FBR slaps 1.5 WHT on tax non-filers

KARACHI: Tax authorities have slapped 1.5 percent withholding tax on manufacturers, who don’t file income tax returns, a move which is likely to increase the numbers of active taxpayers.
The Federal Board of Revenue (FBR), in a circular on Thursday, notified two withholding tax rates at import stage for filers and non-filers.
“The withholding tax rate would be one percent under Section 148 of Income Tax Ordinance, 2001 for manufacturing sector, falling under SRO 1125(I)/2011 subject to their presence in active taxpayers list (ATL),” said the circular.
“Those manufacturers, which are neither on ATL nor the holders of taxpayer’s card, will be charged with withholding tax at 1.5 percent of the import value as increased by the custom duty, sales tax and federal excise duty,” the FBR said.
In the Finance Act, 2014, a distinction was created amongst filers and non-filers and higher rates of WHT were levied on non-filers to increase their cost of doing business.
Accordingly, higher rates of WHT were imposed on non-filers in respect of vehicle registration or purchase, dividend, interest, cash withdrawal and purchase and sale of immovable property.
However, through SRO 136(I)/2015, the concept of higher rates for non-filers has been extended to two more sectors i.e. import and services.
The FBR said the withholding rate for commercial importers covered in SRO 1125 and filer of income tax return will be charged at three percent and for non-filer the rate will be 4.5 percent.
The withholding tax rates at one percent and 1.5 percent for filer and non-filers are applicable for importers of remeltable steel, potassic fertilizers and urea. The withholding tax for importers of pulses, who are on the ATL and holding taxpayer’s card, will be charged two percent and in other cases the rate will be at three percent.
For the ship breakers, the tax rate is 6.5 percent on import of ships in case they are not filer of income tax returns but for compliant taxpayers in the industry the rate is 4.5 percent.
For the withholding tax on services under Section 153(1)(b) of Income Tax Ordinance, 2001, the FBR explained that those companies, which are neither on ATL nor the holders of taxpayer’s card, will be charged withholding tax at 12 percent whereas filers will continue to pay at eight percent.
Persons other than companies, which are non-filers, are liable to pay the withholding tax at 15 percent whereas for filers the rate will remain unchanged at 10 percent.