ISLAMABAD: The Federal Board of Revenue (FBR) has redrafted the law dealing with the payments made to non-residents to simplify the procedure both for the taxpayers, as well as tax officials.

The revised law is part of the proposed draft amendments in the Income Tax Ordinance, 2001 for simplification and harmonisation through the next Finance Bill, 2024.

In this regard, the FBR has proposed changes in section 152 of the Income Tax Ordinance 2001 covering all payments to be made to non-residents on which tax is to be withheld by residents and permanent establishments of non-residents.

The revised section has also elaborated on non-deduction of tax and deduction at reduced rates and exemption certificates, etc. The section has been streamlined and also broken into two sections to make it comprehensible and ensure its easy implementation, the sources added.

Service charges/ commission/ fees: Payments to non-residents brought into the tax net

Under the proposed section 152 (payments to non-residents), every person making a payment specified, in full or part (including payment by way of advance) to a non-resident person shall deduct or collect tax from the gross amount paid at the rate specified and the deductible tax shall be treated as final tax, or minimum tax on the income arising from such amount as indicated.

The FBR has proposed a new table covering the nature of payment; rate of deduction of tax and category of tax (Final/ Minimum).

Under the draft section 152A (payments to non-resident without deduction of tax or at a reduced rate), where a person intends to make a payment to a non-resident person without deduction of tax under section 152, other than payments liable to reduced rate under relevant agreement for avoidance of double taxation, the person shall, before making the payment, furnish to the Commissioner a notice in writing g setting out the name and address of the non-resident person; the nature and amount of the payment and Such other particulars as may be prescribed.

The Commissioner on receipt of notice shall, within thirty days, pass an order accepting the contention or making an order, it added.

Copyright Business Recorder, 2023