0.4pc WHT on foreign currency accounts may go

ISLAMABAD: The government is considering abolishing 0.4 percent Withholding Tax (WHT) on cash withdrawal from foreign currency accounts.

Now formal summary will be prepared and forwarded to withdraw the WHT for foreign currency account holders. “The Economic Coordination Committee (ECC) of the Cabinet will soon consider a summary for allowing exemption related to WHT on cash withdrawal from foreign currency accounts with the purpose to encourage foreign currency accounts in the country,” official sources confirmed to The News here on Sunday.

The government had slapped WHT on cash withdrawal exceeding Rs50,000 amount in a day for penalising non-filers. It’s an adjustable tax as the filers can claim from the FBR at the time of filing tax returns but it basically aims to penalise the non-filers by increasing their cost of doing business in the country.

The government had raised the WHT up to 0.6 percent but after holding negotiations with the stakeholders the rate was reduced to 0.4 percent.

The government’s circles had recently come to know that the foreign accounts holders got discouragement from imposition of 0.4 percent WHT so the government took principled decision to abolish this tax and its formal requirements would be met soon.

Pakistan’s current account deficit had ballooned to around $12 billion for the last fiscal year ended on June 30, 2017 and the government was finding out ways and means to avoid discouragement of foreign currency accounts in the country.

Under section 231AA of Income Tax Ordinance, 2001 related to advance tax on transactions in bank Sub-section (1) every banking company, company, non-banking financial institution, exchange company or any authorised dealer of foreign exchange shall collect advance tax at the time of sale against cash of any instrument, including Demand Draft, Pay Order, CDR, STDR, SDR, RTC, or any other instrument of bearer nature or on receipt of cash on cancellation of any of these instruments.

Sub-section (2) every banking company, non-banking financial institution, Exchange Company or any authorised dealer of foreign exchange shall collect advance tax at the time of transfer of any sum against cash through online transfer, telegraphic transfer, mail transfer or any other mode of electronic transfer. Sub-section (3) the advance tax under this section shall be collected at the rate 0.3 percent from filers and 0.6 percent from non-filers of income tax returns, where the sum total of payments for transactions mentioned in sub-section (1) or sub-section (2) as the case may be, exceed Rs50,000 in a day. With approval of the ECC, this rate was reduced up to 0.4 percent.

Now there is proposal under consideration to grant exemption on payment of WHT on foreign currency account holders. The summary has not yet been prepared by the government circles but it is actively under consideration at the highest level.