witholding of taxes
TRANSCRIPT
WITHHOLDING TAX(COLLECTION AND DEDUCTION OF TAX AT SOURCE)
Under the Income Tax Ordinance, 2001 and Sales Tax Act, 1990
Presented By:
Muhammad Abdullah Yusuf, FCA
Habib Fakhruddin, FCA
2
In the Name of Allah, the Most Beneficent, the Most Merciful
3
IN THIS PRESENTATION
Different colors have been used which means
These words have special meaning as defined in the Income Tax
Ordinance, 2001 or Sales Tax Act, 1990.
Additions or substitutions made through Finance Act, 2014
Deletions or omission made through Finance Act, 2014
4
WITHHOLDING INCOME TAX
1st SessionDefinitions – Relevant for today's workshop
Section wise under standing of:
Persons responsible - Withholding Tax Agents
Persons/transactions attracting withholding tax
Standard rates of withholding tax
Reduced rates of withholding tax
Value/amount on which withholding tax apply
Time of collection or deduction
Credit for tax withheld (Treatment)
Exceptions/exclusions
Related Q & A
5
DEFINITIONSPRINT OUT SEPARATELY PROVIDED
“Association of persons”
“Banking company”
“Company”
“Employee”, “Employer” and “Employment”
“Filer” and “Non-filer”
“Industrial undertaking”
“Permanent establishment”
“Person”
“Profit on debt” and “Debt”
“Public Company”
“Resident” and “Non-resident”
“Salary”
“Tax year”
“Turnover”
6
COLLECTION AND DEDUCTION OF TAX AT SOURCE – Sections 148 to 158
• Imports (Section 148);
• Salary (Section 149);
• Dividends (Section 150);
• Profit on debt (Section 151);
• Payment to non-residents (Section 152);
• Payment for goods and services (Section 153);
• Exports (Section 154);
• Income from property (Section 155);
• Prizes and winnings (Section 156);
• Petroleum products (Section 156A);
• Withdrawal from pension fund (Section 156B); and
• Time of deduction of tax (Section 158);
7
IMPORT OF GOODS
Section 148
Continued
Person(s) liable
to collect tax
Collector of Customs
From whom Importer of goods
Rates of tax
collection:
2015 2014
1. Industrial undertaking
importing remeltable steel (PCT
Heading 72.04) and directly
reduced iron for its own use
1.00% 1.00%
2. Persons importing potassic
fertilizers in pursuance of
Economic Coordination
Committee of the cabinet’s
decision No. ECC-155/12/2004
dated the 9th December, 2004
1.00% 1.00%
3. Persons importing urea 1.00% 1.00%
8
IMPORT OF GOODS
Section 148
Continued
Rates of tax
collection:
2015 2014
4. Manufacturers covered under
Notification No. S.R.O.
1125(I)/2011 dated the 31st
December, 2011
1.00% 1.00%
5. Persons importing pulses 2.00% 2.00%
6. Commercial importers covered
under Notification No. S.R.O.
1125(I)/2011 dated the 31st
December, 2011
3.00% 3.00%
7. Ship breakers on import of ships 4.50% *
8. Industrial undertakings not
covered under S. Nos. 1 to 7
5.50% 5.00%
* Not separately provided
9
IMPORT OF GOODS
Section 148
Continued
Rates of tax
collection:
2015 2014
9. Companies not covered under
S. Nos. 1 to 8
5.50% 5.00%
10.Persons not covered under S.
Nos. 1 to 9
6.00% 5.50%
11.Import of foreign produced film
for the purposes of screening
and viewing
* 12%
On Value of goods as determined under section 25 of the
Customs Act, 1969, as if the goods were subject to
advalorem duty increased by the Customs Duty, Sales
Tax and Federal Excise Duty, if any, payable in respect
of the import of the goods
* Not separately provided
10
IMPORT OF GOODS
Section 148
When At the same time and manner as the customs duty is
payable in respect of the goods imported
Additional
material
separately
provided
• Clarifications
Continued
11
IMPORT OF GOODS
Section 148Treatment Nature
Raw material, excluding edible oil and packing material,imported by an industrial undertaking for its own use
Adjustable
Edible oil and packing material (as raw material), imported bymanufacturers of vegetable oil or ghee or both for its own use
Adjustable/Minimum
Plant, machinery, equipment and parts imported by anindustrial undertaking for its own use
Adjustable
Fertilizer imported by manufacturer of fertilizer Adjustable
Motor vehicles in CBU (completely build up unit) conditionimported by manufacturer of motor vehicles
Adjustable
Any goods by large import houses Adjustable
Foreign produced film imported for the purposes of screeningand viewing
Adjustable
Foreign produced TV plays and serials Adjustable
Import of ships by ship breakers Final
All other goods Final /Adjustable*
12
SALARY
Section 149Person(s) liable
to deduct tax
Person responsible for paying salary
From whom Employee
Rates of tax
deduction
1. On salary excluding specified allowances
chargeable as a separate block of income and
Annual Average Rate (to be calculated as per
Rate Card as reduced by applicable Reduction in
Tax Liability) after making adjustment for:
a. any other adjustable tax collected or deducted
at source (which is not a final tax) from
employee during the tax year;
b. tax credit admissible under section 61, 62, 63
and 64 during the tax year;
c. any excess deduction or deficiency arising out
of any previous deduction; or
d. failure to make deduction during the year
Continued
13
SALARY
Section 149
Rates of tax deduction
Note: The adjustments at (a), (b) and (c)above can be made on submission ofdeclaration by the employee in theprescribed form.
2. On Transport Monetization for Civil Servants (afterdeduction of driver's salary) [Clause (27) of Part IIof 2nd Schedule]
5.00%
3. On flying allowance, not exceeding basic salary,paid to the pilots, flight engineers, navigators ofPakistan Armed Forces, Pakistani Airlines or CivilAviation Authority, Junior Commissioned Officers orother ranks of Pakistan Armed Forces [Clause (1)of Part III of 2nd Schedule]
2.50%
Continued
14
SALARY
Section 149
Rates of tax
deduction
4. On submarine allowance, not exceeding basic
salary, paid to the officers of the Pakistan Navy
[Clause (1) of Part III of 2nd Schedule]
2.50%
5. On all allowances, in excess of the basic pay, paid
to the pilots of Pakistani airlines [Clause (1AA) of
Part III of 2nd Schedule]
7.50%
6. On Directorship fee or fee for attending board
meeting
20.00%
On Salary / allowances etc. chargeable to tax
When At the time the salary is actually paid
Continued
15
SALARY
Section 149
Treatment
1. On Salary excluding following Adjustable
2. On Flying/submarine allowance of specifiedpersons
Separate block/fixed
3. On all allowances of pilots of Pakistani airlines Separate block/fixed
4. On Transport Monetization for Civil Servants Separate block/fixed
5. On Retirement/termination benefits (if opted) Separate block/fixed
6. On Arrears of salary (if opted) Separate block/fixed
Continued
16
SALARY
Section 149
Rate Card for calculating gross income tax on the taxable income from
salary, excluding specified allowance etc. is as under:
Taxable income
between
Rate of tax
(No Change as compared to tax year 2014)
Rs. 1 and
Rs. 400,000
00.00%
Rs. 400,001 and
Rs. 750,0000
5% of the amount exceeding Rs. 400,000
Rs. 750,001 and
Rs.1,400,000
Rs. 17,500 plus 10% of the amount exceeding Rs.
750,000
Rs.1,400,001 and
Rs.1,500,000
Rs. 82,500 plus 12.50% of the amount exceeding
Rs. 1,400,000
Rs.1,500,001 and
Rs.1,800,000
Rs. 95,000 plus 15% of the amount exceeding Rs.
1,500,000
Continued
17
SALARY
Section 149
Rs.1,800,001 and
Rs.2,500,000
Rs. 140,000 plus 17.50% of the amount
exceeding Rs. 1,800,000
Rs.2,500,001 and
Rs.3,000,000
Rs. 262,500 plus 20% of the amount
exceeding Rs. 2,500,000
Rs.3,000,001 and
Rs.3,500,000
Rs. 362,500 plus 22.50% of the amount
exceeding Rs. 3,000,000
Rs.3,500,001 and
Rs.4,000,000
Rs. 475,000 plus 25% of the amount
exceeding Rs. 3,500,000
Rs.4,000,001 and
Rs.7,000,000
Rs. 600,000 plus 27.50% of the amount
exceeding Rs. 4,000,000
Rs.7,000,001 and
above
Rs. 1,425,000 plus 30% of the amount
exceeding Rs. 7,000,000
Continued
18
SALARY
Section 149
Following additional material is separately provided
• Reduction in tax liability
• Annual average
• Change in salary during the tax year
• Change of employer during the tax year
• Retirement or termination benefits
• Arrears of salary
• Clarifications
19
DIVIDEND
Section 150
Person(s) liable to deduct tax
Person
From whom Recipients of dividend
Rates of taxdeduction
See Next Slide
On Gross amount of dividend
When At the time the dividend is actually paid
Treatment Separate charge/final
Continued
20
DIVIDEND
Section 150
Dividend received from: 2015 2014
Rate of deduction Rate of final tax
Rate deduction / final tax
Filer Non-filer No distinction
Power project privatized byWAPDA
7.50% 7.50% 7.50% 7.50%
Company set up for powergeneration
7.50% 7.50% 7.50% 7.50%
Company supplying coalexclusively to power generationprojects
7.50% 7.50% 7.50% 10.00%
Other companies excludingCollective investment scheme or amutual fund
10.00% 15.00% 10.00% 10.00%
Treatment of excess deduction from non-filer?
Continued
21
DIVIDEND
Section 150
Dividend received from: 2015 2014
Rate of deduction Rate of final tax
Rate deduction / final tax
Filer Non-filer No distinction
Collective investment scheme or a mutual fund:
Stock Fund (if dividend receiptsof the fund are less than capitalgains)
12.50% 12.50% 12.50% 10.00%
Stock Fund (if dividend receiptsof the fund are more than capitalgains)
10.00% 10.00% 10.00% 10.00%
Money market Fund, IncomeFund or any other fund:
o Received by an individualor an AOP
10.00% 10.00% 10.00% 10.00%
o Received by a company 25.00% 25.00% 25.00% 10.00%
22
PROFIT ON DEBT
Section 151(1)(a)Person(s) liable to deduct tax
Person
From whom Resident recipient of yield (Profit on debt)
Rate (Filer) 10.00%
Rate (Non-Filer) 10.00% where the profit on debt is upto Rs. 500,00015.00% where the profit on debt exceeds Rs. 500,000
On Yield (profit on debt) on an account, deposit or acertificate (excluding Behbood/Pensioner) under theNational Savings Scheme or Post Office SavingsAccount as reduced by amount of Zakat, if any, paid bythe recipient under the Zakat and Ushr Ordinance, 1980
When At the time the yield (profit on debt) is credited to theaccount of the recipient or is actually paid, whichever isearlier
Treatment Individual or association of persons Final @ 10% *
Company Adjustable
* Irrespective of being filer or non-filer and the excess deduction fromnon-filer is adjustable tax
23
PROFIT ON DEBT
Section 151(1)(b)Person(s) liable to deduct tax
• Banking Company;• Financial Institution
From whom Resident recipient of profit on debt on an account ordeposit
Rate (Filer) 10.00%
Rate (Non-Filer) 10.00% where the profit on debt is upto Rs. 500,00015.00% where the profit on debt exceeds Rs. 500,000
On Profit on debt on an account or deposit maintainedwith the person(s) liable to deduct tax as reduced byamount of Zakat, if any, paid by the recipient under theZakat and Ushr Ordinance, 1980
When At the time the profit on debt is credited to the accountof the recipient or is actually paid, whichever is earlier
Treatment Individual or association of persons Final @ 10% *
Company Adjustable
* Irrespective of being filer or non-filer and the excess deduction fromnon-filer is adjustable tax
24
PROFIT ON DEBT
Section 151(1)(c)
Person(s) liable
to deduct tax
• Federal Government;
• Provincial Government;
• Local Government
From whom Resident recipient of profit (profit on debt) on any
security
Rate (Filer) 10.00%
Rate (Non-Filer) 10.00% where the profit on debt is upto Rs. 500,00015.00% where the profit on debt exceeds Rs. 500,000
On Profit on debt on any security (other than an account,
deposit or certificate under the National Savings
Schemes or Post Office Account) issued by the
person(s) liable to deduct tax as reduced by amount of
Zakat, if any, paid by the recipient under the Zakat and
Ushr Ordinance, 1980
Continued
25
PROFIT ON DEBT
Section 151(1)(c)When At the time the profit on debt is credited to the account
of the recipient or is actually paid, whichever is earlier
Treatment Individual or association of persons Final @ 10% *
Company Adjustable
* Irrespective of being filer or non-filer and the excess deduction fromnon-filer is adjustable tax
26
PROFIT ON DEBT
Section 151(1)(d)
Person(s) liable
to deduct tax
• Banking Company;
• Financial Institution
• Company as defined in the Companies Ordinance,
1984
• Body Corporate formed by or under any law in force
in Pakistan
• Finance Society
From whom Resident recipient of profit on debt
Rate (Filer) 10.00%
Rate (Non-Filer) 10.00% where the profit on debt is upto Rs. 500,00015.00% where the profit on debt exceeds Rs. 500,000
On Profit on debt on any bond, certificate, debenture,
security or instrument of any kind issued by the
person(s) liable to deduct tax as reduced by amount of
Zakat, if any, paid by
Continued
27
PROFIT ON DEBT
Section 151(1)(d)
On the recipient under the Zakat and Ushr Ordinance, 1980
at the time the profit is paid
When At the time the profit on debt is credited to the account
of the recipient or is actually paid, whichever is earlier
Treatment Individual or association of persons Final @ 10% *
Company Adjustable
* Irrespective of being filer or non-filer and the excess deduction from non-filer is adjustable tax
28
NON-RESIDENT – ROYALTY or FEE FOR
TECHNICAL SERVICES – Section 152(1)
Person(s) liable
to deduct tax
Person
From whom Non-Resident Person
Rate of tax
deduction
15.00% or lower rate as per agreement for avoidance of
double taxation
On Gross amount of royalty or fee for technical services
chargeable to tax under section 6 (*)
When At the time the royalty or fee for technical services is
actually paid
Treatment Separate charge/Final
Continued
29
NON-RESIDENT – ROYALTY or FEE FOR
TECHNICAL SERVICES – Section 152(1)
* If the property or right giving rise to the royalty is effectively
connected with a permanent establishment in Pakistan of the non-
resident; or the services giving rise to fee for technical services is
rendered through a permanent establishment in Pakistan of the
non-resident, then such royalty and fee for technical services is
not chargeable under section 6. Such royalty and fee for technical
services for the purposes of deduction of tax at source falls under
section 152(2)
30
NON-RESIDENT – EXECUTION OF
CONTRACTS ETC. – Section 152(1A)
Person(s) liable
to deduct tax
Person
From whom Non-Resident Person
Rate of tax
deduction
06.00% or lower rate as per agreement for avoidance of
double taxation
On Gross amount of the payment (including an advance) on
account of:
(a) A contract or sub-contract under a construction,
assembly or installation project in Pakistan,
including a contract for the supply of supervisory
activities in relation to such project;
(b) Any other contract for construction or services
rendered relating thereto
(c) A contract for advertisement services rendered
by T. V. Satellite Channels
Continued
31
NON-RESIDENT – EXECUTION OF
CONTRACTS ETC. – Section 152(1A)
When At the time the amount is actually paid
Treatment If opted out of final tax regime Adjustable
Otherwise Final
32
NON-RESIDENT – INSURANCE AND RE-
INSURANCE PREMIUM – Section 152(1AA)
Person(s) liable
to deduct tax
Person
From whom Non-Resident Person
Rate of tax
deduction
05.00% or lower rate as per agreement for avoidance of
double taxation
On Gross amount of the insurance premium or re-
insurance premium, excluding payments made to a
permanent establishment in Pakistan of a non-
resident with the written approval of Commissioner
When At the time the amount is actually paid
Treatment Final
33
NON-RESIDENT – MEDIA PERSONS
Section 152(1AAA)
Person(s) liable
to deduct tax
Person
From whom Non-Resident Person relaying from outside Pakistan
Rate of tax
deduction
10.00%
On Gross amount paid for advertising services relayed from
out-side Pakistan
When At the time the amount is actually paid
Treatment Final
34
NON-RESIDENT – OTHER PAYMENTS
Section 152(2)Person(s) liable to deduct tax
Person
From whom Non-Resident Person
Rate of taxdeduction
20.00% or lower rate as per agreement for avoidance ofdouble taxation
Reduced rate 10.00% - On profit on debt payable to a non-resident person not having apermanent establishment in Pakistan[Clause (5A) of Part II of 2nd Schedule]
On Gross amount of any payment including profit on debt,but excluding (*):
When At the time the amount is actually paid
Continued
35
NON-RESIDENT – OTHER PAYMENTS
Section 152(2)
Treatment Profit on debt, derived by a non-residentnot having a permanent establishment inPakistan, on debt instruments,Government securities including treasurybills and Pakistan Investment Bonds wherethe investments are exclusively madethrough a Special Rupee ConvertibleAccount maintained with a Bank inPakistan
Final
Other payments Adjustable
* Exclusions • Payments which are specifically covered underother withholding tax provisions;
• Any payment that is taxable in the hands of apermanent establishment in Pakistan of thenon-resident, with the written approval of theCommissioner [Section 152(3)(b)]
Continued
36
NON-RESIDENT – OTHER PAYMENTS
Section 152(2)
* Exclusions • Any payment that is paid by a person who is liableto pay tax thereon as a representative of the non-resident under section 172(3) provided adeclaration to this effect is filed with theCommissioner prior to making the payment.[Sections 152(3)(c) and 152(4)]
• Any payment that is not chargeable to tax(conditions and restrictions apply) [Sections152(3)(d)]
Following additional material is separately provided
• Exclusions which are specifically covered under other withholding
tax provisions
• Conditions and restrictions applicable on any payment that is not
chargeable to tax
37
NON-RESIDENT – SALE OF GOODS, SERVICES AND
EXECUTION OF CONTRACTS – Section 152(2A)
Person(s) liable to deduct tax
• Federal Government;
• Company;
• Association of Persons constituted by, or under, law;
• Non-profit organization
• Foreign Contractor or Consultant;
• Consortium or Joint Venture;
• Association of Persons having turnover of fifty million rupees or more in the tax year 2007 or in any subsequent tax year;
• An Individual having turnover of fifty million rupees or more in the tax year 2009 or in any subsequent tax year; or
• A person registered under the Sales Tax Act, 1990
From whom Permanent establishment in Pakistan of a non-resident person
Continued
38
NON-RESIDENT – SALE OF GOODS, SERVICES AND
EXECUTION OF CONTRACTS – Section 152(2A)
Rates of taxdeduction
03.50% - Sale of goods
02.00% - Transport services
06.00% - Other services rendered or provided
06.00% - Execution of contact
On Gross amount of payment on account of:
a. Sale of goods inclusive of sales tax payable, ifany,;
b. Rendering of or providing of services inclusive ofsales tax payable, if any,; and
c. Execution of a contract inclusive of sales taxpayable, if any, other than a contract for the sale ofgoods or the rendering of or providing of services;
When At the time the amount is actually paid
Treatment Adjustable
39
SALE OF GOODS/SERVICES/EXECUTION OF
CONTRACTS – Section 153(1)
Person(s) liable to deduct tax
• Federal Government;
• Company;
• Association of Persons constituted by, or under, law;
• Non-profit organization
• Foreign Contractor or Consultant;
• Consortium or Joint Venture;
• Association of Persons having turnover of fifty million rupees or more in the tax year 2007 or in any subsequent tax year;
• An Individual having turnover of fifty million rupees or more in the tax year 2009 or in any subsequent tax year; or
• A person registered under the Sales Tax Act, 1990
From whom Resident person
Continued
40
SALE OF GOODS/SERVICES/EXECUTION OF
CONTRACTS – Section 153(1)
Continued
Rates of tax deduction:
On account of: 2015 2014
Sale of rice, cotton seed or edible oils 1.50% 1.50%
Sale of other goods by:
A company 4.00% 3.50%
Other than a company 4.50% 4.00%
Transport services 2.00% 2.00%
Other services provided or rendered by:
A company 8.00% 6.00%
Other than a company 10.00% 7.00%
Execution of Contract by:
A company 7.00% 6.00%
Other than a company 7.50% 6.50%
A sportsperson * Not separately provided 10.00% *
41
SALE OF GOODS/SERVICES/EXECUTION OF
CONTRACTS – Section 153(1)
Reduced rates 01.00% - Sale of rice by Rice Exporters Association ofPakistan to Utility Store Corporation, inaccordance with the provisions of theagreement, signed with Ministry of Food,Agriculture and Livestock on May 5, 2008[Clause (13HH) of Part II of 2nd Schedule]
01.00% - Distributors of cigarette and pharmaceuticalproducts [Clause (24A) of Part II of 2ndSchedule]
01.00% - Large distribution house who fulfill all theconditions for a large import house as laiddown under section 148(7)(d), for largeimport houses [Clause (24A) of Part II of 2ndSchedule]
01.00% - Local sale of steel scrap to steel melters whohave opted under Sales Tax SpecialProcedures and are compliantly filing returnsunder the said scheme [Clause (12) of PartIV of 2nd Schedule] Continued
42
SALE OF GOODS/SERVICES/EXECUTION OF
CONTRACTS – Section 153(1)
Reduced rate 01.00% - Local sale, supplies and services provided orrendered to the following categories of SalesTax Zero Rated taxpayers registered on orbefore June 30, 2011, namely:
a. Textile and articles thereof;
b. Carpets;
c. Leather and articles thereof includingartificial leather footwear;
d. Surgical goods; and
e. Sports goods
[Clause (45A) of Part IV of 2nd Schedule]
As may be directed by the Commissioner oncase to case basis [Section 153(4)]
On Gross amount of payment on account of:
a. Sale of goods inclusive of sales tax payable, if any,(‘Sale of goods’ includes sale of goods for cash oron credit, whether under written contract or not) ;
Continued
43
SALE OF GOODS/SERVICES/EXECUTION OF
CONTRACTS – Section 153(1)
On b. Rendering of or providing of services inclusive ofsales tax payable, if any, (‘Services’ includes theservices of accountants, architects, dentists, doctors,engineers, interior decorators and lawyers, otherwisethan as an employee); and
c. Execution of a contract inclusive of sales taxpayable, if any, other than a contract for the sale ofgoods or the rendering of or providing of services;
Excluding the following:
a. Payment for goods, services and execution of
contracts made to persons to whom the
Commissioner, by an order in writing directs to make
the payment without deduction of tax. [Section
153(4)]
Continued
44
SALE OF GOODS/SERVICES/EXECUTION OF
CONTRACTS – Section 153(1)
On Excluding the following:
b. Sale of goods by an importer of goods who has paid
tax at the time of import of such goods under section
148 and the goods are sold in the same condition as
they were when imported. [Section 153(5)(a) and
Clause (47A) of Part IV of 2nd Schedule]
c. Payments made to traders of yarn by the taxpayers
specified in the zero-rated regime of sales tax (as
provided under clause (45A) of Part-IV of the
Second Schedule) [Section 153(5)(b)]
d. Refund of any security deposit [Section 153(5)(c)]
e. Payment for execution of contracts representing the
cost of construction materials supplied to the
contractor by the Federal, Provincial or Local
Government [Section 153(5)(d)]
Continued
45
SALE OF GOODS/SERVICES/EXECUTION OF
CONTRACTS – Section 153(1)
On Excluding the following:
f. Payment for sale of goods made to a cotton ginner
who deposits in the Government Treasury, an
amount equal to the amount of tax deductible on the
payment being made to him, and evidence to this
effect is provided to the withholding agent [Section
153(5)(e)]
g. Payment for sale goods (purchase of an asset under
a lease and buy back agreement) by a modaraba,
leasing company, banking company or financial
institution. [Section 153(5)(f)]
h. Any payment for securitization of receivables by a
Special Purpose Vehicle to the Originator [Section
153(5)(g)]
Continued
46
SALE OF GOODS/SERVICES/EXECUTION OF
CONTRACTS – Section 153(1)
When At the time the amount is actually paid
Treatment Sale of goods
By a public company listed on astock exchange
Adjustable
By a company being manufacturerof such goods, other than ginnedcotton
Adjustable
By manufacturer of iron and steelproducts on sale of such goodsmanufactured by them
Adjustable
By large import houses Adjustable
By others Final//Adjustable*
Continued
47
SALE OF GOODS/SERVICES/EXECUTION OF
CONTRACTS – Section 153(1)
Treatment Rendering/providing of services
In case of a company Adjustable
In other cases Adjustable/Minimum
Execution of contracts
By public company listed on a stockexchange
Adjustable
By resident person providing servicesby way of operation of container orchemical or oil terminal at a sea-portin Pakistan or of an infrastructureproject covered by the Government’sInvestment Policy, 1997
Adjustable
By others including sportsperson Final
Following additional material is separately provided
• Clarifications
48
SERVICES OF STITCHING, DYING, ETC
Section 153(2)Person(s) liable
to deduct tax
• Exporter
• Export house
From whom • Resident person; and
• Permanent establishment in Pakistan of the non-
resident
Rate 1.00% 0.50%
On Gross amount of payment for providing of services or
rendering of services on account of Stitching, Dying,
Printing, Embroidery, Washing, Sizing and Weaving
When At the time the amount is actually paid
Treatment Final
49
EXPORT REALIZATIONS
Section 154(1) and (2)
Person(s) liable to deduct tax
Authorized dealer in foreign exchange
From whom • Exporter of goods; and
• Indenting commission agents
Rate 01.00% - On export of goods
05.00% - On indenting commission
On Foreign exchange proceeds of goods exported orindenting commission
When At the time of realization of the export proceeds orindenting commission
Treatment Final / Adjustable*
Following additional material is separately provided
• Clarifications
50
INDIRECT EXPORTS
Section 154(3)
Person(s) liable to deduct tax
Banking company
From whom Person
Rate 01.00%
On Realization of proceeds on account of sale of goods toan exporter under:a. an inland back-to-back letter of credit; orb. any other arrangement as prescribed by the Board
(*)
When At the time of realization of the sale proceeds orrealizing the payment made through crossed cheque
Treatment Final / Adjustable*
* (e.g. Payments made through crossed cheques to indirect exportersagainst Standard Purchase Order in the format prescribed by the StateBank of Pakistan).
51
EXPORTS BY INDUSTRIAL UNDERTAKING
LOCATED IN EPZ – Section 154(3A)
Person(s) liable
to deduct tax
The Export Processing Zone Authority established under
the Export Processing Zone Authority Ordinance, 1980
From whom Industrial undertaking located in the areas declared by
the Federal Government to be a Zone within the
meaning of the Export Processing Zone Authority
Ordinance, 1980
Rate 01.00%
On Proceeds of the export of goods
When At the time of export of goods
Treatment Final / Adjustable*
52
INDIRECT EXPORTERS
Section 154(3B)
Person(s) liable
to deduct tax
• Direct exporter;
• Export House registered under the Duty and Tax
Remission for Export Rules, 2001 provided in sub-
Chapter 7 of Chapter XII of the Customs Rules,
2001
From whom Indirect exporter (defined under sub-Chapter 7 of
Chapter XII of the Customs Rules, 2001)
Rate 01.00%
On Proceeds of the export of goods
When At the time of payment against a firm contract
Treatment Final / Adjustable*
53
EXPORTS (Land Routes)
Section 154(3C)
Person(s) liable to deduct tax
Collector of Customs
From whom Exporter of goods
Rate 01.00%
On Gross value of the goods exported
When At the time of export of goods
Treatment Final / Adjustable*
54
RENT
Section 155
Person(s) liable to deduct tax
• Federal Government; Provincial Government;
• Local Government;
• Company;
• Non-Profit Organization;
• Charitable Institution;
• Diplomatic Mission of a foreign state;
• Private educational institution;
• Boutique;
• Beauty parlour;
• Hospital;
• Clinic;
• Maternity home;• Individuals or association of persons paying gross
rent of rupees one and a half million and above in a year;
• Any other person notified by the Board (Till to date no such person has been notified)
Continued
55
RENT
Section 155
From Recipient of rent of immovable property
Rate 15.00% - Where the recipient of rent is acompany
As per - Where the recipient of rent is anRate individual or an association ofCard persons
On Gross amount of rent of immovable property (includingrent of furniture and fixtures, and amounts for servicesrelating to such property)
Continued
56
RENT
Section 155
When At the time the rent is actually paid
Treatment Adjustable
Rate card Gross Amount of
Rent between
Rate of tax deduction
Rs. 0 and
Rs. 150,000
0.00%
Rs. 150,001 and
Rs. 400,000
10% of the gross amount of rent
exceeding Rs. 150,000
Rs. 400,001 and
Rs. 1,000,000
Rs. Nil plus 10% of the gross
amount of rent exceeding Rs.
150,000
Exceeds
Rs. 1,000,000
Rs. 85,000 plus 15% of the gross
amount of rent exceeding Rs.
1,000,000
57
PRIZES AND WINNINGS
Section 156
Person(s) liable to deduct tax
Person
From whom Recipient of prize or winnings
Rate 15.00% - On Prize of a Prize Bond andCrossword Puzzle
20.00% - On all other prizes and winnings
On • Amount of prize on a prize bond;• Amount of prize or winnings from a raffle, lottery,
quiz or crossword puzzle;• Amount of prize offered by companies for promotion
of sale; or• Fair market value of the prize or winnings if it is not
paid in cash
When At the time the prize or winnings are paid
Treatment Final
58
COMMISSION/DISCOUNT ON PETROLEUM
PRODUCTS – Section 156A
Person(s) liable to deduct tax
Person
From whom Petrol pump operators
Rate 12.00% 10.00%
On Commission or discount allowed to the petrol pumpoperator
When At the time the commission is actually paid
Treatment Final
Following additional material is separately provided
• Clarifications
59
WITHDRAWAL FROM PENSION FUND
Section 156B
Person(s) liable to deduct tax
Pension Fund Manager
From whom Individuals maintaining pension accounts with anapproved pension fund
Rate Average rate of tax on the taxable income of theindividual for three preceding years
On • Any amount withdrawn before the retirement ageexcept under following situations (*)
• In excess of 50% of the accumulated balancewithdrawn on or after the retirement age exceptunder the following situations (**)
When At the time of withdrawal from pension fund
Treatment Adjustable
Continued
60
WITHDRAWAL FROM PENSION FUND
Section 156B
Exceptunderfollowingsituations(*)
• Where the eligible person suffers from any disability asmentioned in sub-rule (2) of rule 17 of the Voluntary PensionSystem Rules, 2005 which renders him unable to continuewith any employment at the age which he may so elect to betreated as the retirement age or the age as on the date of suchdisability if not so elected by him [Section 156B]; or
• Payment to the nominated survivor of the deceased eligibleperson which would be treated as if the eligible person hadreached the age of retirement [Section 156B];
Exceptunderfollowingsituations(**)
• Where the withdrawal is Invested in an approved incomepayment plan of a pension fund manager [Section 156B];
• Where the withdrawal is paid to a life insurance company forthe purchase of an approved annuity plan [Section 156B]; or
• Where the amount is transferred to another individual pensionaccount of the eligible person or the survivors’ pension accountin case of death of the eligible person maintained with anyother pension fund manager as specified in the VoluntaryPension System Rules, 2005 [Section 156B].
61
WITHHOLDING INCOME TAX
1st Session
Related Q & A
62
WITHHOLDING INCOME TAX
2nd SessionSection wise under standing of:
Persons responsible - Withholding Tax Agents
Persons/transactions attracting withholding tax
Standard rates of withholding tax
Reduced rates of withholding tax
Value/amount on which withholding tax apply
Time of collection or deduction
Credit for tax withheld (Treatment)
Exceptions/exclusions
Related Q & A
63
COLLECTION AND DEDUCTION OF TAX AT SOURCE – Sections 231A to 236J
• Cash withdrawal from a bank (Section 231A);
• Issuance of banking instruments (Section 231AA);
• Registration, transfer or purchase of motor vehicles (Section 231B);
• Brokerage and commission (Section 233);
• Stock exchange transactions (Section 233A);
• Margin financing in shares business (Section 233AA)
• Motor vehicles (Section 234);
• CNG stations (Section 234A);
• Industrial and commercial consumers of electricity (Section 235);
• Domestic electricity consumption (Section 235A)
• Steel melters, re-rollers, etc (Section 235B)
• Telephone users (Section 236);
Continued
64
COLLECTION AND DEDUCTION OF TAX AT SOURCE – Sections 231A to 236J
• Sale by auction (Section 236A);
• Domestic air travel ticket (Section 236B)
• Sale, purchase or transfer of immovable property (Section 236C and
236K)
• Functions and gatherings (Section 236D)
• Foreign-produced TV plays and serials (Section 236E)
• Cable operators and other electronic media (Section 236F)
• Sales to distributors, dealers & wholesalers (Section 236G)
• Sales to retailers (Section 236H)
• Fees of educational institutions (Section 236I)
• Commission agents and arhatis etc. (Section 236J)
• International air travel ticket (Section 236L)
65
CASH WITHDRAWAL FROM A BANK
Section 231A
Person(s) liable to deduct tax
Banking Company
From whom Persons withdrawing cash, other than the following:
a. Foreign diplomat;
b. Diplomatic mission in Pakistan; or
c. Person who produces a certificate from theCommissioner that his income during the tax
year is exempt. [Section 231A(2)]
Rate (Filer) 00.30%
Rate (Non-Filer) 00.50%
On Cash withdrawn exceeding Rs. 50,000 during a day
When At the time the cash is withdrawn
Treatment Adjustable
Following additional material is separately provided
• Clarifications
66
ISSUANCE OF BANKING INSTRUMENTS
Section 231AA
Person(s) liable to collect tax
• Banking Company;
• Non-banking financial institution;
• Exchange Company;
• Any authorized dealer of foreign exchange
From whom • Persons (excluding *) to whom sale of anyinstrument (including Demand Draft, Pay Order,Call Deposit Receipt, Short Term Deposit Receipt,Security Deposit Receipt, Rupee Travelers Chequeor any other instrument of bearer nature) is madeagainst cash payment;
• Persons (excluding *) who transfer any sumagainst cash through online transfer, telegraphictransfer, mail transfer or any other mode ofelectronic transfer
Continued
67
ISSUANCE OF BANKING INSTRUMENTS
Section 231AA
From whom Excluding:
• A foreign diplomat or a diplomatic mission inPakistan; or
• A person who produces a certificate from theCommissioner that its income during the tax year isexempt.
Rate 00.30%
On The amount/value of the instrument or transfer if itexceeds Rs. 25,000 during a day
When At the time of sale of instrument or transfer
Treatment Adjustable
68
REGISTRATION, TRANSFER OR PURCHASE
OF MOTOR VEHICLE - Section 231B
Person(s) liable to collect tax
• Motor vehicle registration authorities of Excise and Taxation Department;
• Manufacturer of motor vehicle
From whom • Persons applying for registration new locallymanufactured motor vehicle (if tax has not beenpaid by the person applying for registrationunder this section to the manufacturer or undersection 148 (import stage));
• Persons purchasing motor car or jeep from amanufacturer;
• Persons applying for transfer of registration orownership of a private motor vehicle, within fiveyears from the date of first registration,
Other than a foreign diplomat or diplomatic mission inPakistan [Proviso to section 231B]
Rates of taxcollection
According to the engine capacity (see next slide)
Continued
69
REGISTRATION, TRANSFER OR PURCHASE
OF MOTOR VEHICLE - Section 231B
Continued
Rates of tax collection
Engine capacity: 2015 2014
Filer Non-filer No distinction
Upto 850cc Rs. 10,000 Rs. 10,000 Rs. 10,000
851cc to 1000cc Rs. 20,000 Rs. 25,000 Rs. 20,000
1001cc to 1300cc Rs. 30,000 Rs. 40,000 Rs. 30,000
1301cc to 1600cc Rs. 50,000 Rs. 100,000 Rs. 50,000
1601cc to 1800cc Rs. 75,000 Rs. 150,000 Rs. 75,000
1801cc to 2000cc Rs. 100,000 Rs. 200,000 Rs. 100,000
2001cc to 2500cc Rs. 150,000 Rs. 300,000 Rs. 150,000
2501cc to 3000cc Rs. 200,000 Rs. 400,000 Rs. 150,000
Above 3000cc Rs. 250,000 Rs. 450,000 Rs. 150,000
70
REGISTRATION, TRANSFER OR PURCHASE
OF MOTOR VEHICLE - Section 231B
Rates of tax collection
In case of transfer of registration or ownership of aprivate motor vehicle the rate of collection of advancetax shall be reduced by 10% for each year from thedate of first registration
On According to the engine capacity
When • At the time of registration of new motor vehicle;
• At the time of purchase of motor car or jeep from amanufacturer; or
• At the time of transfer of registration
Treatment Adjustable
71
BROKERAGE OR COMMISSION
Section 233
Person(s) liable to deduct tax
• Federal Government;
• Provincial Government;
• Local Government;
• Company;
• Association of persons constituted by, or under, law
From whom Recipient of brokerage or commission
Rate 12.00% 10.00% - Other than commission ofadvertising agents
07.50% 05.00% - On commission of advertisingagents
On Amount of brokerage or commission
When At the time the brokerage or commission is actually paid(*)
Continued
72
BROKERAGE OR COMMISSION
Section 233
* (If an agent retains commission or brokerage from any
amount remitted by him to the principal, he shall be
deemed to have been paid the commission or brokerage
by the principal and the principal shall collect advance
tax from the agent)
Treatment Final
Following additional material is separately provided
• Clarifications
73
COMMISSION OF MEMBERS OF STOCK
EXCHANGES – Section 233A
Person(s) liable to collect tax
Stock Exchange registered in Pakistan
From whom Members of stock exchange
Rate 00.01%
On Purchase and/or sale value of shares (in lieu ofcommission)
When At the time of making or receiving payment
Treatment Adjustable
74
MARGIN FINANCING IN SHARE BUSINESS ETC
Section 233AA
Person(s) liable to deduct tax
NCCPL (National Clearing Company of Pakistan Limited)
From whom • Members of the stock exchanges registered inPakistan;
• Margin Financers;
• Trading Financers;
• Security Lenders
Rate 10.00%
On Profit or mark-up or interest earned by the member,margin financier, trading financier or securities lender
When At the time of making or receiving payment
Treatment Adjustable
75
MOTOR VHEICLES
Section 234
Person(s) liable to collect tax
Person collecting motor vehicle tax (Excise and Taxation Department)
From whom Owner of motor vehicle excluding:
a. Motor cars used for more than ten years in Pakistan[Section 234(2A)];
b. Passenger transport vehicle with registered seatingcapacity of ten or more persons after a period of tenyears from the first day of July of the year of make ofthe vehicle [Section 234(3)];
c. Goods transport vehicle with registered laden weightof less than 8120 kilograms after a period of tenyears from the date of first registration of vehiclein Pakistan [Section 234(4)]
Continued
76
MOTOR VHEICLES
Section 234Rate • In the case of goods transport vehicles - Rs. 5 per
kilogram of the registered laden weight (Seereduced rates)
• In the case of passenger transport vehicles plyingfor hire with registered seating capacity of—
(a) Four or more persons but less than tenpersons – Rs. 25 per seat per annum
(b) Ten or more persons but less thantwenty persons - Rs. 60 per seat perannum
(c) Twenty persons or more - Rs. 500 per seatper annum (see reduced rates)
• In case of private motor cars (see next slide)
Continued
77
MOTOR VHEICLES
Section 234
Continued
Engine Capacity: 2015 2014
Filer Non-filer No distinction
Where Motor Vehicle Tax is collected on annual basis
upto 1000cc Rs. 1,000 Rs. 1,000 Rs. 750
1001cc to 1199cc Rs. 1,800 Rs. 3,600 Rs. 1,250
1200cc to 1299cc Rs. 2,000 Rs. 4,000 Rs. 1,750
1300cc to 1499cc Rs. 3,000 Rs. 6,000 Rs. 3,000
1500cc to 1599cc Rs. 4,500 Rs. 9,000 Rs. 3,000
1600cc to 1999cc Rs. 6,000 Rs. 12,000 Rs. 4,000
2000cc & above Rs. 12,000 Rs. 24,000 Rs. 8,000
78
MOTOR VHEICLES
Section 234
Continued
Engine Capacity: 2015 2014
Filer Non-filer No distinction
Where Motor Vehicle Tax is collected in lump sum
upto 1000cc Rs. 10,000 Rs. 10,000 Rs. 7,500
1001cc to 1199cc Rs. 18,000 Rs. 36,000 Rs. 12,500
1200cc to 1299cc Rs. 20,000 Rs. 40,000 Rs. 17,500
1300cc to 1499cc Rs. 30,000 Rs. 60,000 Rs. 30,000
1500cc to 1599cc Rs. 45,000 Rs. 90,000 Rs. 30,000
1600cc to 1999cc Rs. 60,000 Rs. 120,000 Rs. 40,000
2000cc & above Rs. 120,000 Rs. 240,000 Rs. 80,000
79
MOTOR VHEICLES
Section 234
Reduced rate • Rs. 1,200 - Goods transport vehicles with laden
weight of 8120 kilograms or more after a period of
ten years from the date of first registration of the
vehicle in Pakistan [Paragraph (1A) of Division III of
Part IV of 1st Schedule].
• In the case of goods transport vehicles - Rs. 2 per
kilogram of the registered laden weight [Clause (14)
of Part II 2nd Schedule]
• In the case of passenger transport vehicles plying
for hire with registered seating capacity of Twenty
persons or more - Rs. 250 per seat [Clause (14B)
of Part II 2nd Schedule]
Continued
80
MOTOR VHEICLES
Section 234
On • Registered laden weight of goods transport vehicles
• Registered seating capacity of passenger transport
vehicles plying for hire
• Engine capacity of private motorcars
When At the time of collecting motor vehicle tax (If motor
vehicle tax is collected in installments or lump sum, the
tax is also collected in installments or lump sum)
Treatment Adjustable
81
NATURAL GAS CONSUMPTION BY CNG STATIONS
Section 234A
Person(s) liable to collect tax
Person preparing gas consumption bill
From whom Consumer of gas for compressed natural gas station
Rate 04.00%
On Amount of gas bill
When At the time of realization of gas consumption charges
Treatment Final
82
ELECTRICITY CONSUMPTION
Section 235
Person(s) liable to collect tax
Person preparing electricity consumption bill
From whom Commercial and Industrial consumers of electricity
Rate Where the amount of electricity bill is(see next slide)
On Amount of electricity consumption charges
When Along with payment of electricity consumption charges
Treatment In case of company Adjustable
In case of other than a company:
Where the monthly bill does notexceed Rs. 30,000
Adjustable/Minimum
Where the monthly bill exceeds Rs.30,000
Adjustable
Continued
83
ELECTRICITY CONSUMPTION
Section 235
Rate Bill amount between Rate of taxRs. 0 and Rs. 400 Rs. 0
Rs. 401 and Rs. 600 Rs. 80
Rs. 601 and Rs. 800 Rs. 100
Rs. 801 and Rs. 1,000 Rs. 160
Rs. 1,001 and Rs. 1,500 Rs. 300
Rs. 1,501 and Rs. 3,000 Rs. 350
Rs. 3,001 and Rs. 4,500 Rs. 450
Rs. 4,501 and Rs. 6,000 Rs. 500
Rs. 6,001 and Rs. 10,000 Rs. 650
Rs. 10,001 and Rs. 15,000 Rs.1000
Rs. 15,001 and Rs. 20,000 Rs.1500
Above Rs. 20,000 10% of the billed
amount for commercialconsumers; and
5% of the billed
amount for industrialconsumers
84
DOMESTIC ELECTRICITY CONSUMPTION
Section 235A
Person(s) liable to collect tax
Person preparing electricity consumption bill
From whom Domestic consumers of electricity
Rate Where the amount of monthly electricity consumptionbill is:
• Less than Rs. 100,000 - 0.00%• Rs. 100,000 or more - 7.50%
On Amount of electricity consumption charges
When Along with payment of electricity consumption charges
Treatment Adjustable
85
STEEL MELTERS, RE-ROLLERS, ETC
ELECTRICITY CONSUMERS - Section 235B
Person(s) liable to collect tax
Person preparing electricity consumption bill
From whom Steel melters, steel re-rollers and composite steel unitsregistered for the purpose of Chapter XI of Sales TaxSpecial Procedure Rules, 2007
Rate Rupee 1 per unit of electricity consumed for productionof steel billets, ingots and mild steel (MS products)excluding stainless steel
On Units of electricity consumed
When Along with payment of electricity consumption charges
Treatment Non-Adjustable – No credit allowed to any personThis tax shall be deemed to be the tax required to bededucted U/S 153(1) from payments for local scrap andcredit of this shall not be admissible to any person.
Corresponding exemption to the steel melters, steel re-rollers, composite steel units, as a payer, in respect ofpurchase of scrap from application of section 153(1)(a)has been granted
86
PHONE USAGE
Section 236
Person(s) liable to collect tax
Person preparing phone usage bill
Person issuing or selling prepaid cards for phone
From whom Phone subscriber and purchaser of prepaid phonecards excluding the following:
a. Foreign diplomat;
b. Diplomatic mission in Pakistan; or
c. Person who produces a certificate from theCommissioner that his income during the tax
year is exempt from tax [Section 236(4)]
Rate In the case of phone subscriber (other than mobilephone) where the monthly bill —(a) Up to Rs. 1,000 Rs. Nil(b) Exceeds Rs. 1,000 10% of the amount
exceeding Rs.1,000
14.00% - In the case of subscriber of mobile15.00% telephone, pre-paid phone card or sale of
units through any electronic medium orwhatever form
Continued
87
PHONE USAGE
Section 236On Amount of bill or sale price of a pre-paid telephone card
or sale of units through of units through any electronicmedium or whatever
When Along with payment of telephone bill or at the time ofissuance or sale of pre-paid telephone cards
Treatment Adjustable
88
SALE BY AUCTION OR AUCTION BY A TENDER
Section 236A
Person(s) liable to collect tax
Person making sale by public auction or auction by a tender
From whom Purchaser of any property (including the awarding ofany lease to any person, including a lease of the right tocollect tolls, fees or other levies, by whatever namecalled) or goods confiscated or attached eitherbelonging to or not belonging to the Government, localGovernment, any authority, a company, a foreignassociation declared to be a company under sub-clause(vi) of clause (b) of sub-section (2) of section 80, or aforeign contractor or a consultant or a consortium orCollector of Customs or Commissioner of Income Tax orany other authority
Rate 10.00%
On Amount of sale price
When At the time of realization of sale proceeds
Treatment Adjustable
89
DOMESTIC AIR TRAVEL
Section 236B
Person(s) liable to collect tax
Airlines issuing Person preparing air travel ticket
From whom Purchaser of domestic air travel ticket excluding thefollowing:(a) Federal Government;(b) Provincial Government;(c) Person who produces a certificate from the
Commissioner Inland Revenue that income of suchperson during the tax year is exempt.
Rate 05.00%
On Amount of sale price
When At the time of realization of sale proceeds
Treatment Adjustable
90
SALE OR TRANSFER OF IMMOVABLE PROPERTY
Section 236C and 236KPerson(s) liable to collect tax
Person responsible for registering or attesting transfer of any immovable property
From whom • Seller or transferor of immovable property
• Purchaser or transferee of immoveable property
Other than
• The Federal Government, a Provincial Government, aLocal Government, a foreign diplomatic mission inPakistan, as purchaser or transferee; and
• Expatriate Pakistanis, as purchaser or transferee, in ascheme introduced by the Federal Government, orProvincial Government or an Authority establishedunder a Federal or Provincial law for expatriatePakistanis.
Rate See next slide
On Gross amount of the consideration received by the selleror transferor of immovable property
When At the time of registering or attesting the transfer
Treatment Adjustable
Continued
91
SALE OR TRANSFER OF IMMOVABLE PROPERTY
Section 236C and 236K
Collection of tax
from:
Value of immovable
property
2015 2014
Filer Non-filer No
distinction
Seller or transferor Not applicable 0.50% 1.00% 0.50%
Purchaser or
transferee
Upto Rs. 3,000,000 0.00% 0.00% NA
Purchaser or
transferee
Exceeds Rs. 3,000,000 1.00% * 1.00% /
2.00%
NA
* Currently 1% and 2% from the date appointed by the Board
92
FUNCTIONS AND GATHERINGS
Section 236DPerson(s) liable to collect tax
The owner, a lease-holder, an operator or a manager ofa marriage hall, marquee, hotel, restaurant, commerciallawn, club, a community place or any other place usedfor holding a “function”.
From whom A person arranging or holding a “function” in a marriagehall, marquee, hotel, restaurant, commercial lawn, club,a community place or any other place used for suchpurpose
Rate 05.00% 10.00%
On The total amount of the bill including the amount of the
bills for food, service or any other facility provided by
any other person
When At the time of realization of the payment
Treatment Adjustable
"function" includes any wedding related event, a seminar, a workshop, a
session, an exhibition, a concert, a show, a party or any other gathering
held for such purpose
93
FOREIGN PRODUCED TV PLAYS AND SERIALS
Section 236E
Person(s) liable
to collect tax
Any licensing authority certifying any foreign TV drama
serial or a play dubbed in Urdu or any other regional
language, for screening and viewing on any landing
rights channel
From whom Person applying for screening and viewing certification
Rate • Rs. 100,000 per episode of the serial
• Rs. 100,000 per play (single episode)
On Not applicable
When Not specified (Logically at the time of certification)
Treatment Adjustable
94
CABLE OPERATORS AND OTHER
ELECTRONIC MEDIA – Section 236FPerson(s) liable to collect tax
Pakistan Electronic Media Regulatory Authority
From whom Cable operators and other electronic media licensee(For this, "cable television operator", "DTH","Distribution Service", "electronic media", "IPTV", "loopholder", "MMDS", "mobile TV", have the samemeanings as defined in Pakistan Electronic MediaRegulatory Authority Ordinance, 2002 and rules madethere under.)
Rate • In the case of IPTV, FM Radio, MMDS, Mobile TV,Mobile Audio, Satellite TV Channel and LandingRights – 20% of the permission fee or renewal fee,as the case may be.
Continued
95
Rate In case of cable television operators:License Category Tax on Tax on
License Renewal
H Rs. 7,500 Rs. 10,000
H-1 Rs. 10,000 Rs. 15,000
H-II Rs. 25,000 Rs. 30,000
R Rs. 5,000 Rs. 30,000
B Rs. 5,000 Rs. 40,000
B-1 Rs. 30,000 Rs. 50,000
B-2 Rs. 40,000 Rs. 60,000
B-3 Rs. 50,000 Rs. 75,000
B-4 Rs. 75,000 Rs.100,000
B-5 Rs. 87,500 Rs.150,000
B-6 Rs.175,000 Rs.200,000
B-7 Rs.262,500 Rs.300,000
B-8 Rs,437,500 Rs.500,000
B-9 Rs.700,000 Rs.800,000
B-10 Rs.87S,500 Rs.900,000
CABLE OPERATORS AND OTHER ELECTRONIC
MEDIA – Section 236F
96
On Not applicable
When At the time of issuance of license for distribution
services or renewal of the license
Treatment Adjustable
CABLE OPERATORS AND OTHER ELECTRONIC
MEDIA – Section 236F
97
DISTRIBUTORS, DEALERS & WHOLESALERS
Section 236G
Person(s)
liable to collect
tax
Every manufacturer or commercial importer of
electronics, sugar, cement, iron and steel products,
fertilizer, motorcycles, pesticides, cigarettes, glass,
textile, beverages, paint or foam sector
From whom Distributors, dealers and wholesalers
Rate 00.10%
On Gross amount of sales
When At the time of sale
Treatment Adjustable
Nature of goods: 2015 2014
Filer Non-filer No-
distinction
Fertilizer 0.20% 0.40% 0.10%
Other than fertilizer 0.10% 0.20% 0.10%
98
RETAILERS
Section 236HPerson(s) liable to collect tax
Every manufacturer, distributor, dealer, wholesaler orcommercial importer of electronics, sugar, cement,iron and steel products, fertilizer, motorcycles,pesticides, cigarettes, glass, textile, beverages, paint orfoam sector
From whom Retailers
Rate 00.50%
On Gross amount of sales
When At the time of sale
Treatment Adjustable
99
FEES OF EDUCATIONAL INSTITUTIONS
Section 236I
Person(s) liable to collect tax
Person preparing “fee” voucher or challan
"fee" includes, tuition fee and all charges received bythe educational institution, by whatever name called,excluding the amount which is refundable
From whom Either of the parents or guardian making payment of the“fee” exceeding Rs. 200,000 annually
Rate 05.00%
On Amount of “fee” paid to an educational institution
When In the manner the fee is charged
Treatment Adjustable
100
COMMISSION AGENTS AND ARHATIS ETC
Section 236J
Person(s) liable to collect tax
Every “market committee”"market committee" includes any committee or bodyformed under any provincial or local law made for thepurposes of establishing, regulating or organizingagricultural, livestock and other commodity markets
From whom Dealers, commission agents and arhatis etc.
Rate Group or Class Amount of TaxA Rs. 10,000B Rs. 7,500C Rs. 5,000Any other Rs. 5,000
On Not applicable
When At the time of issuance or renewal of licenses
Treatment Adjustable
101
INTERNATIONAL AIR TRAVEL
Section 236L
Person(s) liable to collect tax
Every airline issuing ticket for journey originating from Pakistan
From whom Purchaser of international air travel ticket
Rate Economy class ticket - 0.00%First/business/club class tickets - 4.00%
On Amount of sale price
When At the time of realization of sale proceeds
Treatment Adjustable
102
CREDIT OF TAX COLLECTED OR
DEDUCTED Section 168
Continued
Amount of tax deducted at source from a payment is treated as income
derived by the person to whom the payment was made.
Amount of tax collected or deducted at source is treated as tax paid by
the person from whom the tax was collected or deducted.
Tax collected or deducted at source is either:
• “Non-Adjustable tax collected or deducted at source” i.e., taxcollected or deducted at source for which credit is not allowed indetermining the income tax payable on taxable income. These aretaxes collected or deducted against:
– Income subject to a separate charge;
– Income subject to final taxation;
• “Adjustable tax collected or deducted at source” i.e., taxcollected or deducted at source, other than the non-adjustable taxcollected or deducted at source, for which credit is allowed indetermining the income tax payable on taxable income.
Back
103
CREDIT OF TAX COLLECTED OR
DEDUCTED Section 168Adjustable* at the option of the taxpayer to opt out from the final taxregime, which is subject to following conditions:
ImportsSection 148
The minimum tax liability under the normal taxregime should not be less than 5.50% and 6.00% ofthe value of the imports for corporate and non-corporate tax payers respectively 60% of the taxalready collected/collectable at import stage.
Sale of goodsSection 153(1)(a)
The minimum tax liability under the normal taxregime should not be less than 3.50% and 4.00% ofthe payments received against sale of goods forcorporate and non-corporate tax payers respectively70% of the tax already deducted/deductible from thepayments received against sale of goods.
Execution of contracts Section 153(1)(c)
The minimum tax liability under the normal taxregime should not be less than 6.00% and 6.50% ofthe payments received against execution of contractsfor corporate and non-corporate tax payersrespectively.
Back Continued
104
CREDIT OF TAX COLLECTED OR
DEDUCTED Section 168Adjustable* at the option of the taxpayer to opt out from the final taxregime, which is subject to following conditions:
Services of stitching etc. Section 153(2)
The minimum tax liability under the normal taxregime should not be less than 0.50% of thepayments received against services of stitching etc.
Exports and indenting commissionSection 154
The minimum tax liability under the normal taxregime should not be less than 50% of the taxalready collected/collectable from such exports andindenting commission.
Petrol Pump Operators Section 156A
The minimum tax liability under the normal taxregime should not be less than 10.00% of thecommission received for sale of petroleum products.
Brokerage and Commission Section 233
The minimum tax liability under the normal taxregime should not be less than 10.00% of thebrokerage and commission received.
Back
105
WITHHOLDING INCOME TAX
2nd Session
Related Q & A
106
WITHHOLDING INCOME TAX
3rd Session (Part-I)Exemptions
Exemption or lower rate certificate
Obligations of withholding agent:
Payment/deposit of tax withheld
Failure to collect, deduct or deposit
Recovery from whom tax was not withheld
Certificate of tax withheld
Withholding tax statements
Priority of tax withheld
Indemnity
Service charges for tax withheld
Related Q & A
107
EXEMPTIONS
Exemptions with respect to collection and deduction of tax are of three
types:
• Where specified persons are exempt from collection or
deduction of tax by the withholding agents;
• Where specified goods, payments, etc. are exempt from
collection or deduction of tax by the withholding agents; and
• Where specified withholding agents are exempt from
collecting or deducting the tax.
Following additional material is separately provided:
• Complete list of exemptions
108
EXEMPTION OR LOWER RATE CERTIFICATE
Section 159
A person responsible/required to collect or deduct tax at source, is
obliged to collect or deduct the full amount of tax specified under the 1st
Schedule to the Ordinance (i.e. standard rates), unless there is in
force a exemption certificate or lower rate certificate issued by the
Commissioner, in which case the withholding agent is required to
comply with such certificate.
The true impact of the above, is that exemption or reduce rate for
collection or deduction tax at source provided through the 2nd Schedule
or SRO’s are not operative unless a certificate to this effect is issued by
the Commissioner. However, practically, such exemptions and
reduced rates are being applied without a certificate issued by the
Commissioner.
Continued
109
EXEMPTION OR LOWER RATE CERTIFICATE
Section 159
For this purpose a person from whom tax is required to be collected ordeducted at source, can apply in writing (form prescribed under Rule 40)to the Commissioner for issuance of an exemption certificate or a lowerrate certificate.
The Commissioner is empowered to issue such certificates (formprescribed under Rule 41) on being satisfied that:
• The amount subject to collection or deduction of tax at source is:
– Exempt from tax under the Ordinance; or
– Subject to tax at a rate lower than that specified in the FirstSchedule to the Ordinance; or
•The income of the recipient of profit on securities of the Federal,Provincial or Local Government is not likely to be chargeable to taxunder the Ordinance.
110
PAYMENT OF TAX COLLECTED OR DEDUCTEDSection 160 and Rule 43
Tax collected or deducted at source or purported to be collected ordeducted at source is required to be paid to the Commissioner by wayof credit to the Federal Government, by the “withholding agent”,within the time and in the manner as under:
• Where the tax is collected or deducted by the FederalGovernment or a Provincial Government on the day the tax iscollected or deducted; or
• Where the tax is collected or deducted by a person, other than theFederal Government or a Provincial Government, by remittance tothe Government Treasury or deposit in an authorized branch of theSBP or NBP within seven days from the end of each week endingon every Sunday.
A tax deposit slip form (Challan) is prescribed for deposit of taxcollected or deducted.
Continued
111
PAYMENT OF TAX COLLECTED OR DEDUCTEDSection 160 and Rule 43
Most of the branches of State Bank of Pakistan and National Bank ofPakistan have been automated to receive the tax payments and issue aComputerized Payment Receipt (CPR). In order to ensure correct creditof tax to the person from whom it has been collected or deducted, it ismandatory to provide the following information at the time of deposit ofthe tax collected or deducted:
a. Particulars of the withholding agent:
i. National Tax Number (NTN) or Free Tax Number (FTN);
ii. Name and address
b. Particulars of the person from whom tax has been collected ordeducted:
i. National Tax Number (NTN) or Computerized National IdentityCard Number (CNIC) or Passport No. in case of non-residents;and
ii. Name and address;
Continued
112
PAYMENT OF TAX COLLECTED OR DEDUCTEDSection 160 and Rule 43
c. Particulars of the transaction from which tax has beencollected or deducted:
i. Nature of transaction;
ii. Section of the Income Tax Ordinance, 2001 under which
tax has been collected or deducted;
iii. Gross amount of the transaction on which tax has
been collected or deducted; and
iv. Amount of tax collected or deducted.
Continued
113
PAYMENT OF TAX COLLECTED OR DEDUCTEDSection 160 and Rule 43
At the option of the withholding agent:
a. A separate tax payment in respect of each person from whom tax
has been collected or deducted can be made; or
b. A combined payment in respect of all persons from whom tax has
been collected or deducted can be made, in which case the
particulars and details of the transaction in respect of each person
from whom tax has been collected or deducted are to be
separately stated. In case of manual tax payment deposit slip form
(Challan) a maximum of ten persons can be accommodated and in
case of computerized tax payment deposit slip there is no limit.
Continued
114
PAYMENT OF TAX COLLECTED OR DEDUCTEDSection 160 and Rule 43
The procedure for deposit of the tax collected or deducted at any
branch of State bank of Pakistan and National Bank of Pakistan,
currently, is as under:
• Manual payment:
- At branches, which are not fully automated, through tax deposit
receipts (Challan) dully filed and completed (in respect of the
requisite particulars and details as stated earlier).
- At branches, which are fully automated, by providing the
requisite particulars and details as stated above.
This may take a long time for the facilitation staff to transfer the
details on the computerized system.
To avoid delays:
Continued
115
PAYMENT OF TAX COLLECTED OR DEDUCTEDSection 160 and Rule 43
Alternatively, by providing a Payment Slip Identification (PSID)
number generated from FBR’s web portal (https://e.fbr.gov.pk)
by entering or uploading the requisite particulars from the
convenience of your office or home. This will save your waiting
and processing time at the bank branches.
At a large number of branches of NBP and SBP, Taxpayer
Facilitation Desks are also established where the Facilitation
Officers (FOs) prepare the PSID on behalf of the taxpayers for
expeditious payment of taxes for those taxpayers who bring
manually filled deposit receipts.
Continued
116
PAYMENT OF TAX COLLECTED OR DEDUCTEDSection 160 and Rule 43
• Electronic payment:
The pre-requisite is that the “withholding agent” should have a
digital signature and an account with National Bank of Pakistan
from where the electronic transfer of funds can be done. The
procedure is to first generate a Payment Slip Identification (PSID)
number (as explained above) from our web portal
httpp://e.fbr.gov.pk) and authorizing the transfer of funds under a
digital signature. This is the speediest and efficient manner of
payment of tax collected or deducted at source from the comfort of
your office or home.
117
FAILURE TO COLLECT OR DEDUCT TAX OR DEPOSIT THE TAX COLLECTED OR DEDUCTED
Section 161 and 163
A “withholding agent” is personally liable to pay to theCommissioner the amount of tax, along with the default surcharge (@18% per annum), if the “withholding agent”:
• Fails to collect or deduct tax at source as required; or
• Fails to pay the tax collected or deducted to the Commissioner asrequired.
The Commissioner can proceed to recover the same by an ordermaking the “withholding agent” personally liable, after providing anopportunity of being heard.
The provisions of the Ordinance with regard to the recovery of the taxdue under an assessment equally apply to any amount of taxcollectable or deductible at source.
Continued
118
If the “withholding agent” fails to collect or deduct tax at source andthe same is recovered from the “withholding agent”, after making himpersonally liable, the withholding agent is entitled to recover thesame from the person from whom such tax was collectable ordeductible at source.
If the tax required to be collected or deducted at source has not beenso deducted or collected and in the meanwhile, it is established thatsuch tax has been paid by the person from whom such tax wascollectable or deductible, the “withholding agent” is liable to paydefault surcharge (@ 18% per annum) from the date the “withholdingagent” was required to collect or deduct the tax to the date it is paid bythe person from whom such tax was collectable or deductible.
FAILURE TO COLLECT OR DEDUCT TAX OR DEPOSIT THE TAX COLLECTED OR DEDUCTED
Section 161 and 163
119
If the “withholding agent” fails to collect or deduct tax at source the
following expenditures are not allowed as deduction for the purpose of
computing income:
• Salary
• Rent
• Brokerage or commission
• Profit on debt
• Payment to non-resident
• Payment for services or fee
FAILURE TO COLLECT OR DEDUCT TAX OR DEPOSIT THE TAX COLLECTED OR DEDUCTED
DEDUCTIONS NOT ALLOWED – Section 21
120
Any person responsible for collection or deduction of tax at source as a
withholding agent, without reasonable excuse:
• fails to collect or deduct the tax is liable to a penalty of
Rs.25,000 or 10% of the amount of tax involved, whichever is
higher;
• fails to deposit the tax collected or deducted within the time
allowed for this purpose is liable for a penalty of Rs. 25,000 or
10% of the amount of tax involved, whichever is higher; and
• fails to furnish, within the time allowed for this purpose, any
statement(s) of tax collected or deducted is liable for a penalty of
Rs. 2,500 for each day of default subject to a minimum penalty
of Rs. 50,000 and maximum penalty of 25% of the tax payable;
FAILURE TO COLLECT OR DEDUCT TAX OR DEPOSIT THE TAX COLLECTED OR DEDUCTED
PENALTY – Section 182
121
Any person who, without reasonable excuse:
• fails to comply with the obligation to collect or deduct tax;
• having collected or deducted fails to pay the tax; or
• fails to furnish the monthly and annual statements of taxcollected or deducted;
is treated as having committed an offence punishable on convictionwith a fine or imprisonment for a term not exceeding one year, or both.
Note: Imposition of the penalty is in addition to prosecutionproceedings and not in derogation of any other punishment under theIncome Tax Ordinance, 2001 or any other law in force.
FAILURE TO COLLECT OR DEDUCT TAX OR DEPOSIT THE TAX COLLECTED OR DEDUCTED
PROSECUTION – Section 191
122
RECOVERY OF TAX FROM WHOM TAX WAS NOT COLLECTED OR DEDUCTED – Section 162 and 163
The Commissioner, after passing an order to this effect, is alsoempowered to recover the amount of tax, which the “withholdingagent” failed to collect or deduct, from the person from whom it wascollectable or deductible.
The recovery of tax by the Commissioner from the person from whomit was collectable or deductible does not absolve the “withholdingagent” from any other legal action in relation to such failure, or from acharge of default surcharge (@ 18% per annum) or the disallowance ofa deduction for the expense to which the failure relates.
The provisions of the Ordinance with regard to the recovery of the taxdue under an assessment equally apply to any amount of taxrecoverable from the person from whom the tax was required tocollected or deducted at source.
123
CERTIFICATE OF COLLECTION OR DEDUCTION OF TAX – Section 164 and RULE 42
“Certificate of collection or deduction of tax at source” – A“withholding agent”, at the time of (rules are contrary to this)collection or deduction of tax at source, is required to issue to theperson from whom the tax is collected or deducted, copies of the taxdeposit receipt (challan) of payment or any other equivalent documentalong with a certificate (form prescribed under Rule 42) stating theamount of tax collected or deducted and such other particulars asprescribed.
“Certificate of collection or deduction of tax at source” is to beissued by the withholding agent in duplicate and serially numbered.The certificate of tax collected or deducted is required to be issued:
Where the tax has been deducted from salary under section 149:
• Within 45 days from the end of each financial year; or
• Within 7 days of the ceasing of the employment or at the time ofmaking payment of final settlement whichever is later, where theemployment ceases before the end of the financial year.
Continued
124
CERTIFICATE OF COLLECTION OR DEDUCTION OF TAX – Rule 42
Where the tax is collected or deducted under any other provisions;
• Within 15 days after the end of the financial year or discontinuation of
business etc.; or
• Within 7 days where the person from whom tax was collected or
deducted requests for the issuance of the certificate before the end of
the financial year.
Where the original certificate issued is lost, stolen or destroyed:
• Within 7 days from the request in writing for issuance of duplicate
certificate. Such certificate should be clearly marked as “duplicate”.
125
WITHHOLDING TAX STATEMENTSSection 165 and Rule 44
A withholding agent is required to furnish to the Commissioner :
• “Monthly withholding tax statement” - A single consolidated
statement of all taxes collected or deducted for each month within
15 days from the end of the each month in the form prescribed
under Rule 44(2) accompanied with evidence of deposit of tax
collected or deducted to the credit of the Federal Government; and
• “Annual withholding tax statement” (for the period July to June)
is also required to be furnished by the withholding agent obliged to
deduct tax from salary under section 149 of the Income Tax
Ordinance, 2001 in the form prescribed under Rule 44(1) on or
before 31st August of every year.
In these statements all payments / transactions made during the month
or year, as the case may be, are to be reflected whether tax has been
collected/deducted or not. In case tax has not been collected/deducted,
the reasons thereof, by quoting the relevant section, clause or SRO.
Continued
126
WITHHOLDING TAX STATEMENTSSection 165 and Rule 44
Explanation.— For the removal of doubt, it is clarified that
this sub-section overrides all conflicting provisions
contained in the Protection of Economic Reforms Act, 1992
(XII of 1992), the Banking Companies Ordinance, 1962
(LVII of 1962), the foreign Exchange Regulation Act, 1947
(VII of 1947) and the regulations made under the State
Bank of Pakistan Act, 1956 (XXXIII of 1956), if any, on the
subject, in so far as divulgence of information under section
165 is concerned.
Continued
127
WITHHOLDING TAX STATEMENTSSection 165 and Rule 44
The Commissioner is empowered to:
• Grant an extension of time to furnish a withholding tax statementafter the due date. For this purpose the withholding agent isrequired to apply in writing and if the Commissioner is satisfiedthat a reasonable cause exists for non-furnishing of thewithholding tax statement by the due date, he/she can, by anorder in writing, grant the withholding agent an extension of timeto furnish the withholding tax statement; and
• Require the withholding agent to furnish a reconciliation of theamounts mentioned in the annual and monthly withholding taxstatements with the amounts mentioned in the return of income,statement of final tax, related annexes and other documentssubmitted from time to time.
Continued
128
WITHHOLDING TAX STATEMENTSSection 165 and Rule 73
e-filing of monthly and annual statements is mandatory where the
withholding agent is:
– Federal Government;
– A company; or
– An association of persons.
129
PRIORITY OF TAX COLLECTED OR DEDUCTEDSection 166
Tax collected or deducted at source by a withholding agent is:
• Held by the withholding agent in trust for the FederalGovernment; and
• Not subject to attachment in respect of any debt or liability of thewithholding agent.
In the event of the liquidation or bankruptcy of the withholding agent,the amount of tax collected or deducted do not form part of the estate ofthe withholding agent in liquidation or bankruptcy and theCommissioner has a first claim over the amount collected or deductedbefore any distribution of property is made.
Every amount that a withholding agent is required to collect or deductat source has –
• A first charge on the payment; and
• Deducted prior to any other amount that the withholding agent isrequired to deduct from the payment by virtue of an order of anyCourt or under any other law.
130
INDEMNITYSection 167
A withholding agent, who has deducted tax at source from a payment
and remitted the deducted amount to the Commissioner is treated as
having paid the deducted amount to the recipient of the payment for the
purposes of any claim by the recipient for payment of the deducted tax.
131
SERVICE CHARGES FOR TAX COLLECTED OR DEDUCTED – Section 168
“Service charges for collecting or deducting tax at source” – A
withholding agent is not authorized to charge and deduct any amount
on account of service charges for acting as a withholding agent from
tax collected or deducted at source.
Any service charges deducted by the withholding agent is treated as
payable to the Federal Government and all the provisions of the
Ordinance applicable to recovery of tax also apply for recovery of such
service charges deducted by a withholding agent.
132
WITHHOLDING INCOME TAX
3rd Session (Part-I)
Related Q & A
133
WITHHOLDING SALES TAX
3rd Session (Part – II)Definitions – Relevant for today's workshop
Scope of withholding tax
Exemptions
Issues and clarifications required
Obligations of withholding agent:
Certificate of deduction of tax
Furnishing of return
Payment of tax deducted
Method of furnishing the return / withholding statement
Related Q & A
134
“Distributor”
“Retailer”
“Taxable goods”
“Taxable supply”
“Wholesaler”
DEFINITIONSPRINT OUT SEPARATELY PROVIDED
135
SALES TAX – Sales Tax Special Procedure
(Withholding) Rules, 2007
Person(s) liable
to deduct tax
• Federal Government departments;
• Provincial Government departments;
• Autonomous Bodies;
• Public Sector Organization;
• Company (as defined under Income Tax
Ordinance, 2001) registered for Sales Tax or
Federal Excise Duty or Income Tax;
• Recipients of services of advertisement registered
for Sales Tax;
• Persons registered as exporters;
From whom Suppliers of taxable goods and services whether
registered under the Sales Tax, 1990 or not.
Continued
136
SALES TAX – Sales Tax Special Procedure
(Withholding) Rules, 2007
Rate
(where the
supplier is
registered
under the Sales
Tax, 1990)
20.00%* - Where the supplier is registered under the
Sales Tax Act, 1990 [other than as a
wholesaler, dealer (including petroleum
dealers) or distributor] and the “sales tax
withholding agent” is other than recipients
of services of advertisement.
10.00%* - Where the supplier is a registered as a
wholesaler, dealer (including petroleum
dealers) or distributor under the Sales Tax
Act, 1990.
Rate
(where the
supplier is
registered
under the Sales
Tax, 1990)
100%* - Where the supplier is registered under the
Sales Tax Act, 1990 and the “sales tax
withholding agent” is the recipient of
services of advertisement.
Continued
137
SALES TAX – Sales Tax Special Procedure
(Withholding) Rules, 2007
Rate
(where the supplier is NOTregistered under the Sales Tax, 1990)
100%* - Where the withholding agent is the Federalor Provincial Government Department,Autonomous Body or Public SectorOrganization and holds Free Tax Number(FTN) on purchase of taxable goods frompersons liable to be registered but notactually registered.
1.00%**- Where the withholding agent is other thanstated above, on purchase of taxable goodsfrom persons liable to be registered but notactually registered.
100%* - Where the withholding agent is the recipientof advertisement services.
Continued
138
SALES TAX – Sales Tax Special Procedure
(Withholding) Rules, 2007
On* • Amount of Sales Tax charged/shown on the Sales
Tax Invoice by the supplier registered under the
Sales Tax Act, 1990.
• Amount of sales tax applicable on the gross value of
taxable supply where the supplier is not registered
under the Sales Tax, 1990.
On** • Gross value of taxable supply.
When At the time of making the payment
Input Tax Credit A withholding agent is not entitled to claim input tax in
respect of tax deducted from a person liable to be
registered but not actually registered.
Continued
139
SALES TAX – Sales Tax Special Procedure
(Withholding) Rules, 2007
Exemption from deduction of Sales Tax on
supply of following goods and services by persons registered under the Sales Tax Act, 1990.
• Electrical energy;
• Natural gas;
• Petroleum products supplied by petroleumproduction and exploration companies, oil refineriesand oil marketing companies;
• Mild steel products;
• Products made from sheets of iron or non-steelalloy, stainless steel or other alloy steel, such aspipes, almirahs, trunks, etc.;
• Papers in rolls or sheets;
• Plastic products including pipes;
• Vegetable ghee and cooking oil;
• Telecommunication services;
• Goods specified in the 3rd Schedule to the SalesTax Act, 1990; and
• Supplies made by commercial importers who havepaid value addition tax on such goods at the time ofimport.
Continued
140
SALES TAX – Sales Tax Special Procedure
(Withholding) Rules, 2007
Issues or clarifications required.
• How and who will determine whether a personmaking supply of taxable goods is liable to beregistered or not. Clarification issued by FBR videC. No. 3(10)ST-L&P/07 dated August 11, 2014.
141
SALES TAX WITHHOLDING AGENTS
OBLIGATIONS
Certificate of
deduction of
sales tax
Every sales tax withholding agent (person obliged
deduct sales tax at source) deducting sales is obliged to
issue certificate of sales tax deducted, to the person
from whom such tax has been deducted.
No specific format of this certificate has been
prescribed. However, such certificate should specify the
name and registration number, if any, of the supplier,
description of goods and the amount of sales tax
deducted.
142
SALES TAX WITHHOLDING AGENTS
OBLIGATIONS
Furnishing of
return of sales
tax and deposit
of sales tax
deducted at
source
(withheld)
Sales tax deducted at source (withheld) during a
calendar month by the “sales tax withholding agent” is
payable to the credit of the Federal Government by 15th
of the following month.
Where the “sales tax withholding agent is registered
under the Sales Tax Act, 1990 or Federal Excise Act,
2005 the sales tax deducted at source (withheld) is to
be reported in the monthly sales tax–cum–federal
excise return for which appropriate space is provided in
the said monthly return and is paid/adjusted by way of
addition to the output tax.
Continued
143
SALES TAX WITHHOLDING AGENTS
OBLIGATIONS
Furnishing of
return of sales
tax and deposit
of sales tax
deducted at
source
(withheld)
Where the “sales tax withholding agent is not
registered under the Sales Tax Act, 1990 or Federal
Excise Act, 2005 the sales tax deducted at source
(withheld) is to be reported through a special monthly
sales tax return for withholding agents and is payable:
• Where the “sales tax withholding agent” is
registered under the Income Tax Ordinance, 2001
(hold a National Tax Number (NTN)) in the like
manner as sales tax due is payable by a person
registered under the Sales Tax Act, 1990; and
• Where the “sales tax withholding agent” is not
registered under the Income Tax Ordinance, 2001
the sales tax deducted at source (withheld) is to
be paid directly in the State Bank of Pakistan or
designated branches of National Bank of Pakistan
through the said special monthly sales tax return
for withholding agent.
Continued
144
SALES TAX WITHHOLDING AGENTS
OBLIGATIONS
E-filing of return
of Sales Tax
deducted at
source (withheld)
e-filing of sales tax return and special sales tax return
for “sales tax withholding agents” is mandatory for all
except where the “sales tax withholding agent” is not
registered under the Sales Tax Act, 1990, Federal
Excise Act, 2005 and Income Tax Ordinance, 2001
145
WITHHOLDING SALES TAX
3rd Session (Part – II)
Related Q & A
146
THANK YOU
147
Reference Material
148
CROSS INDEXWITHHOLDING AGENT WISE
Persons liable to collect or deduct tax
(Withholding agents)
Applicable sections
Airlines issuing air travel tickets 236B, 236L
Association of persons constituted by, or under,
law
152(2A), 153(1), 233
Association of Persons having turnover of fifty
million rupees or more in the tax year 2007 or in
any subsequent tax year
152(2A), 153(1)
Association of Persons paying rent of Rs.
1,500,00 or more
155
Authorized dealer in foreign exchange 154(1), 154(2), 231AA
Banking Company 151(1)(b), 151(1)(d),
154(3), 231A, 231AA
Beauty parlor 155
149
CROSS INDEXWITHHOLDING AGENT WISE
Persons liable to collect or deduct tax
(Withholding agents)
Applicable sections
Body corporate formed by or under any law in
force in Pakistan
151(1)(d)
Boutique 155
Charitable institution 155
Clinic 155
Collector of Customs 148, 154(3C)
Commercial importer of electronics, sugar,
cement, iron and steel products, fertilizer,
motorcycles, pesticides, cigarettes, glass, textile,
beverages, paint or foam sector
236G, 236H
Company as defined under the Companies
Ordinance, 1984
151(1)(d)
150
CROSS INDEXWITHHOLDING AGENT WISE
Persons liable to collect or deduct tax
(Withholding agents)
Applicable sections
Company as defined under the Income Tax
Ordinance, 2001
153(1), 152(2A), 155,
233
Consortium or a joint venture 152(2A), 153(1)
Dealer of electronics, sugar, cement, iron and
steel products, fertilizer, motorcycles, pesticides,
cigarettes, glass, textile, beverages, paint or foam
sector
236H
Diplomatic mission of a foreign state 155
Direct Exporter 154(3B)
Distributor of electronics, sugar, cement, iron and
steel products, fertilizer, motorcycles, pesticides,
cigarettes, glass, textile, beverages, paint or foam
sector
236H
151
CROSS INDEXWITHHOLDING AGENT WISE
Persons liable to collect or deduct tax
(Withholding agents)
Applicable
sections
Educational institution 236I
Exchange company 231AA
Excise and taxation departments of a Provincial
Government
231B
Export House 153(1A)
Export House registered under the Duty and Tax
Remission for Export Rules, 2001 of Customs Rules
154(3B)
Export Processing Zone Authority 154(3A)
Exporter 153(1A)
Federal Government 151(1)(c), 152(2A),
153(1), 155, 233
Finance society 151(1)(d)
Financial Institution 151(1)(b), 151(1)(d)
152
CROSS INDEXWITHHOLDING AGENT WISE
Persons liable to collect or deduct tax
(Withholding agents)
Applicable sections
Foreign contractor or consultant 152(2A), 153(1)
Hospital 155
Individual paying rent of Rs. 1,500,00 or more 155
Individual having turnover of fifty million rupees or
more in the tax year 2009 or in any subsequent
tax year
152(2A), 153(1)
Licensing authority certifying any foreign TV
drama serial or a play for screening and viewing
on any landing rights channel
236E
Local Government 151(1)(c), 155, 233
Manufacturer of electronics, sugar, cement, iron
and steel products, fertilizer, motorcycles,
pesticides, cigarettes, glass, textile, beverages,
paint or foam sector
236G, 236H
153
CROSS INDEXWITHHOLDING AGENT WISE
Persons liable to collect or deduct tax
(Withholding agents)
Applicable sections
Manufacturer of motor car or jeep 231B
“Market committee” 236J
Maternity home 155
Motor Vehicle Tax Collection Authority 234
NCCPL (National Clearing Company of Pakistan
Limited)
233AA
Non-banking financial institutions 231AA
Non-profit organization 152(2A), 153(1), 155
Owner, a lease-holder, an operator or a manager
of a marriage hall, marquee, hotel, restaurant,
commercial lawn, club, a community place or any
other place used for holding a “function”
236D
Pakistan Electronic Media Regulatory Authority 236F
154
CROSS INDEXWITHHOLDING AGENT WISE
Persons liable to collect or deduct tax
(Withholding agents)
Applicable sections
Pension Fund Manager 156B
Person 150, 152(1), 152(1A),
152(1AA), 152(1AAA),
152(2), 156
Person making sale by public auction or auction
by a tender
236A
Person paying profit on debt on National Saving
Schemes of Directorate of National Savings or
Post Office Saving Account
151(1)(a)
Person preparing gas consumption bills 234A
Person preparing telephone bills or selling
prepaid telephone cards
236
155
CROSS INDEXWITHHOLDING AGENT WISE
Persons liable to collect or deduct tax
(Withholding agents)
Applicable sections
Person preparing electricity consumption bills 235, 235A, 235B
Person registered under the Sales Tax Act, 1990 152(2A), 153(1)
Persons responsible for registering or attesting
transfer of immovable property
236C, 236K
Persons responsible for paying salary 149
Person selling petroleum products to petrol pump
operators
156A
Private educational institution 155
Provincial Government 151(1)(c), 155, 233
Stock Exchanges Registered in Pakistan 233A
Wholesaler of electronics, sugar, cement, iron
and steel products, fertilizer, motorcycles,
pesticides, cigarettes, glass, textile, beverages,
paint or foam sector
236H
156
DEFINITIONS
“Association of persons” includes a firm, a Hindu undivided family, any
artificial juridical person and any body of persons formed under a foreign
law, but does not include a company.
“Banking company” means a banking company as defined in the
Banking Companies Ordinance, 1962 (LVII of 1962) and includes any
body corporate which transacts the business of banking in Pakistan.
Back
157
DEFINITIONS
“Company” means –
• A company as defined in the Companies Ordinance, 1984 (XLVII of1984);
• A body corporate formed by or under any law in force in Pakistan;
• A modaraba;
• A body incorporated by or under the law of a country outsidePakistan relating to incorporation of companies
• A trust;
• A co-operative society;
• A finance society;
• Any other society;
• An entity or body of persons established or constituted by or underany law for the time being in force;
• A non-profit organization;
• A foreign association, whether incorporated or not, which the Boardhas, by general or special order, declared to be a company for thepurposes of this Ordinance;
• A Provincial Government; or
• A Local Government in Pakistan.
ContinuedBack
158
DEFINITIONS
“Employee” means any individual engaged in employment.
“Employer” means any person who engages and remunerates an
employee.
“Employment” includes –
(a) a directorship or any other office involved in the management of a
company;
(b) a position entitling the holder to a fixed or ascertainable
remuneration; or
(c) the holding or acting in any public office
“Filer” means a taxpayer whose name appears in the active taxpayers’
list issued by the Board from time to time or is holder of a taxpayer’s
card.
“Non-filer” means a person who is not a filer.
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159
DEFINITIONS
Back
“Industrial undertaking” means –• an undertaking which is set up in Pakistan and which employs,
– Ten or more persons in Pakistan and involves the use of electricalenergy or any other form of energy which is mechanicallytransmitted and is not generated by human or animal energy; or
– Twenty or more persons in Pakistan and does not involve the use ofelectrical energy or any other form of energy which is mechanicallytransmitted and is not generated by human or animal energy;
and which is engaged in:– the manufacture of goods or materials or the subjection of goods or
materials to any process which substantially changes their originalcondition;
– Ship-building;– Generation, conversion, transmission or distribution of electrical
energy, or the supply of hydraulic power; or– The working of any mine, oil-well or any other source of mineral
deposits; and• any other industrial undertaking which the Board may by notification in
the official Gazette, specify.
160
DEFINITIONS
“Permanent establishment” means, a fixed place of business throughwhich the business is wholly or partly carried on, and includes –………….
“Person” for the purposes of the Ordinance means:-
(a) An individual;
(b) An association of persons incorporated, formed, organized or
established in Pakistan or elsewhere;
(c)A company incorporated, formed, organized or established in
Pakistan or elsewhere;
(d) The Federal Government,
(e) A foreign government,
(f) A political subdivision of a foreign government, or
(g) Public international organization
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161
DEFINITIONS
“Profit on a debt” whether payable or receivable, means–
• Any profit, yield, interest, discount, premium or other
amount, owing under a debt, other than a return of capital; or
• Any service fee or other charge in respect of a debt,
including any fee or charge incurred in respect of a credit facility
which has not been utilized.
“Debt” means any amount owing, including accounts payable and the
amounts owing under promissory notes, bills of exchange, debentures,
securities, bonds or other financial instruments.
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162
DEFINITIONS
“Public company” means –
• a company in which not less than fifty per cent of the shares areheld by the Federal Government or Provincial Government;
• a company in which not less than fifty per cent of the shares areheld by a foreign Government, or a foreign company owned by aforeign Government;
• a company whose shares were traded on a registered stockexchange in Pakistan at any time in the tax year and whichremained listed on that exchange at the end of that year; or
• a unit trust whose units are widely available to the public and anyother trust as defined in the Trusts Act, 1882.
Note: The definition of ‘Public Company’ under the Income TaxOrdinance, 2001 is different from one generally under stood
or as defined under the Companies Ordinance, 1984.
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163
DEFINITIONS
“Residential status” (where a person resides in a tax year) is of great
importance for the purposes of income Ordinance, 2001. Basically there
are two categories of residential status, namely:
• Resident; and
• Non-Resident
The Federal Government is resident.
An ”individual” is resident in a tax year if he/she is:
• Present in Pakistan for 183 days or more in that tax year; or
• An employee or official of the Federal or a Provincial
Government posted abroad in that tax year.
ContinuedBack
164
DEFINITIONS
An association of persons is “resident” in a tax year if the control andmanagement of the affairs of the association is situated wholly or partly inPakistan at any time in the year.
A company is “resident” in a tax year if:
• it is incorporated or formed by or under any law in force in Pakistan;
• the control and management of the affairs of the company is situatedwholly in Pakistan at any time in the year; or
• it is a Provincial Government or Local Government in Pakistan.
An individual, an association of persons and a company is “non-resident” in a tax year if he/she/it is not a resident for that tax year.
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165
DEFINITIONS
“Salary” means any amount received by an employee from any
employment, whether of a revenue or capital nature, including -
• Pay, wages or other remuneration, including leave pay,
payment in lieu of leave, overtime payment, bonus, commission,
fees, gratuity or work condition supplements (such as for unpleasant
or dangerous working conditions);
• Perquisites, whether convertible to money or not;
• Allowances including cost of living, subsistence, rent, utilities,
education, entertainment or travel allowance, but excluding any
allowance solely expended in the performance of the duties of
employment;
• Expenditure incurred by an employee that is paid or reimbursed by
the employer, other than expenditure incurred on behalf of the
performance of the duties of employment;
• Benefit under ‘Employee Share Scheme’ (Section 14).
ContinuedBack
166
DEFINITIONS
• Profits in lieu of, or in addition to, salary or wages, including:
– Consideration for an agreement to enter into an employmentrelationship;
– Consideration for an agreement to any conditions or changes tothe conditions of employment;
– Retirement or termination benefits, whether paid voluntarily orunder an agreement, including any compensation forredundancy or loss of employment and golden handshake;
– Any amount from a provident or other fund, to the extent towhich it is not a repayment of contributions made by theemployee; and
– Consideration for an employee’s agreement to a restrictivecovenant in respect of any past, present or prospectiveemployment;
• Pension or annuity, or any supplement to a pension orannuity; and
• Income tax payable on salary where the employer agrees to pay theIncome tax payable
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167
DEFINITIONS
“Tax Year”
“Normal tax year” is a period of twelve months ending on 30th day of
June and is denoted by the calendar year in which the said date falls.
For example, tax year for the period of twelve months from July 01, 2011
to June 30, 2012 shall be denoted by calendar year 2012 and the period
of twelve months from July 01, 2012 to June 30, 2013 shall be denoted
by calendar year 2013.
“Special tax year” is any period of twelve months (subject to certain
conditions and restrictions) and is denoted by the calendar year relevant
to the normal tax year in which closing date of the special tax year falls.
For example, tax year for the period of twelve months from January 01,
2011 to December 31, 2011 shall be denoted by calendar year 2012 and
the period of twelve months from October 01, 2011 to September 30,
2012 shall be denoted by calendar year 2013.
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168
DEFINITIONS
“Turnover” (for the purposes of section 153) means, –
• The gross sales or gross receipts, inclusive of sales tax and federal
excise duty or any trade discounts shown on invoices, or bills,
derived from the sale of goods;
• The gross fees for the rendering of services for giving benefits
including commissions;
• The gross receipts from the execution of contracts; and
• The company’s share of the amounts stated above of any
association of persons of which the company is a member.”
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IMPORT OF GOODS
Section 148
Clarifications:
1. Importers of goods belonging to tribal areas etc. are also liable for
collection of tax on goods imported by them. However, since
Income Tax Ordinance, 2001 does not extend to tribal areas etc.,
they can claim the refund of such tax collected from them (certain
restrictions apply) [Circular Letter C. No. 63(I)/IT-6/80 dated
November 27, ?????.
2. In case of importers of Azad Kashmir, the Customs authorities in
Pakistan shall honour the certificate issued by the Commissioner,
Azad Jammu and Kashmir, to the effect that such importer has paid
the tax due as required by this section in designated branches of
National Bank of Pakistan in Azad Jammu and Kashmir, alongwith
a copy of such tax paid deposit receipt (challan) [Circular No. 13 of
1998 dated October 02, 1998]
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170
SALARY
Section 149
Reduction in Tax Liability
Senior
citizen
Where the taxable income, in a tax year, of a taxpayer
aged 60 years or more on the first day of that tax year
does not exceed Rs. 1,000,000, his tax liability on such
income is reduced by fifty percent (50%) [Sub-clause (1A)
of Clause (1) of Part III of 2nd Schedule]
Full time
teacher or
researcher
The tax payable by a full time teacher or a researcher,
employed in a non profit education or research institution
including government training and research institution
duly recognized by a Board of Education or a University
or the University Grants Commission, is further reduced
by an amount equal to 40% of the tax payable on salary
income after the aforesaid senior citizen reduction [Sub-
clause (2) of Clause (1) of Part III of 2nd Schedule]
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171
SALARY – ANNUAL AVERAGE RATE
Following example will illustrate the calculation of annual average rate
of tax and to be deducted from salary:
Monthly salary Rs. 100,000
Annual salary Rs. 1,200,000
Tax on annual salary (assumed) Rs. 62,500
Monthly deduction Rs. 5,208
.
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172
SALARY – CHANGE IN SALARY
Following example will illustrate the calculation of tax and monthly
deduction where the salary is increased or decreased during the tax
year:
Monthly salary for the first 5 months Rs. 100,000
Annual salary Rs. 1,200,000
Tax on annual salary Rs. 62,500
Monthly deduction for first 5 months Rs. 5,208
From the 6 month salary increased Rs. 120,000
Revised annual salary (100,000 X 5 + 120,000 X 7) Rs. 1,340,000
Tax on revised annual salary Rs. 76,500
Less: Tax deducted in first 5 months Rs. 26,040
Balance tax to be deducted in next 7 months Rs. 50,460
Monthly deduction in next 7 months Rs. 7,209
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173
SALARY – CHANGE IN EMPLOYER
Following example will illustrate the calculation of tax and monthly
deduction where the employee has changed the employer during the tax
year:
Salary for the 5 months from previous employer * Rs. 500,000
Tax deducted by previous employer * Rs. 26,040
* Based on the certificate from previous employer
Salary for the next 7 months from new employer Rs. 120,000
Revised annual salary (500,000 + 120,000 X 7) Rs. 1,340,000
Tax on revised annual salary Rs. 76,500
Less: Tax deducted by previous employer Rs. 26,040
Balance tax to be deducted in next 7 months Rs. 50,460
Monthly deduction in next 7 months Rs. 7,209
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174
SALARY - RETIERMENT OR TERMINATION BENEFITS – Sub-section (6) of Section 12
Salary is chargeable to tax on the basis of actually received in a tax
year. Accordingly the retirement or termination benefits received in lump
sum are current year’s income. As a result the income tax payable
substantially increases, since the taxable income falls in a higher tax
slab.
To overcome this problem, the taxpayer has an option to notify the
concerned Commissioner of Income Tax by the due date for furnishing
the return, that he/she has elected for the retirement or termination
benefits to be taxed as a separate block of income at the average rate of
income tax of the three preceding years (fixed income tax)
ContinuedBack
175
SALARY - RETIERMENT OR TERMINATION
BENEFITS – Sub-section (6) of Section 12
Following example will illustrate the effects and calculations:Salary for the year:
Excluding retirement or termination benefits (RTB) Rs. 1,000,000Retirement or termination benefits (RTB) Rs. 5,000,000
Continued
Calculation of income tax, if not
electing
Excluding
RTB
Including
RTB
Chargeable / total /taxable income 1,000,000 6,000,000
Income tax rate (assumed) 9% 19%
Income tax on above 90,000 1,140,000
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176
SALARY - RETIERMENT OR TERMINATION
BENEFITS – Sub-section (6) of Section 12
Continued
Calculation separate tax at the average
rate of income tax of preceding three
years
Taxable
income
Income tax
payable
(assumed)
Preceding Year 1 950,000 85,500
Preceding Year 2 900,000 67,500
Preceding Year 3 850,000 63,750
Total 2,700,000 216,750
Average rate of income tax (Total income tax payable
divided by Total taxable income) .080277
RTB 5,000,000
Fixed income tax on RTB (RTB multiply by average rate) 401,389
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177
SALARY - RETIERMENT OR TERMINATION
BENEFITS – Sub-section (6) of Section 12
Calculation of income tax, if electing
Income tax on chargeable / total / taxable income
excluding RTB
90,000
Fixed income tax on RTB calculated at the average rate
of income tax of preceding three years 401,389
Total income tax liability 491,389
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178
SALARY – ARREARSSub-section (7) of Section 12
Salary is chargeable to tax on the basis of actually received in a tax
year. Accordingly the arrears of salary received is income of the tax year
in which received. As a result the income tax payable substantially
increases, since the taxable income falls in a higher tax slab.
To overcome this problem, the taxpayer has an option to notify the
concerned Commissioner of Income Tax by the due date for furnishing
the return, that he/she has elected for the arrears of salary to be taxed
as a separate block of income at the rates of income tax that would have
been applicable had such arrears received in the tax year to which it
relates (fixed income tax).
ContinuedBack
179
SALARY – ARREARSSub-section (7) of Section 12
Continued
Following example will illustrate the effects and calculations:Salary for the year:
Excluding arrears Rs. 1,000,000Arrears (of last 2 years) Rs. 200,000 for each year Rs. 400,000
Calculation of income tax, if not electing Excluding
Arrears
Including
Arrears
Chargeable / total / taxable income 1,000,000 1,400,000
Income tax rate (assumed) 9% 11%
Income tax on above 90,000 154,000
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180
SALARY – ARREARSSub-section (7) of Section 12
Calculation of separate tax at the rates of income tax that would have
been applicable if such arrears were received in the tax year in which
the services were rendered
Taxable income Income tax payable (assumed)
Excluding
arrears
Including
arrears
Excluding
arrears
Including
arrears
Difference
Preceding year 1 700,000 900,000 42,000 67,500 25,500
Preceding year 2 600,000 800,000 27,000 60,000 33,000
Total 58,500
Calculation of tax liability, if electing
Income tax on chargeable taxable income excluding RTB 90,000
Fixed income tax on arrears calculated as above 58,500
Total income tax liability 148,500
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181
SALARY
Section 149
Clarifications:
1. Chargeability of income to tax is subject to determination of
residential status that is resident individual or not. Since residential
status of a Pakistani Seaman working abroad foreign flag-ships
cannot be determined before the expiry of the tax year. Shipping
agents are not required to withhold tax on salary paid to such
Pakistani seaman. [Circular No. 18 of 2000 dated July 20, 2000]
2. The employer is permitted to make necessary adjustments while
deducting tax from a subsequent payment of salary during tax year
for any over or under-deducted tax from any earlier payment of
salary in the same tax year. [Section 149(1)(iii) and Circular No. 18
of 2004 dated August 09, 2004]
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182
NON-RESIDENT – OTHER PAYMENTS
Section 152(2)
*Exclusions which are specifically covered under other withholding tax provisions
• Salary being covered under section 149. [Section 152(3)(a)]
• Dividend being covered under section 150. [Section 152(3)(a)]
• Royalty or fee for technical services which are covered under section152(1) [Section 152(2)]
• Certain contracts which are covered under section 152(1A) [Section152(2)]
• Insurance premium or re-insurance premium which are covered undersection 152(1AA) [Section 152(2)]
• Media persons which are covered under section 152(1AAA) [Section152(2)]
• Sale of goods, rendering of or providing of services and execution ofcontracts to the non-resident having a permanent establishment inPakistan which are covered under section 152(2A) [Section 152(2)]
• Prizes and winnings being covered under section 156. [Section 152(3)(a)]
• Brokerage or commission being covered under section 233. [Section152(3)(a)]
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NON-RESIDENT – OTHER PAYMENTS
Section 152(2)
Conditions and restrictions applicable on any payment that is not
chargeable to tax
For the purposes of any payment that is not chargeable to tax excluded
from the ambit of deduction of tax source under this section, following
conditions and restrictions apply:
• A notice in writing to the Commissioner that a payment being not
chargeable to tax is being made without deduction of tax at source
indicating the name and address of the payee and the nature and
amount of payment.
• The Commissioner on receipt of the notice will pass an order
accepting the contention or directing to deduct the tax.
• The exclusion of such payment from the payments not liable to
deduction of tax source will not apply if the Commissioner directs
otherwise.
ContinuedBack
184
NON-RESIDENT – OTHER PAYMENTS
Section 152(2)
However, notice to the Commissioner is not required for payment on
account of :
• Import of goods where title to the goods passes outside Pakistan and
is supported by import documents, except an import that is part of an
overall arrangement for the supply of goods, their installation, and
any commission and guarantees in respect of the supply where:
a. the supply is made by the head office outside Pakistan of a
person to a permanent establishment of the person in Pakistan;
b. the supply is made by a permanent establishment of the person
outside Pakistan to a permanent establishment of the person in
Pakistan;
c. the supply is made between associates; or
d. the supply is made by a resident person or a Pakistan
permanent establishment of a non-resident person
• Educational and medical expenses remitted in accordance with the
regulations of the State Bank of Pakistan
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SALE OF GOODS/SERVICES/EXECUTION
OF CONTRACTS – Section 153(1)Clarifications:
1. Payment to agents, who work on fixed commission basis butreceive payment on behalf of their principals as well, can bebifurcated between the agent and the principal for the purposes ofdeduction at source. Accordingly the tax deducted will beseparately deposited on behalf of the agent and principal.
Where the principal is exempt, the tax shall be deducted from thepayment relating to the agent only.
This situation normally arises in case of advertising agents,insurance agents, travel agents and agents of petroleumcompanies etc.
[Circular No. 25 of 1980 dated September 23, 1980, Circular No. 1of 1981 dated January 03, 1981 and Circular No. 29 of 1999 datedNovember 16, 1999]
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186
SALE OF GOODS/SERVICES/EXECUTION OF
CONTRACTS – Section 153(1)Clarifications:
2. In case the recipient of payment claims exemption on account of
sale of imported goods, it is the responsibility of the person making
the payment to ensure that the conditions for exemption are
fulfilled and for this purpose may obtain the relevant import
documents etc. [Section 153(5)(a) and Clause (47A) of Part IV of
2nd Schedule]
3. Lease payments under “lease financing arrangements” are not
liable to deduction of tax at source [Circular Letter C. No.
IT.JI.1(7)/84-Vol II dated March 27, 1988]
4. Renting of vehicles amounts to provision of services and therefore
car rentals attract deduction of tax at source [Circular Letter C. No.
1(17)WHT/91 dated November 18, 1992]
ContinuedBack
187
SALE OF GOODS/SERVICES/EXECUTION OF
CONTRACTS – Section 153(1)
Clarifications:
5. Insurance premiums paid to and claims discharged by insurance
companies are not liable to deduction of tax at source [Circular
Letters C. No. IT.JI.1(7)/84 dated February 08, 1988 and C. No.
1(25)IT-I/80 dated October 01, 1980]
6. The Commissioner is empowered under section 153(4) of the
Income Tax Ordinance, 2001, to issue exemption certificate to the
petrol pump operators who may be subjected to further tax
deduction from the sales of petroleum products under section
153(1) of the Income Tax Ordinance, 2001 from whom tax has
already been collected under section 156A of the Income Tax
Ordinance, 2001 [Circular No. 11 of 2004 dated July 01, 2004].
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188
EXPORT REALIZATIONS
Section 154(1) and (2)
Clarification
Advance payment received against exports to be made are also
realization of export proceeds and liable to deduction of tax at source.
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189
COMMISSION/DISCOUNT ON PETROLEUM
PRODUCTS – Section 156A
Clarification
The Commissioner is empowered under section 153(4) of the Income TaxOrdinance, 2001, to issue exemption certificate to the petrol pumpoperators who may be subjected to further tax deduction from the sales ofpetroleum products under section 153(1) of the Income Tax Ordinance,2001 from whom tax has already been collected under section 156A ofthe Income Tax Ordinance, 2001 [Circular No. 11 of 2004 dated July 01,2004].
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190
CASH WITHDRAWAL FROM A BANK
Section 231A
Clarifications
[Circular No. 4 of 2005 dated July 14, 2005]
• The incidence of withholding is on the person in whose name theaccount, deposit or any other arrangement exists and from which acash withdrawal in excess of Rs.50,000 per day is made.
• Withholding tax is attracted on issuance of bearer pay order or othersimilar banking instrument either by debiting an account, deposit orany other arrangement, or against cash received
• Withholding tax is not attracted on encashment of pay order or othersimilar banking instrument
• Withholding tax is not attracted on direct cash payment against homeremittances from abroad
• Withholding tax is attracted on cash withdrawn from ATM outsidePakistan against card issued in Pakistan
• Withholding tax is not attracted on cash withdrawal from ATM inPakistan against credit card issued outside Pakistan
• Withholding tax is not attracted on credit card issued by Non-bankingcompanies ContinuedBack
191
CASH WITHDRAWAL FROM A BANK
Section 231A
Clarifications
[Circular No. 4 of 2005 dated July 14, 2005]
• Whenever there is a cash withdrawal of full amount or amount ofwithdrawal and tax involved exceeds the balance, then either thebank should refuse payment on account of “withdrawal amountexceeds the balance” or make payment to the person presenting theinstrument after setting aside the amount of tax involved
• Withholding tax is not attracted on cash withdrawals by banks fromaccounts maintained with sub-treasury for their day-to-day cashrequirements
• Generally, the withdrawal limit from an ATM is below Rs.25,000 perday and therefore, withdrawals for day-to-day requirement by defaultdo not attract withholding tax. However, in case cash withdrawal froman ATM exceeds Rs.50,000, per day withholding tax is attracted.
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BROKERAGE OR COMMISSION
Section 233
Clarification
Payment to agents, who work on fixed commission basis but receivepayment on behalf of their principals as well, can be bifurcated betweenthe agent and the principal for the purposes of deduction at source.Accordingly the tax deducted will be separately deposited on behalf of theagent and principal.
Where the principal is exempt, the tax shall be deducted from thepayment relating to the agent only.
This situation normally arises in case of advertising agents, insuranceagents, travel agents and agents of petroleum companies etc.
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EXEMPTIONS
Continued
Persons exempt from collection or
deduction of tax by the withholding agents
Under Section
Federal Government [Section 49 and SRO
947(I)/2008 dated September 05, 2008].
148, 150, 151(1)(a),
151(1)(b), 151(1)(c),
151(1)(d), 153(1), 155,
231A, 231AA, 231B,
234, 235, 236, 236C,
236D, 236I
Provincial Government [Section 49 and SRO
947(I)/2008 dated September 05, 2008].
Local Government [Section 49 and SRO
947(I)/2008 dated September 05, 2008].
Financial Institution. [Section 151(1)(d)] 151(1)(d)
A person whose income is not likely to be
chargeable to tax and produces a certificate
from the Commissioner of an exemption from
deduction of tax [Section 159(1A)]
151(1)(c)
Any Mutual Fund which distributes not less
than 90% of its income amongst the unit
holders [Proviso to section 233AA]
233AA
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EXEMPTIONS
Continued
Persons exempt from collection or
deduction of tax by the withholding agents
Under Section
Companies entitled to group taxation under
section 59AA and 59B of the Income Tax
Ordinance, 2001 in respect of their inter
corporate dividend and profit on debt
[Clause (11B) of Part IV of 2nd Schedule].
150, 151(1)(b),
151(1)(d)
Institutions of the Agha Khan Development
Network (Pakistan) listed in Schedule 1 of the
Accord and Protocol dated November 13,
1994, executed between the Government of
the Islamic Republic of Pakistan and Agha
Khan Development Network. [Clause (16) of
Part IV of 2nd Schedule].
148, 151(1)(a),
151(1)(b), 151(1)(c),
151(1)(d), 153(1),
153(1A), 155, 156
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195
EXEMPTIONS
Continued
Persons exempt from collection or deduction of tax by the withholding agents
Under Section
Non-resident, (excluding local branches orsubsidiaries or offices of foreign banks,companies, associations of persons or anyother person operating in Pakistan), in respectof their profit on debt from Pak rupeesdenominated Government and corporatesecurities and redeemable capital, as definedin Companies Ordinance, 1984, listed on aregistered stock exchange, where theinvestments are exclusively made from foreignexchange remitted into Pakistan through aSpecial Convertible Rupees Accountmaintained with a bank in Pakistan. [Clause(19) of Part IV of 2nd Schedule]
151(1)(a), 151(b), 151(1)(c), 151(1)(d)
Special Purpose Vehicle for the purposes ofsecuritization [Clause (38) of Part IV of 2nd
Schedule]
151(1)(a), 151(1)(b), 151(1)(c), 151(1)(d), 153(1), 153(1A), 233
Venture Capital Company [Clause (38A) ofPart IV of 2nd Schedule].
150, 151(1)(a), 151(1)(b), 151(1)(c), 151(1)(d), 233Back
196
EXEMPTIONS
Continued
Persons exempt from collection or deduction of tax by the withholding agents
Under Section
Islamic Development Bank [Clause (38B) and(38C) of Part IV of 2nd Schedule]
150, 151(1)(a), 151(1)(b), 151(1)(c), 151(1)(d), 152(1), 152(1A), 152(1AA), 152(1AAA), 153(1), 153(1A), 233
Foreign news agencies, syndicate servicesand non-resident contributors, who have nopermanent establishment in Pakistan[Clause (41B) of Part IV of 2nd Schedule]
152(1AAA)
Traders of yarn for sales, supplies andservices to the following categories of SalesTax Zero Rated taxpayers registered on orbefore June 30, 2011, namely, Textile andarticles thereof; Carpets; Leather and articlesthereof including artificial leather footwear;Surgical goods; and Sports goods [Clauses(45A) of Part IV of 2nd Schedule]
153(1)
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197
EXEMPTIONS
Continued
Persons exempt from collection or deduction of tax by the withholding agents
Under Section
a. National Investment (Unit) Trust;b. A modaraba;c. A collective investment scheme;d. An approved Pension Fund;e. An approved Income Payment Plan;f. Real Estate Investment Trust (REIT)
Scheme;g. A Private Equity and Venture Capital Fund;h. A recognized Provident Fund;i. An approved Superannuation Fund;
andj. An approved Gratuity Fund.[Clause (47B) of Part IV of 2nd Schedule].
150, 151(1)(a), 151(1)(b), 151(1)(c), 151(1)(d), 233
Direct and indirect exporters covered undersub-chapter 7 of Chapter XII of SRO450(I)/2001 dated June 18, 2001[Clause(56)(ii) of Part IV of 2nd Schedule]
148
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198
EXEMPTIONS
Continued
Persons exempt from collection or deduction of tax by the withholding agents
Under Section
Manufacturing Bond as prescribed underChapter XV of Customs Rules, 2001 notifiedvide S.R.O. 450(I)/2001, dated June 18, 2001[Clause (56)(iv) of Part IV of 2nd Schedule]
148
Trading Houses which full fill the followingconditions in a tax year:
(i) Has a paid up capital of more than Rs.250million;
(ii) Owns fixed assets exceeding Rs.300 million atthe close of the Tax Year;
(iii) Maintains computerized records of imports andsales of goods;
(iv) Maintains a system for issuance of 100% cashreceipts on sales;
(v) Presents its accounts for tax audit every year;and
(vi) Is registered with Sales Tax Department:
[Clauses (57) of Part IV of 2nd Schedule]
153(1)
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199
EXEMPTIONS
Continued
Persons exempt from collection or deduction of tax by the withholding agents
Under Section
Large import houses which full fill the followingconditions in a tax year:
(i) Has a paid up capital of more than Rs. 250 million;(ii) Has imports exceeding Rs.500 million during the tax
year;(iii) Owns total assets exceeding Rs. 350 million at the
close of the Tax Year;(iv) Is a single object company;(v) Maintains computerized records of imports and sales
of goods;(vi) Maintains a system for issuance of 100% cash
receipts on sales;(vii) Presents its accounts for tax audit every year;(viii) Is registered with Sales Tax Department; and(ix) Makes sales of industrial raw material to
manufacturer registered for sales tax purposes;
[Clauses (57A) of Part IV of 2nd Schedule]
153(1)
Earthquake victim against compensationreceived from GOP including paymentsthrough Earthquake Reconstruction andRehabilitation Authority (ERRA) [Clause (61) ofPart IV of 2nd Schedule].
231A
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200
EXEMPTIONS
Continued
Persons exempt from collection or deduction of tax by the withholding agents
Under Section
Exporters-cum-manufacturers of carpets,leather and articles thereof including artificialleather footwear, surgical goods, sports goodsand textile and articles thereof [Clause (66) ofPart IV of 2nd Schedule]
235
International Finance Corporation establishedunder the International Finance CorporationAct, 1956 [Clause (67) of Part IV of 2nd
Schedule]
150, 151(1)(a), 151(1)(b), 151(1)(c), 151(1)(d), 152(1), 152(1A), 152(1AA), 152(1AAA), 153(1), 233
Pakistan Domestic Sukuk Company Limited[Clause (68) of Part IV of 2nd Schedule
151(1)(a), 151(1)(b), 151(1)(c), 151(1)(d), 153(1), 155
Asian Development Bank established underthe Asian Development Bank Ordinance, 1971[Clause (69) of Part IV of 2nd Schedule]
150, 151(1)(a), 151(1)(b), 151(1)(c), 151(1)(d), 152(1), 152(1A), 152(1AA), 152(1AAA), 153(1), 233Back
201
EXEMPTIONS
Continued
Persons exempt from collection or deduction of tax by the withholding agents
Under Section
Contactors and sub-contractors engaged in theexecution of power project under theagreement between the Islamic Republic ofPakistan and HUB Power Company Limited[Clause (70) of Part IV of 2nd Schedule].
148
ECO Trade and Development Bank [Clause(72) of Part IV of 2nd Schedule]
150, 151(1)(a), 151(1)(b), 151(1)(c), 151(1)(d), 152(1), 152(1A), 152(1AA), 152(1AAA), 153(1), 233
An industrial undertaking which has paid thetax liability for the current tax year, on the basisof determined tax liability for any of thepreceding two tax years, whichever is thehigher, and a certificate to this effect is issuedby the concerned Commissioner [Clause (72B)of Part IV of 2nd Schedule]
148
Back
202
EXEMPTIONS
Continued
Persons exempt from collection or deduction of tax by the withholding agents
Under Section
Shareholder of a coal mining project or coalbased power generation project situated inSindh for a period of 30 years commencingfrom the date of commencement of business.[Clause (78) of Part IV of 2nd Schedule]
150
A non-resident person (subject to certainrestrictions and conditions) [Clause (89) of PartIV of 2nd Schedule]
236I
An individual entitled to privileges under theUnited Nations (Privileges and Immunities) Act,1948 [Clause (89) and (90) of Part IV of 2nd
Schedule]
236D, 236I
A foreign diplomat or a diplomatic mission inPakistan [Clause (89) and (90) of Part IV of 2nd
Schedule]
236D, 236I
Businessmen Hospital Trust, Lahore. [SRO840(I)/79 dated September 12, 1979].
148
Back
203
EXEMPTIONS
Continued
Persons exempt from collection or deduction of tax by the withholding agents
UnderSection
A person whose income is exempt from tax andproduces a certificate from the Commissioner of anexemption from deduction of tax. [SRO 586(I)/91 datedJune 30, 1991
153(1A)
A person who produces a certificate from theCommissioner to the effect that their income during thetax year is exempt from tax under the Income TaxOrdinance, 2001 or any other law for the time being inforce. [SRO 594(I)/91 dated June 30, 1991].
151(1)(a), 151(1)(b), 151(1)(c), 151(1)(d)
A person who produces a certificate from the AdditionalCommissioner to the effect that the recipient’s incomeduring the tax year is exempt from tax under theOrdinance. [SRO 1130(I)/91 dated November 07, 1991]
155
Shareholder who produces a certificate from theCommissioner to the effect that the recipient’s incomeduring the tax year is exempt from tax under theIncome Tax Ordinance, 2001. [SRO 1236(I)/91 datedDecember 05, 1991]
150
Back
204
EXEMPTIONS
Continued
Persons exempt from collection or deduction of tax by the withholding agents
Under Section
Cotton Export Corporation of Pakistan. [SRO987(I)/92 dated October 07, 1992]
154(1), 154(2), 154(3)
Foreign company and its associations whosemajority share capital are held by a foreignGovernment. [SRO 947(I)/2008 datedSeptember 05, 2008].
148
Petroleum (E&P) companies (other than motorvehicles) covered under the Customs andSales Tax Notification No. SRO 678(I)/2004dated August 7, 2004 [SRO 947(I)/2008 datedSeptember 05, 2008]
148
Consumers who have paid the entire advancetax liability under section 147 of the IncomeTax ordinance, 2001 and produce anexemption certificate to this effect issued bythe Commissioner. [SRO 1053(I)/2010 datedNovember 22, 2010]
235
Back
205
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Profit on debt paid under a loan agreement bythe borrower to a Banking company or adevelopment financial institution. [Section151(1)(d)]
151(1)(d)
Profit on debt on an account, deposit orcertificate issued under the National SavingsScheme of Post Office Savings Account whichwere exempt from tax under the repealedIncome Tax Ordinance, 1979 and whereinvestment was made on or before June 30,2001 [Section 239(14)]
151(1)(a)
Profit on debt on Mahana Amadni Accountheld under the National Savings Schemewhere the monthly installment does not exceedRs. 1,000 [Section 239(14)]
151(1)(a)
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206
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Sale of agricultural produce by the growers ofsuch produce, subject to furnishing of thecertificate in the prescribed form by the grower.[Clause (12) of Part IV of 2nd Schedule]
153(1)
Incidental expenses of the crew of oil tanker onbusiness trip paid in cash [Clause (12) of PartIV of 2nd Schedule]
153(1)
Advertising services by electronic and printmedia [Clause (16A) of Part IV of 2ndSchedule].
153(1)
Profit on debt on Bahbood Savings Certificateor Pensioner’s Benefit Account issued underthe National Savings Scheme [Clause (36A) ofPart IV of 2nd Schedule]
151(1)(a)
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207
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Sale of petroleum products imported by thesame person under the Government ofPakistan’s de-regulation policy of POLproducts. [Clause (43A) of Part IV of 2nd
Schedule]
153(1)
Sale of air tickets by travel agents who havepaid withholding tax on their commission[Clause (43B) of Part IV of 2nd Schedule]
153(1)
Sale of petroleum products by an oildistribution company or an oil refinery orpermanent establishment of non-residentPetroleum Exploration and Production (E&P)Company [Clause (46) of Part IV of 2nd
Schedule].
153(1)
Realization of exports proceeds againstcooking oil or vegetable ghee exported toAfghanistan by a person from whom tax hasbeen collected on import of edible oil [Clause(47C) of Part IV of 2nd Schedule]
154(1)
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208
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Import of goods classified under PakistanCustoms Tariff falling under Chapters 27, 86and 99 [Clause (56)(i) of Part IV of 2nd
Schedule]
148
Goods temporarily imported into Pakistan forsubsequent exportation and which are exemptfrom customs duty and sales tax underNotification No. S.R.O. 492(I)/2009, dated the13th June, 2009 [Clause (56)(iii) of Part IV of2nd Schedule]
148
Mineral oil imported by a manufacturer orformulator of pesticides which is exempt fromcustoms-duties under the customs NotificationNo. S.R.O. 857(I)/2008, dated the 16th August,2008 [Clause (56)(v) of Part IV of 2nd
Schedule]
148
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209
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Profit on debt on Term Finance Certificateheld by a company, issued on, or after, thefirst day of July, 1999 [Clause (59)(i) of Part IVof 2nd Schedule]
151(1)(d)
Profit on debt on Term Finance Certificatesbeing the instruments of redeemable capitalunder the Companies Ordinance, 1984 (XLVIIof 1984), issued by Prime Minister’s HousingDevelopment Company (Pvt) Limited (PHDCL)[Clause (59)(ii) of Part IV of 2nd Schedule]
151(1)(d)
Profit on debt on Pak rupee accounts orcertificates, which are created out of foreigncurrency account or deposit held on May 28,1998, with a bank authorized under theForeign Currency Scheme of State Bank ofPakistan [Clause (59)(iii) of Part-IV of 2nd
Schedule]
151(1)(a), 151(1)(b), 151(1)(c), 151(1)(d)
Back
210
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Profit on debt on Monthly Income SavingsAccount held under the National SavingsScheme, where monthly installment in anaccount does not exceed one thousand rupees(applies to a resident individual only) [Clause(59)(iv)(b) of Part-IV of 2nd Schedule]
151(1)(a)
Import and sale of fully as well partlydesigned/assembled cipher devices, for usewithin the country as are verified by CabinetDivision (NTISB) with reference to design,quality and quantity [Clause (60) of Part IV of 2nd
Schedule].
148, 153(1)
Import and sale of goods dedicated for use inrenewable sources of energy like solar andwind etc., even if locally manufactured, whichinclude induction lamps, SMD, LED’s with or without blastwith fittings and fixtures, wind turbines including alternatorand mast, solar torches, lanterns and related instruments,PV modules with or without the related componentsincluding inventers, charge controllers and batteries.[Clause (77) of Part IV of 2nd Schedule].
148, 153(1)
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211
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Sale of goods or providing or rendering ofservices to a coal mining project or coal basedpower generation project situated in Sindhduring the project construction and operationsperiod. [Clause (78) of Part IV of 2nd Schedule]
153(1)
Sale for goods, rendering or providing ofservices and execution of contracts byresidents of Tribal Areas or Azad Kashmir, whoexecute contracts in Tribal Areas or AzadKashmir only, as the case may be, andproduces a certificate to this effect from thePolitical Agent concerned or the districtauthority, as the case may be, or in case ofAzad Kashmir, from the Income Tax Officerconcerned. [SRO 586(I)/91 dated June 30,1991]
153(1)
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212
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Sale for goods, rendering or providing ofservices and execution of contracts by aperson who produces a certificate from theCommissioner to the effect that their incomeduring the tax year is exempt from tax. [SRO586(I)/91 dated June 30, 1991]
153(1)
Sale of agricultural produce including freshmilk by the growers/producers of agriculturalproduce to a company or an association ofpersons having turnover of Rs. 50,000,000 orabove or an individual having turnover of Rs.50,000,000 or above. [SRO 586(I)/91 datedJune 30, 1991].
153(1)
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213
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Sale of live chicken birds and eggs (which hasnot been subjected to any process other thanthat which is ordinarily performed to rendersuch produce fit to be taken to the market) by aperson engaged in poultry farming or anindustrial undertaking engaged in poultryprocessing. [SRO 586(I)/91 dated June 30, 1991].
153(1)
Sale of electricity and gas by a company[SRO 586(I)/91 dated June 30, 1991]
153(1)
Sale of crude oil by a company [SRO586(I)/91 dated June 30, 1991].
153(1)
Sale of their products by Attock RefineryLimited, National Refinery Limited andPakistan Refinery Limited [SRO 586(I)/91dated June 30, 1991]
153(1)
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214
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Sale of petroleum products by Pakistan StateOil Company Limited, Shell Pakistan Limited,and Caltex Oil (Pakistan) Limited [SRO586(I)/91 dated June 30, 1991]
153(1)
Sale of food and services of accommodation orboth by hotels and restaurants, if payment ismade in cash. [SRO 586(I)/91 dated June 30,1991]
153(1)
Sale of passenger tickets and for the cargocharges of goods transported by shippingcompanies and air carriers [SRO 586(I)/91dated June 30, 1991].
153(1)
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215
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Sale of goods not exceeding rupees twentyfive thousand in a financial year by a person.Provided that where the total payments in afinancial year, exceed rupees twenty fivethousand, the payer shall deduct tax from thepayments including the tax on payments madeearlier without deduction of tax during thesame financial year. [SRO 586(I)/91 datedJune 30, 1991]
153(1)
Services rendered or provided and executionof contracts not exceeding rupees tenthousand in a financial year by a person.Provided that where the total payments in afinancial year, exceed rupees ten thousand,the payer shall deduct tax from the paymentsincluding the tax on payments made earlierwithout deduction of tax during the samefinancial year. [SRO 586(I)/91 dated June 30,1991].
153(1)
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216
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Sale of cottonseed. [SRO 586(I)/91 dated June30, 1991]
153(1)
Sale of goods by the manufacturer thereof,who produces a certificate from theCommissioner to the effect that its incomeduring the tax year is not likely to bechargeable to tax due to assessed lossescarried forward. [SRO 586(I)/91 dated June 30,1991].
153(1)
Carriage of goods by an owner of one goodtransport vehicle, receiving payment once in afinancial year from a payer on account of asingle journey undertaken during the financialyear. [SRO 586(I)/91 dated June 30, 1991]
153(1)
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217
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Sale of goods, rendering or providing ofservices or execution of contracts, other thanthose which are subject to final taxation, by aperson who produces a certificate from theCommissioner to the effect that its incomeduring the tax year is not likely to bechargeable to tax due to assessed lossescarried forward. [SRO 586(I)/91 dated June 30,1991]
153(1)
Back
218
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Sale of goods, rendering or providing ofservices or execution of contracts, other thanthose which are subject to final taxation, by aperson:• from whom tax has been deducted undersub-section (1) of section 153;• the aggregate of the tax deducted underthe said sub-section is equal to or exceedsthe tax payable under section 147 inrespect of that tax year; and• a certificate to that effect from theCommissioner is produced by suchperson.[SRO 586(I)/91 dated June 30, 1991]
153(1)
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219
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Foreign currency account or depositmaintained by a person with authorized banksin Pakistan, in accordance with ForeignCurrency Accounts Scheme introduced by theState Bank of Pakistan, by citizens of Pakistanand foreign nationals residing abroad, foreignassociation of persons, companies registeredand operating abroad and foreign nationalsresiding in Pakistan. [SRO 594(I)/91 datedJune 30, 1991]
151(1)(b)
Rupee account or deposit held by a citizen ofPakistan residing abroad with a scheduledbank in Pakistan, where the deposits in thesaid account are made exclusively from foreignexchange remitted into the said account. [SRO594(I)/91 dated June 30, 1991]
151(1)(b)
Back
220
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Inter-bank deposits by a banking company[SRO 594(I)/91 dated June 30, 1991]
151(1)(b) , 151(1)(d)
Sale of goods to an exporter of such goodsoutside Pakistan. Provided that –(a) the exporter shall deduct tax on account ofgoods purchased in respect of goods soldin Pakistan; and(b) if tax has not been deducted frompayments on account of supply of goods inrespect of goods sold in Pakistan, the saidtax shall be paid by the exporter, if the salesin Pakistan are in excess of five percent ofexport sales.This exemption does not apply to sale ofgoods in respect of which special rates of taxdeduction are specified.[SRO 368(I)/94 dated March 07, 1994]
153(1)
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221
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Import of plant, machinery, fixtures, fittings orits allied equipments for the purposes of settingup an industrial undertaking (includinghotels) or for installation of an existingindustrial undertaking (including hotels) bythe same industrial undertaking and acertificate to that effect from the Commissioner,in respect of such plant, machinery, fixtures,fittings or equipments is produced. *certainconditions and restrictions apply on theissuance of the certificate by theCommissioner). [SRO 947(I)/2008 datedSeptember 05, 2008].
148
Back
222
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Plant or machinery imported by a person forexecution of a contract with the FederalGovernment or Provincial Government or LocalGovernment and produces a certificate fromthat Government. [SRO 947(I)/2008 dated September05, 2008].
148
High-speed diesel oil, light diesel oil, high-octane blending component or kerosene oilimported by companies. [SRO 947(I)/2008 datedSeptember 05, 2008].
148
Crude oil for refining and chemicals used inrefining thereof imported by companies. [SRO947(I)/2008 dated September 05, 2008].
148
Goods temporarily imported into Pakistan forsubsequent exportation which are exempt fromCustoms duty and Sales tax under NotificationNo. SRO 1065(I)/2005 dated 20th October,2005 [SRO 863(I)/2006 dated August 22, 2006]
148
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223
EXEMPTIONS
Continued
Specified goods, payments, etc. exempt from collection or deduction of tax by the withholding agents
Under Section
Raw materials imported for own consumptionby the taxpayers (other than the manufacturersand suppliers of cement, sugar, beverages andcigarettes) located in the most affected areasof Khyber Pakhtunkhwa, (district Peshawar,Malakand Agency, and districts of Swat, Buner,Shangla, Upper Dir, Lower Dir, Hangu, Bannu,Tank, Kohat, and chitral) and taxpayers locatedin moderately affected areas of KhyberPakhtunkhwa (Charsada, Nowshera, D.I.Khan, Batagram, Lakki Marwat, Swabi andMardan), FATA and PATA on production ofexemption certificate issued by the ChiefCommissioner concerned. [SRO 754/(I)/2010dated August 09, 2010]
148
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224
EXEMPTIONS
Continued
Specified withholding agents exempt from
collecting or deducting tax
Under Section
Special Purpose Vehicle for the purposes of
securitization Company [Clause (38) of Part IV
of 2nd Schedule]
151(1)(d), 153(1),
153(1A), 233
Venture Capital Company [Clause (38A) of
Part IV of 2nd Schedule]
150, 151(1)(d), 233
Islamic Development Bank [Clause (38B) of
Part IV of 2nd Schedule]
150, 151(1)(b),
151(1)(d), 152(1),
152(1A), 152(1AA),
152(1AAA), 153(1),
153(1A), 233
A manufacturer-cum-exporter, excluding
payments relating to goods sold in Pakistan or
payments in respect of which special rates of
tax deduction are specified. [Clause (45) of
Part IV of 2nd Schedule].
153(1)
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225
EXEMPTIONS
Continued
Specified withholding agents exempt from
collecting or deducting tax
Under Section
Trading Houses which full fill the following
conditions in a tax year:
(i) Has a paid up capital of more than Rs.250
million;
(ii) Owns fixed assets exceeding Rs.300
million at the close of the Tax Year;
(iii) Maintains computerized records of imports
and sales of goods;
(iv) Maintains a system for issuance of 100%
cash receipts on sales;
(v) Presents its accounts for tax audit every
year; and
(vi) Is registered with Sales Tax Department:
[Clauses (57) of Part IV of 2nd Schedule]
153(1)
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226
EXEMPTIONS
Continued
Specified withholding agents exempt from collecting or deducting tax
Under Section
Large import houses which full fill the followingconditions in a tax year:
(i) Has a paid up capital of more than Rs. 250 million;
(ii) Has imports exceeding Rs.500 million during the taxyear;
(iii) Owns total assets exceeding Rs. 350 million at theclose of the Tax Year;
(iv) Is a single object company;
(v) Maintains computerized records of imports and salesof goods;
(vi) Maintains a system for issuance of 100% cashreceipts on sales;
(vii) Presents its accounts for tax audit every year;
(viii) Is registered with Sales Tax Department; and
(ix) Makes sales of industrial raw material tomanufacturer registered for sales tax purposes;
[Clauses (57A) of Part IV of 2nd Schedule]
153(1)
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227
EXEMPTIONS
Specified withholding agents exempt from
collecting or deducting tax
Under Section
Hajj Group Operator in respect of Hajj
operations provided that the tax has been paid
at the rate of Rs.3,500 per Hajji for the tax year
2013 and Rs.5,000 per Hajji for the tax year
2014 in respect of income from Hajj operations
[Clause (72A) of Part IV of 2nd Schedule]
152(1), 152(1A) ,
152(1AA),
152(1AAA),
152(1AAA), 152(2A)
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228
“Distributor” means a person appointed by a manufacturer,
importer or any other person for a specified area to purchase
goods from him for further supply and includes a person who
in addition to being a distributor is also engaged in supply of
goods as a wholesaler or a retailer.
“Retailer” means a person, supplying goods to general public
for the purpose of consumption
“Taxable goods” means all goods other than those which
have been exempted under section 13 of the Sales Tax Act,
1990.
DEFINITIONS
ContinuedBack
229
“Taxable supply” means a supply of taxable goods made byan importer, manufacturer, wholesaler (including dealer),distributor or retailer other than a supply of goods which isexempt under section 13 and includes a supply of goodschargeable to tax at the rate of zero per cent under section 4.
“Wholesaler” includes a dealer and means any person whocarries on, whether regularly or otherwise, the business ofbuying and selling goods by wholesale or of supplying ordistributing goods, directly or indirectly, by wholesale for cashor deferred payment or for commission or other valuableconsideration or stores such goods belonging to others as anagent for the purpose of sale; and includes a personsupplying taxable goods to a person who deducts income taxat source under the Income Tax Ordinance, 2001 (XLIX of2001)
DEFINITIONS
Back