FBR notifies amendments to Income Tax Law: Non-filers to pay 200pc more tax for vehicle registration

ISLAMABAD: The Federal Board of Revenue (FBR) Thursday notified amendments to the Income Tax Law for collecting advance tax on registration of vehicles from non-active taxpayers by 200 percent more than those present on the active taxpayers list.

A circular issued by the FBR states that previously, a fixed amount of withholding tax was required to be collected by the withholding agent under Section 23 I B of the Ordinance at the time of purchase or registration of motor vehicle having engine capacity of 2001cc and above.

Through the Finance Act 2023, this fixed amount of tax on motor vehicle having engine capacity of 2001cc and above has been replaced with collection of tax at the rate of 6 percent, 8 percent and 10 percent of the value of motor vehicle having engine capacity of 2001cc to 2500cc, 2501cc to 3000cc and above 3000cc respectively. These rates will apply to persons on ATL.

In case of non-ATL persons, the rates will be increased by two hundred percent i.e. l8%, 24% and 30% respectively in terms of the second proviso to rule 1 of Tenth Schedule to the Ordinance.

The value of the motor vehicle having an engine capacity of 2001cc and above for the purpose of collection of withholding tax is provided in the following manner:

Imported vehicle: The import value assessed by the Customs authorities as increased by customs duty, federal excise duty and sales tax payable at import stage. (ii) Vehicle manufactured or assembled locally in Pakistan: The invoice value inclusive of all duties and taxes.

Auctioned Vehicle: The auction value inclusive of all duties and taxes. It has been further provided that where engine capacity is not applicable and the value of vehicle is Rs5 million or more, the rate of tax collectible will be 3% of the import value as increased by customs duty, sales tax and federal excise duty in case of imported vehicles or invoice value in case of locally manufactured or assembled vehicles.

Increase in withholding tax rates on sale and purchase of immovable property: Through Finance Act, 2023, the withholding tax rates on sale and purchase of immovable property have been increase from 2o/o to 302 under sections 236C and 236K respectively. Now any person responsible for registering, recording or attesting transfer of any immovable property at the time of registering, recording or attesting the transfer will collect 3% or 6% of tax of the gross amount of the consideration received under section 236C from the seller on ATL or non-ATL respectively.

Similarly, the aforementioned withholding agent will collect 3% or 70.5Yo tax of the fair market value under section 236K from the purchaser on ATL or non-ATL respectively.

Increase in tax rates on payments to non-resident persons through debit/credit card section 236Y was introduced through Finance Act 2022, whereby payment to non-residents through a debit/credit card had been subjected to 1% withholding tax rate for ATL persons and2o/o for Non-ATL persons

These payments to non-resident persons have substantial impact on foreign exchange outflow from the country. In order to discourage unnecessary outflow of foreign exchange reserves, withholding tax rates under section 236Y have been increased from l% to 5%o for ATL persons and from 2% to 10% for non-ATL persons through Finance Act, 2023.

For collection of tax from foreign national home maids, Finance Act,2023 has introduced a new section 23 1C whereby advance tax of Rs200,000 will be collected and deposited by any Pakistan authority issuing or renewing domestic aide visa to such foreign domestic worker. Such authority will collect this advance tax from the employer or sponsor or agency, as the case may be, at the time of issuance or renewing of domestic aide visa.

This is an adjustable tax and the person from whom this tax has been collected can adjust this advance tax against tax liability assessed for a tax year. The provision of rule (1) of Tenth Schedule to the Income Tax Ordinance will apply if the person name, from whom the tax is collectable under this section, is not appearing in Active Taxpayer list.