Tax on credit, debit-card payments to non-residents hiked by 400%
To deter the outflow of foreign exchange reserves, the Federal Board of Revenue (FBR) increased the withholding tax (WHT) on payments made to non-residents using debit and credit cards by 400%. The FBR wrote in a circular issued last week titled “number 2 of 2023 for explaining amendments to the Finance Act 2023” that section […] The post Tax on credit, debit-card payments to non-residents hiked by 400% appeared first on Economy.pk.
Karobar
To deter the outflow of foreign exchange reserves, the Federal Board of Revenue (FBR) increased the withholding tax (WHT) on payments made to non-residents using debit and credit cards by 400%.
The FBR wrote in a circular issued last week titled “number 2 of 2023 for explaining amendments to the Finance Act 2023” that section 236Y was introduced through Finance Act 2022, which required payments to non-residents via debit/credit card to be subject to a 1% withholding tax rate for Active Taxpayer List (ATL) persons and a 2% withholding tax rate for Non-ATL persons.
These payments to non-residents have a significant impact on the country’s foreign exchange outflow. To deter the unnecessary outflow of foreign exchange reserves, the withholding tax rates under section 236Y of the Finance Act of 2023 have been increased from 1% to 5% for ATL persons and from 2% to 10% for non-ATL persons.
This indicates that the FBR has hiked tax rates by 400% in both categories.
According to estimates given to MPs by the State Bank of Pakistan (SBP) prior to the latest budget for 2023-24, roughly $70 to $100 million were used monthly for credit or debit card payments, increasing the yearly sum to around $1 billion.
The FBR received powers under Section 236Y of the Finance Bill, which allows it to charge advance tax on anyone who sends money overseas using credit, debit, or prepaid cards.
At the time of transfer of any sum remitted outside Pakistan on behalf of any person who has completed a credit card, debit card, or prepaid card transaction with a person outside Pakistan, every banking company shall collect advance tax at the rate specified in Division XXVII of Part IV of the First Schedule.
The advance tax levied under this clause is modifiable.
The Finance Bill 2022 suggested an advance tax rate of 1% of the gross amount transferred overseas by credit, debit, or prepaid cards under section 236Y.
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