ISLAMABAD: To discourage outflow of foreign exchange reserves, the Federal Board of Revenue (FBR) has increased the Withholding Tax (WT) on payments made to non-residents through debit cards and credit cards by 400 percent. , JEE News reported Monday. .
In a circular issued last week and titled “Clarifying Amendments in Finance Act 2023 No. 2 of 2023”, the FBR wrote that Section 236Y was introduced by the Finance Act 2022, under which non-residents Payment was made by debit/credit card. 1% withholding tax rate for Active Tax Payer List (ATL) persons and 2% for non-ATL persons.
These payments to non-residents significantly affect the outflow of foreign exchange from the country. Therefore, to discourage unnecessary outflow of foreign exchange reserves, the rate of withholding tax under Section 236Y of the Finance Act, 2023 has been increased from 1% to 5% for ATL persons and from 2% for non-ATL persons. has been increased to 10%.
This means that FBR has increased the tax rate by 400% for both the categories.
According to an estimate shared by the State Bank of Pakistan (SBP) with parliamentarians ahead of the final budget for 2023-24, around $70 million to $100 million was used monthly for payments through credit cards or debit cards. , bringing the annual amount to about $1. A billion
Through the Finance Bill, the FBR acquired powers under Section 236Y to advance tax on persons remitting funds abroad through credit or debit or prepaid cards.
Every banking company shall collect advance tax at the time of money transfer outside Pakistan by any person who has completed a credit card or debit card, or prepaid card transaction with a person outside Pakistan. at the rate specified in Division XXVII of Part IV of the First Schedule.
The advance tax collected under this section shall be adjustable.
The Finance Bill 2022 has proposed a rate of advance tax on money remitted abroad through credit, debit or prepaid cards under section 236Y which will be 1% of the gross amount remitted abroad.
