05 July 2023

Withholding Tax – Part II

Contents

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Introduction

Withholding Tax 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 on Supply of goods by a resident person – Section 153, Division III Part III 1^st Schedule

Withholding tax on the supply of goods is applicable as follows:

Applicable Section	Nature	Filer	Non-Filer
Other Goods u/s 153(1)(a)/30	Association of Persons (AOP)	5.50%	11.00%
Other Goods u/s 153(1)(a)/30	Individuals	5.50%	11.00%
Other Goods u/s 153(1)(a)/29	Company	5.00%	10.00%
Fast Moving Goods u/s 153(1)(a)/28	Association of Persons (AOP)	0.25%	0.50%
Fast Moving Goods u/s 153(1)(a)/28	Individuals	0.25%	0.50%
Fast Moving Goods u/s 153(1)(a)/28	Company	0.25%	0.50%

Withholding Tax on Fast Moving Consumer Goods – Section 2 (22A)

These goods are consumer goods that are supplied in retail markets.

Withholding Tax on Execution of contracts:

Withholding tax rates in the execution of contracts are as follows:

10% – for a contract with sportspersons.

7.5% – for a contract with a company, 8% other than a company

Threshold Rs.75,000:

Where payment to the service provider is less than Rs.75,000 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 receive payment in cash.

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

The tax shall be deducted by the following persons:

Federal Government, Provincial Government, Local Government

Company, Non-profit organization, AOP

Individuals, AOP, and persons 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 imports – Section 148(7), (7A), Part II 1^st Schedule and 12^th Schedule

Tax on imports of goods ranges from 1% to 5.5%.

Please refer to Income Tax Ordinance Part I, II, and III of the 12^th schedule.

Withholding Tax on Import of mobile phones:

Tax ranges from Rs.70 to Rs.11,500

Withholding Tax on Commission or Brokerage – Section 233, Division II Part IV 1^st Schedule

Tax from commission or brokerage shall be deducted at the following rates as minimum tax liability:

Person	Rate %
Advertising agents	10
Life insurance agents where a commission is more than Rs.500,000	8
Other cases	12

Tax on advertising agents shall be deducted from the amount of commission as A x (15/85).

Where A is an amount payable to electronic or print media for advertising services excluding commission.