Tax rates on payments for goods or services during TY22

Tax rates on payments for goods or services during TY22

The Federal Board of Revenue (FBR) has released the advance tax rates on payments for goods or services to non-residents for the tax year 2022.

These rates, outlined in the First Schedule of the Income Tax Ordinance, 2001, provide a structured framework for tax deductions applicable to various transactions with non-residents. The ordinance, updated up to June 30, 2021, incorporates amendments introduced through the Finance Act, 2021.

Section 153: Advance Tax Rates on Payments to Non-Residents

(1) Sale of Goods:

• In the case of the sale of rice, cotton seed, or edible oils, the rate of tax to be deducted is 1.5% of the gross amount payable.

• For clarity, “cotton seed and edible oils” specifically refer to cotton seed oil and edible oils.

• In the case of the sale of goods, including toll manufacturing:

• For companies, the rate is 4% of the gross amount payable.

• For other cases, the rate is 4.5% of the gross amount payable.

(2) Rendering of Services:

• For transport services, freight forwarding services, air cargo services, courier services, manpower outsourcing services, hotel services, security guard services, software development services, IT services, IT-enabled services, tracking services, advertising services (excluding print or electronic media), share registrar services, engineering services (including architectural services), warehousing services, services by asset management companies, data services provided under a license issued by the Pakistan Telecommunication Authority, telecommunication infrastructure (tower) services, car rental services, building maintenance services, services by Pakistan Stock Exchange Limited and Pakistan Mercantile Exchange Limited, inspection, certification, testing and training services, oilfield services, telecommunication services, collateral management services, travel and tour services:

• The tax rate is 3% of the gross amount payable.

• For other services:

• For companies, the rate is 8% of the gross amount payable.

• For other cases, the rate is 10% of the gross amount payable.

• For persons making payments to electronic and print media for advertising services:

• The rate is 1.5% of the gross amount payable.

(3) Payment to Sportspersons:

• The rate of tax to be deducted from payments to sportspersons is 10% of the gross amount payable.

• For companies, the rate is 6.5% of the gross amount payable.

• For other cases, the rate is 7% of the gross amount payable.

These rates, as specified under Section 153 of the Income Tax Ordinance, 2001, are crucial for businesses and individuals engaged in transactions with non-residents. It is essential for taxpayers to be aware of these rates to ensure compliance with tax regulations.

As part of the disclaimer issued by Team PkRevenue.com, it is important to note that while efforts are made to provide the correct version of the text, the team is not responsible for any error or omission. Taxpayers are encouraged to consult with tax professionals for a comprehensive understanding and application of the regulations in their specific circumstances.

The release of advance tax rates for payments to non-residents for 2022 provides clarity and a standardized approach to tax deductions. These rates contribute to a transparent and accountable taxation framework, enabling businesses and individuals to navigate their financial transactions in accordance with the prevailing tax regulations.