Islamabad – The Federal Board of Revenue (FBR) has released updated withholding tax rates on exports of goods and services for the fiscal year 2021-2022.
The amendments to the tax rates come in accordance with changes made to the Income Tax Ordinance, 2001 through the Finance Act, 2021.
Under Section 154 of the Income Tax Ordinance, 2001, the FBR is authorized to collect withholding tax on exports. The latest withholding tax card outlines the revised rates applicable to various categories of export transactions.
Withholding Tax Rates Overview:
1. Section 154(1):
• Tax Rate: 1% of the gross value of export of goods.
• Collection Method: Authorized dealers in foreign exchange deduct the tax from exporters at the time of realizing export proceeds.
2. Section 154(2):
• Tax Rate:
• 5% of gross value for non-export indenting agents.
• 5% of gross value for export indenting agents/exporting buying houses.
• Collection Method: Authorized dealers in foreign exchange collect the tax at the time of realizing foreign exchange proceeds or indenting commission.
3. Section 154(3):
• Tax Rate: 1% on realization of proceeds from the sale of goods to an exporter under an inland back-to-back LC or any other prescribed agreement.
• Collection Method: Banking companies collect the tax from exporters at the time of realizing proceeds.
4. Section 154(3A):
• Tax Rate: 1% of gross value on exports of goods located in Export Processing Zone (EPZ).
• Collection Method: EPZ authority is responsible for collecting the tax from industrial undertakings in the EPZ at the time of export.
5. Section 153(3B):
• Tax Rate: 1% of gross value on payments to indirect exporters defined in DTRE Rules, 2001.
• Collection Method: Direct exporters/export houses registered under DTRE Rules, 2001 collect the tax from indirect exporters at the time of payment against a firm contract.
6. Section 154(3C):
• Tax Rate: 1% of gross value on clearance of exported goods.
• Collection Method: Collector of Customs is responsible for collecting the tax from exporters at the time of export.
7. Section 154A:
• Tax Rate: 1% of proceeds of export; 2% if the person is not on the Active Taxpayers List (ATL) issued by the FBR.
• Collection Method: Authorized dealers in foreign exchange deduct the tax at the time of realizing foreign exchange proceeds.
The tax deducted under Section 154 of the Income Tax Ordinance, 2001 is considered final, providing clarity to exporters regarding their tax obligations on different types of export transactions. The FBR aims to ensure transparency and compliance within the export sector through these revised withholding tax rates.
