Withholding income tax rates that will be deducted at the import stage for the tax year 2019 have been unveiled, giving importers in Pakistan a clear picture of their tax obligations.
The Federal Board of Revenue (FBR) recently released the withholding tax rates for the year, specifying the rates and conditions for the deduction of withholding income tax from importers. These rates have been established under Section 148 of the Income Tax Ordinance, 2001.
One of the key developments is the empowerment of the collector of customs to collect withholding income tax from importers of goods. This collection is to be conducted at the same time and in the same manner as customs duties are paid for the imported goods.
The withholding tax rates are categorized based on the status of the importer, distinguishing between filers and non-filers of income tax returns.
For filers, the withholding tax rate is set at 1 percent of the import value, calculated after adding customs duty, sales tax, and federal excise duty. Non-filers, on the other hand, are subject to a slightly higher rate of 1.5 percent of the import value, increased by the aforementioned duties.
These rates are applicable to various categories of importers and goods:
1. Industrial Undertakings Importing Specific Items: For those importing remeltable steel (PCT Heading 72.04) and directly reduced iron for their own use, the filer rate is 1 percent, while non-filers are taxed at 1.5 percent. The same rates apply to individuals importing Urea, as well as manufacturers covered under specific notifications and importing relevant items.
2. Gold Importers: Importers of gold are also subject to the 1 percent rate for filers and 1.5 percent for non-filers.
3. Cotton Importers: Those importing cotton are taxed at the same rates as gold importers, with a 1 percent rate for filers and 1.5 percent for non-filers.
4. LNG Importers: Importers of liquefied natural gas (LNG) are subjected to a 1 percent withholding tax rate for filers and 1.5 percent for non-filers.
5. Pulse Importers: The rates for importers of pulses are slightly higher, with filers paying 2 percent and non-filers paying 3 percent.
6. Commercial Importers of Specific Items: Commercial importers covered under specific notifications and importing relevant items face a 3 percent withholding tax rate for filers and 4.5 percent for non-filers.
7. Coal Importers: Importers of coal are taxed at 4 percent for filers and 6 percent for non-filers.
8. Ship Breakers: Individuals involved in shipbreaking face a withholding tax rate of 4.5 percent for filers and 6.5 percent for non-filers.
9. Other Industrial Undertakings and Companies: For industrial undertakings and companies not included in the aforementioned categories, the rates are 5.5 percent for filers and 8 percent for non-filers.
10. Other Persons: Individuals not covered in the previous categories face a withholding tax rate of 6 percent for filers and 9 percent for non-filers.
It’s important to note that the withholding tax rate specified is final for all importers unless they are excluded under Section 148(7) and (8) of the Income Tax Ordinance, 2001. Adjustments to these rates are possible for specific categories and items, such as raw materials, plant and equipment by industrial undertakings for their own use, motor vehicles in CBU (completely built-up) condition by vehicle manufacturers, large import houses as defined by Section 148(7)(d), and foreign-produced films imported for screening and viewing purposes.
These withholding tax rates provide clarity to importers and align with the government’s efforts to ensure tax compliance and revenue collection in the country. Importers should be aware of their tax obligations and ensure that they meet the necessary filing requirements to benefit from the lower tax rates available to filers.
