Persons not appearing on ATL: Commissioners told to enforce collection of higher rates of WHT by banks

ISLAMABAD: The Federal Board of Revenue (FBR) Chairman Asim Ahmad Friday directed Chief Commissioners Inland Revenue of Karachi to enforce the collection of higher rates of withholding taxes by banks from those not appearing on the Active Taxpayers List (ATL) under various provisions of the Income Tax Ordinance 2001.

Sources told Business Recorder here on Friday that the issue of tax collection by the banking sector was discussed during the last Chief Commissioners conference at Large Tax Office (LTO) Karachi for improving revenue collection in the second quarter (October-December) of 2022-23.

The FBR chairman directed the Chief Commissioners of Karachi, Quetta and Hyderabad to fully implement provisions relating to the financial sector introduced through the Finance Act 2022. The new provisions of the Finance Act 2022 pertaining to persons not appearing on the ATL should be enforced as per law on different transactions.

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Under the Finance Act 2022, every banking company will collect this adjustable advance tax at the time of remitting money outside Pakistan on behalf of a person who has completed a credit card, debit card or prepaid card transaction with a person outside Pakistan. The rate will increase by 100 per cent in case of persons not on the ATL.

Two new sub-sections (1DC) and (1DD) have been inserted in section 152 of the Income Tax Ordinance. Under sub-section (DC), service charges/commission /fee, by whatever name called, paid by an exchange company licensed by the State Bank of Pakistan (SBP) to a non-resident person has been brought under the tax net.

Now these exchange companies have been made liable to deduct tax at the time of making payment of service charges or commission or fee to the global money transfer operators, international money transfer operators or such other persons engaged in international money transfers or cross-border remittances for facilitating outward remittances.

Similarly, under sub-section (1DD), every banking company has been made liable to deduct tax at the time of making payment to card network company or payment gateway or any other person, on any transaction fee or licensing fee or service charges or commission or fee by whatever name called or interbank financial telecommunication services.

This final tax on the income of non-resident person and rates have been provided in Division IV of Part I of the First Schedule.

Corresponding changes in this regard have been made in sections 6 and 8 of the Ordinance.

Moreover, the Central Directorate of National Savings (CDNS) is required to charge 30 percent withholding tax on “profit on debt” from persons not appearing in the ATL of the FBR.

The rate of tax for profit on debt imposed under Section 7B was 15 percent effective from July 1, 2021.

However, persons not appearing in the ATL, the rate of tax required to be deducted or collected as the case may be, shall be increased by 100 percent of the rate specified in the First Schedule of the Income Tax Ordinance 2001.

The rate of withholding tax (irrespective of the date of investment and amount), would be 15 percent on persons appearing in the ATL and the rate of withholding tax (irrespective of the date of investment and amount), would be 30 percent on persons not appearing in the ATL.

Copyright Business Recorder, 2022