Failure to function under SWAPS: FBR to impose huge penalties on withholding agents

ISLAMABAD: The Federal Board of Revenue (FBR) will impose huge penalties/fines on withholding agents including government departments/private companies, who would fail to collect or deduct withholding taxes through the new Synchronized Withholding Administration and Payment System (SWAPS).

The new penalty regime would be applicable on the withholding agents from July 1, 2022.

According to sources, the FBR is automating the entire process of collection and depositing of tax by withholding agents. In this regard, a new Directorate-General for Synchronized Withholding Agents System has been established to document withholding transactions in future.

Under the Finance Act 2022, the “Synchronized Withholding Administration and Payment System agent” or “SWAPS agent” means any person or class of persons notified by the Board to collect or deduct withholding taxes through the SWAPS.

As per the new procedure, the Board may, by notification in the official gazette, notify any person or class of persons required to deduct or collect tax under the Ordinance to integrate with the Synchronized Withholding Administration and Payment System and to act as SWAPS agent within the time and in the manner as may be prescribed.

The tax collected or purported to be collected or deducted or purported to be deducted under the Ordinance by a notified SWAPS agent and credited to the Commissioner through digital mode shall be treated to have been paid under section 160 of the Ordinance.

Where tax has been paid by a notified SWAPS agent in accordance with sub-section (2) of this section, copy or number of SWAPS Payment Receipt (SPR) shall replace copy or number of Computerized Payment Receipts (CPR) for the purposes of the Ordinance. Any notified SWAPS agent shall not be eligible for tax credit under Part X of Chapter III of the Ordinance and exemption under any of the provisions of the Ordinance if notified SWAPS agent fails to integrate with Board.

All persons from whom the tax has been collected or deducted by the notified SWAPS agents shall be eligible for credit of tax withheld against SPR issued by SWAPS agent. All other provisions of the Ordinance, not specifically dealt with in this section, shall, mutatis mutandis, apply to the notified SWAPS agents, the FBR added.

Any person who fails to integrate or perform roles and functions as specified, after being duly notified by the Board as SWAPS agent, such person shall pay a penalty of Rs50,000 for first default of seven days and Rs100,000 for second default of next seven days, Rs50,000 for each week after the second consecutive week of default: Provided that no penalty shall be imposed for the period for which extension from integration is granted by the Commissioner subject to the condition that, if the SWAPS agent fails to integrate within such extended time, penalties shall be imposed as if no extension was granted, the FBR added.

Copyright Business Recorder, 2022