Withholding tax on prize bonds increased to 25pc for non-filers

KARACHI: The rate of withholding tax for non-filers against the winning amount on prize bonds has been increased to 25 percent from the existing 20 percent.

The government through the Finance Bill, 2017 has proposed stern measures for non-filers in order to broaden the tax base and generate revenue.

In this regard, the rate of withholding tax on a prize bond or crossword puzzles has been proposed to be enhanced to 25 percent from 20 percent for non-filers. However, the withholding tax rate for filers is unchanged at 15 percent.

The huge gap in withholding tax rate clearly indicates the government’s intention to enhance the cost of transactions for non-filers and compelling them to declare their income and assets. 

Similarly, the finance bill also proposed enhancement in the withholding tax rate to 17.5 percent from the existing 15 percent on the income generated by a company from immovable property being a non-filer.

In order to bring petrol pump operators in the tax net, the government further enhanced the withholding tax rate on the sale of petroleum products by dealers.

The rate of collection on petroleum products has been proposed to be increased to 17.5 percent from the existing 15 percent for non-filers. In the case of the payments made by non-filers to non-residents against supply of goods and services, the government further enhanced the withholding tax rates on such transactions.

For the payments made by non-filers on supply of goods, the rate of withholding tax has been increase to seven percent from six percent in case of a company; and
from 6.5 percent to 7.75 percent in case of other than a company.

Similarly, in the case of payments made to non-residents by non-filers against services, the rate of withholding tax has been increase to 14 percent from 12 percent with regard to a company and from 15 percent to 17.5 percent in the case of other than a company.

At present, every manufacturer, distributor, dealer, wholesaler or commercial importer of goods, at the time of sale to retailers, and every distributor or dealer, at the time of sale to wholesaler, are required to collect advance tax at 0.5 percent.

The finance bill proposed to increase the rate to one percent for non-filers and for sale of electronics by filers.

A gap in the withholding tax rate has been created between filers and non-filers on the collection of advance tax at the time of sale by auction. Tax at the rate of 15 percent has been proposed to be collected from non-filers, purchasing any property or goods through public auction. Presently, the applicable rate is 10 percent for both filers and non-filers.

However, to give incentives to the information technology sector, the government proposed reduction in the advance tax from 14 percent to 12.5 percent on subscribers of internet, mobile telephones and prepaid internet or telephone cards.

In order to give incentives to return filers, the finance bill proposed to reduce the advance tax on purchase, registration and transfer of motor vehicles.

In case of filers, the rate of advance tax on registration or transfer has been proposed to be reduced: up to 850CC from Rs10,000 to Rs7,500; 851CC to 1,000CC from Rs20,000 to Rs15,000; and 1,001CC to 1,300CC from Rs30,000 to Rs25,000.