Increase in withholding tax rates for non-filers

FBR has consistently espoused the policy of creating a distinction between compliant and non-compliant taxpayers. FBR felt the Increase in withholding tax rates for non-filers in order to increase the compliant taxpayers in the country.

An endeavor has been made o increase the cost of doing business for non-filers by prescribing higher rates of withholding tax for non-compliant taxpayers who choose to remain out of the tax net.

Continuing with the same policy the Finance Act, 2018 envisages a further increase in the withholding tax rates for non-filers in the following instances:-

(i) Withholding tax on sale of goods under section 153(1)(a) of the Income Tax Ordinance, 2001 [Sub-paragraph (b), paragraph (1), Division III of Part III of the First Schedule]

The withholding tax rates on sale of goods to a non-filer under section 153(1)(a) of the Ordinance have been increased from the existing 7% to 8% in the case of a company, and from the existing 7.75% to 9% in non-corporate cases through the Finance Act, 2018 as under:-

(ii) Withholding tax in respect of payments made for execution of contracts under section 153(1)_(c) of the Income Tax Ordinance, 2001. [Sub-paragraphs (ii) and (iii), paragraph (3), Division III of Part III of the First Schedule].

The withholding tax rates applicable to a non-filer under section 153(1)(c) of the Ordinance upon the execution of a contract have been increased from the existing 12% to 14% in the case of a company, and from the existing 12.5% to 15% in non-corporate cases through the Finance Act, 2018 as under:-

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