ISLAMABAD: The Federal Board of Revenue (FBR) has implemented revised tax rates for non-filers to boost tax collection from individuals who choose not to be part of the tax system.
As per the recent income tax circular (no. 02, 2023), cash withdrawals below Rs50,000 per day will not incur any tax deduction. However, for non-filers, the bank will deduct Rs303 on cash withdrawals of Rs50,500 per day. The tax deduction increases with higher cash withdrawal amounts – Rs330 on Rs55,000 and Rs450 on Rs75,000, respectively.
Certain exemptions from tax deduction apply, including federal and provincial governments, foreign diplomats, or diplomatic missions in Pakistan. It also involves individuals with a commissioner-certified income exemption during the tax year.
The tax rates for motor vehicles with an engine capacity of 2001cc and above are set at 6%, 8%, and 10% of the vehicle’s value. These rates are applicable to individuals on the Active Taxpayers List (ATL). Non-ATL persons will face increased rates of 18%, 24%, and 30% for the respective engine capacity ranges.
Different tax rates apply to motor vehicles without specified engine capacity but valued at Rs 5 million or more. The tax rate for imported vehicles is calculated as 3% of the import value, which includes customs duty, sales tax, and federal excise duty. On the other hand, for locally manufactured or assembled vehicles, the tax rate is simply 3% of the invoice value.
Finance Act 2023 raised withholding tax on immovable property sale/purchase from 2% to 3%. The withholding tax rates are now 3% for ATL persons and 6% for non-ATL persons, based on the gross amount received from the seller. For the purchaser, the withholding agent collects 3% or 7.5% of the fair market value for ATL and non-ATL, respectively.
Strengthening Controls on Foreign Exchange Outflow
Withholding tax rates on debit/credit card payments to non-residents increased to curb foreign exchange outflow. The new rates for ATL persons and non-ATL persons are 5% and 10%, respectively, up from 1% and 2%. This measure aims to control the impact of such payments on foreign exchange outflow from the country.
Under the Finance Act 2023, foreign domestic workers coming to Pakistan must pay an advance tax of Rs 200,000. Pakistan authorities will collect this tax from employers or sponsors while issuing/renewing domestic aide visas, adjustable against their tax liability.
