International air travellers/passengers: FBR urged to grant WHT exemption to certain categories

The Board of Airline Representatives in Pakistan (BARIP), Karachi has urged the Federal Board of Revenue (FBR) to exempt certain categories of international passengers/travellers from payment of four percent withholding tax that include infants, transit passengers, diplomats, airline staff/supernumerary crew and Hajis from July 1, 2014-15.
In a latest communication to the FBR here on Monday, BARIP has raised the issues pertaining to withholding tax and Federal Excise Duty (FED) on air tickets. According to the BARIP, an emergency meeting of the BARIP was called to discuss the application of the newly levied withholding tax and enhanced Federal Excise Duty (FED) through Finance Act 2014. The issues were extensively discussed and the airline delegates unanimously forwarded five major recommendations to the FBR. Firstly, the rules as applied in case of Federal Excise Duty should be followed where reporting is of 45 days, this is because the sales report for the 1st to 15th of the month is received on the 30th of the month and 16th to 30th period is reported on the 15th of the following month after completion of the same. The filing of the report can be submitted and the comprehensive statement provided, but individual filing or providing the challan is not possible. Secondly, the rate of 4 percent withholding tax to be applied to the net fare and not gross fare, as the gross fare includes many other taxes and surcharges and will amount to double taxation if the withholding tax is applied on gross fare.
Thirdly, tax to be applied only on tickets issued in Pakistan from July 1, 2014 for travel on or after July 1, 2014 ie it will not apply on tickets issued prior to July 1, 2014 for travel on or after July 1, 2014. Fourthly, exemption be given to infants, transit passengers (within 24 hours), diplomats, airline staff/supernumerary crew and Hajis. Fifthly, the Advance Tax to be collected and deposited by Uplifting Carrier with FBR and not by issuing Carrier. This will assist FBR/LTU to audit and reconcile the relevant data.
The FBR should review its tax policy in the light of the issues raised by the BARIP and incorporate the said amendments in the tax laws, BARIP letter added. Through an income tax circular, the FBR has said that the section 236L has been introduced through Finance Act, 2014 which provide for collection of advance tax on air tickets of classes other than economy for journeys originating from Pakistan. Every airline issuing tickets for journey originating from Pakistan shall be the prescribed withholding agent for this section. Advance tax shall be collected in the manner air ticket charges are collected or charged. The prescribed person/withholding agent under this section shall be required to file withholding statements under section 165. The advance tax collected under this section shall be adjustable against the tax liability of the passenger at the time of filing of return. The mode, manner and time of collection under this section shall be separately prescribed in the rules, FBR added.
It is worth mentioning that the FBR has already issued instruction to the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) to ensure that the amount of the FED is properly charged, collected and paid by the airlines from July 1, 2014. Effective July 1, 2014, the rates of FED on domestic and international travel by air have been revised as follows:
Travel by air within Pakistan: Long routes (over 500 kms), Rs 2,500; short routes (up to 500 kms, excluding socio-economic routes) revised rate of Rs 2,500 per passenger and in case of socio-economic routes (along Balochistan coastal belt), revised rate of the FED is Rs 500 per passenger. Travel by air of passengers embarking on international journeys from Pakistan: Economy and economy plus, (previous rate Rs 3,840), revised rate of the FED is now Rs 5,000 per passenger and club, business & first class (previous rate Rs 6,840), and the revised rate of the FED Rs 10,000 per passenger.