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 1st 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 1st Schedule and 12th 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 12th 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 1st 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.