Withholding Tax – Part I

Introduction

Withholding is the tax under which tax deducted or collected at source is treated as a minimum tax for such transaction.

This tax becomes final tax when withholding tax is higher than normal tax, otherwise, adjustable in normal tax.

Withholding Tax deducted on services – Section 153 Division III (2) Part III 1^st Schedule

Prescribed Services – Section 153(1) b:

The tax on gross amount including sales tax shall be deducted according to the below table for the following prescribed services;

List of Prescribed Services

Transport Services

Freight and forwarding services

Air Cargo Services

Courier Services

Manpower Outsourcing

Hotel Services

Security Services

Software Development

Tracking Services

IT & IT enabled services As per Clause (133) of Part I 2nd Schedule

Advertisements other than print or electronic media

Share Registrar Services

Engineering services including architectural services

Car Rental Services

Building Maintenance Services

Services rendered by asset management companies

Data services under license by Pakistan Telecommunication Authority (PTA)

Telecommunication infrastructure (tower) services

Services rendered by Pakistan Stock Exchange (PSX) and Pakistan Mercantile Exchange Ltd.

Inspection, certification, testing and training services

Oilfield services

Collateral management services

Travel and tours services

REIT management services

Services rendered by National Clearing Company of Pakistan (NCCPL)

Withholding tax on Other Services:

Tax on gross amount including sales tax, other than the above services shall be deducted according to the below table;

Withholding Tax Table for tax rates for Prescribed Services and Other Services:

Applicable section	Nature	Filer	Non-Filer
Prescribed Services u/s 153(1)(b)/21	AOP	4.00%	8.00%
Prescribed Services u/s 153(1)(b)/21	Individuals	4.00%	8.00%
Prescribed Services u/s 153(1)(b)/21	Company	4.00%	8.00%
Other Services u/s 153(1)(b)/4	Company	9.00%	18%
Other Services 153(1)(b)/5	AOP	11.00%	22%
Other Services 153(1)(b)/5	Individuals	11.00%	22%
Other Media Advertising Services u/s 153(1)(b)/11	Media	1.50%	3%

Withholding tax shall be deducted by the following persons;

Federal Government, Provincial Government, Local Government

Company, Non-profit organization, AOP

Individuals and AOP and a person registered under the sales tax act have a turnover of Rs.100 million or above in any preceding years.

Foreign Contractors or consultants

Consortium or joint venture

Builder and land developers

Withholding tax on print or electronic media:

Tax @1.5% shall be deducted including sales tax.

Threshold Rs.30,000:

Where payment to the service provider is less than Rs.30,000 aggregate during a financial year no tax shall be deducted.

Exemptions:

Payments to the following are exempted from the provisions of section 153;

• To the Provincial government, local authority.

• For electricity and gas.

• To Hotels and restaurants receiving payment in cash.

• Shipping companies and air carriers for passenger tickets and cargo charges of goods.

Payments to non-resident media person – Section 152(1AAA)

Every person making a payment of advertisement services to a non-resident media person relying from outside Pakistan shall deduct tax from the gross amount @10%.

This tax shall be considered as the minimum tax liability of the recipient.

Advance tax on TV plays and advertisements – Section 236CA, Division XA part IV 1^st Schedule

Advance tax considered as minimum tax on following;

Foreign produced TV drama Serial or play	Rs.1 million per episode
Foreign produced TV play (per episode)	Rs.3 million
Advertisement starring foreign actor	Rs.100,000 per second

Second Part

Withhoding Tax – Part II

FBR Website

Please also read:

Final Tax Regime Part I

Income from Property