the Board from time to time.

Every authorized dealer in foreign exchange shall collect the tax from exporter at the time of realization of the export proceeds.

The tax deducted under Section 154 of the Income Tax Ordinance, 2001 is a final tax.

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