Tax rates on payments to non-residents during TY22

Tax rates on payments to non-residents during TY22

In a move to streamline tax regulations and provide clarity to businesses, the Federal Board of Revenue (FBR) has released the advance tax rates on payments to non-residents for the tax year 2022.

The rates, outlined under the First Schedule of the Income Tax Ordinance, 2001, were updated up to June 30, 2021, with amendments incorporated through the Finance Act, 2021.

The advance tax rates, categorized under various sections of the Income Tax Ordinance, are as follows:

(1) Section 152 (1A): 7% Tax Deduction The rate of tax to be deducted from a payment referred to in sub-section (1A) of section 152 shall be 7 per cent of the gross amount payable. This applies to specific payments as outlined in the ordinance.

(1A) Section 152 (1AA): 5% Tax Deduction For payments falling under sub-section (1AA) of section 152, the rate of tax deduction is set at 5 per cent of the gross amount paid. This includes a separate category of payments subject to this specific rate.

(2) Section 152 (2): 20% Tax Deduction Payments under sub-section (2) of section 152 are subject to a 20 per cent tax deduction on the gross amount paid. This applies to a distinct set of transactions specified in the ordinance.

(3) Section 152 (1AAA): 10% Tax Deduction For payments referred to in sub-section (1AAA) of section 152, the rate of tax deduction is 10 per cent of the gross amount paid. This pertains to a specific category of transactions subject to this rate.

(3A) Section 152 (1D) and (1DA): 10% Tax Deduction on Capital Gains Under sub-sections (1D) and (1DA) of section 152, the rate of tax deduction is 10 per cent of the amount of capital gain. This is applicable for transactions involving capital gains.

(4) Section 152 (2A, clause a): Company – 4%, Other Cases – 4.5% Tax Deduction Payments under clause (a) of sub-section (2A) of section 152 are subject to different rates:

• In the case of a company, 4 per cent of the gross amount payable.

• In any other case, 4.5 per cent of the gross amount payable.

(5) Section 152 (2A, clause b): Variable Tax Rates For payments under clause (b) of sub-section (2A) of section 152, the tax rates vary based on the nature of services:

• 3 per cent of the gross amount payable for specific services.

• In other cases:

• In the case of a company, 8 per cent of the gross amount payable.

• In any other case, 10 per cent of the gross amount payable.

(6) Section 152 (2A, clause c): Variable Tax Rates for Sportspersons For payments under clause (c) of sub-section (2A) of section 152:

• 10 per cent of the gross amount payable in the case of sportspersons.

• 7 per cent of the gross amount payable for other cases.

It is crucial for businesses and taxpayers to familiarize themselves with these advance tax rates to ensure compliance with the Income Tax Ordinance, 2001. The FBR emphasizes the importance of accurate tax deductions to avoid penalties and promote a transparent and efficient tax system. (Disclaimer: The provided text is for informational purposes, and PkRevenue.com is not responsible for any errors or omissions.)