Withholding tax rates on transfer of motor car ownership

Withholding tax rates on transfer of motor car ownership

The Federal Board of Revenue (FBR) in Pakistan has announced the revised rates of withholding tax applicable to the transfer of registration or ownership of motor vehicles for the fiscal year 2021/2022.

The new rates, detailed under Section 231B(2) of the Income Tax Ordinance, 2001, provide a framework for the collection of withholding tax by the motor vehicle registration authorities.

Under the Income Tax Ordinance, the responsibility of collecting withholding tax on the transfer of motor vehicle ownership or registration lies with the motor vehicle registration authority. The tax is collected by the provincial authority at the time of the transfer from the person relinquishing ownership or registration.

The updated rates of advance tax on the transfer of ownership of motor vehicles are categorized based on engine capacity. The rates are as follows:

1. Up to 850cc: Zero Tax

• Individuals involved in the transfer of motor vehicles with an engine capacity of up to 850cc will be exempt from withholding tax.

2. 851cc to 1000cc:

• For tax filers (on Active Taxpayers List – ATL): Rs5,000

• For non-tax filers (not on ATL): Rs10,000

3. 1001cc to 1300cc:

• For tax filers: Rs7,500

• For non-tax filers: Rs15,000

4. 1301cc to 1600cc:

• For tax filers: Rs12,500

• For non-tax filers: Rs25,000

5. 1601cc to 1800cc:

• For tax filers: Rs18,750

• For non-tax filers: Rs37,500

6. 1801cc to 2000cc:

• For tax filers: Rs25,000

• For non-tax filers: Rs50,000

7. 2001cc to 2500cc:

• For tax filers: Rs37,500

• For non-tax filers: Rs75,000

8. 2501cc to 3000cc:

• For tax filers: Rs50,000

• For non-tax filers: Rs100,000

9. Above 3000cc:

• For tax filers: Rs62,500

• For non-tax filers: Rs125,000

These rates aim to streamline the process of collecting withholding tax on motor vehicle transfers and align with the principle of progressive taxation based on the engine capacity of the vehicles. It is important for both buyers and sellers to be aware of these rates to ensure compliance with the tax regulations during the transfer of motor vehicle ownership. The FBR encourages individuals to stay informed about any updates in tax laws and seek professional advice when needed.