Witholding of taxes

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


Rs.3,000,001 and

Rs.3,500,000



Rs.3,500,001 and

Rs.4,000,000

Rs. 475,000 plus 25% of the amount


Rs.4,000,001 and

Rs.7,000,000



Rs.7,000,001 and

above

Rs. 1,425,000 plus 30% of the amount


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


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%


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


Company Adjustable


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%


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


Company Adjustable


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%


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


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


Rate of tax

deduction


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


Rate of tax

deduction


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


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


Treatment Final

34

NON-RESIDENT – OTHER PAYMENTS

Section 152(2)Person(s) liable to deduct tax

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 (*):


Continued

35


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


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)]


• 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)



• 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;


Treatment Adjustable

39

SALE OF GOODS/SERVICES/EXECUTION OF

CONTRACTS – Section 153(1)



• 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



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%


Execution of Contract by:

A company 7.00% 6.00%


A sportsperson * Not separately provided 10.00% *

41



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



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



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



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



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




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



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


• 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


Treatment Final

49

EXPORT REALIZATIONS

Section 154(1) and (2)


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*


• Clarifications

50

INDIRECT EXPORTS

Section 154(3)


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


* (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


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


53

EXPORTS (Land Routes)

Section 154(3C)


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


54

RENT

Section 155


• 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


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

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

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


• Clarifications

59

WITHDRAWAL FROM PENSION FUND

Section 156B


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


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


1st Session

Related Q & A

62


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


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



• 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


68

REGISTRATION, TRANSFER OR PURCHASE

OF MOTOR VEHICLE - Section 231B


• 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



Continued

Rates of tax collection

Engine capacity: 2015 2014


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



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


71

BROKERAGE OR COMMISSION

Section 233



• 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


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


• Clarifications

73

COMMISSION OF MEMBERS OF STOCK

EXCHANGES – Section 233A


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


74

MARGIN FINANCING IN SHARE BUSINESS ETC

Section 233AA


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


75

MOTOR VHEICLES

Section 234


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


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


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)


81

NATURAL GAS CONSUMPTION BY CNG STATIONS

Section 234A


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 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



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



85

STEEL MELTERS, RE-ROLLERS, ETC

ELECTRICITY CONSUMERS - Section 235B



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


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 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


88

SALE BY AUCTION OR AUCTION BY A TENDER

Section 236A


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


89

DOMESTIC AIR TRAVEL

Section 236B


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%




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


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


"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)


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


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


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


99

FEES OF EDUCATIONAL INSTITUTIONS

Section 236I


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


100

COMMISSION AGENTS AND ARHATIS ETC

Section 236J


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


101

INTERNATIONAL AIR TRAVEL

Section 236L


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%




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


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


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


2nd Session

Related Q & A

106


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


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


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


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


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


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


• 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.


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


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;


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.


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


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


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


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


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



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



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



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



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



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


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


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


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




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




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




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




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




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




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




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.

Back

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.

Back

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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169

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



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



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



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


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


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


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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183


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


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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185

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]

Back Continued

186


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



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


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


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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192


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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193

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


Local Government [Section 49 and SRO


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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194

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


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


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


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


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


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


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

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202

EXEMPTIONS

Continued


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

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203

EXEMPTIONS

Continued


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

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204

EXEMPTIONS

Continued


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

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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


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


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


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


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)

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210

EXEMPTIONS

Continued


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


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


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


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


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


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


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


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)

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218

EXEMPTIONS

Continued


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


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)

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220

EXEMPTIONS

Continued


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


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

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222

EXEMPTIONS

Continued


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


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



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



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

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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

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Law

Witholding of taxes