KARACHI: Federal Board of Revenue (FBR) has introduced various withholding tax provisions through Finance Act, 2016.
The new provisions added to the Income Tax Ordinance, 2001, are:
Payment for foreign produced commercials
A new section 152A has been inserted in the Ordinance through which payment made to a non-resident person for foreign produced commercials has been brought within the ambit of withholding tax. The payment made directly or through an agent or intermediary for a foreign produced commercial shall be subjected to a final tax at 20 percent in the hand of the non-resident recipient. The FBR clarified that this specific provision shall apply under circumstances notwithstanding a general provision under sub-section (3) of Section 152.
Advance tax on extraction of minerals
Through Finance Act 2016, a new section 236V has been inserted in the Ordinance through which advance tax at five percent has been introduced on the value of minerals extracted, produced, dispatched or carried away. The advance tax shall be collected from lease holder or the person extracting minerals by the provincial authorities responsible for collecting royalty per metric ton. The advance tax collected under this section shall be adjustable.
Option of being self – withholding agent for the cotton ginners
Previously, clause (e) of sub-section (5) of section 153 provided an option to a cotton-ginner / supplier to deposit by himself an amount equal to the amount of tax deductible by withholding agent/spinner on supply of cotton. In that event, the withholding agent/spinner was not required to withholding tax from payment being made to the cotton ginner for such supply of cotton. The said clause (e) has been omitted through Finance Act 2016. Resultantly, the option of self-withholding and self-deposit of withholding tax available with the cotton-ginner has been withdrawn. Now, from July 01, 2016 onwards, the spinner/buyer is required to withholding tax under section 153(1)(a) from payments being made to cotton-ginner for supply of cotton.
Final tax on lease of right to collect toll
Section 236A of the Income Tax Ordinance, 2001, relates, inter alia, to collection of advance tax at the time of lease of right to collect toll. A new sub-section (3) has been inserted in section 236A through Finance Act 2016 in which the tax collected at the time of lease of the right to collect toll, fee etc., has been prescribed as final tax. Resultantly, from July 01, 2016 onwards, the tax collected at the time of lease of right to collect toll, fee etc., shall not be adjustable as it was before.
Gain from future commodity contracts
In the tax year 2015 tax was imposed on transactional basis under section 236T. Through Finance Act, 2016 transactional taxation has been done away with and tax on capital gain has been introduced and an explanation has been inserted after clause (b) of sub-section (3A) of section 37A through which capital gain derived from future commodity contracts by member of Pakistan Commodity Exchange has been defined as a derivative product and brought under the tax under the NCCPL’s mechanism laid down in the Eight Schedule of the Ordinance. For this purpose, separate tax rate of five percent for tax year 2017 of the amount of gain earned from future commodity contracts has been prescribed in the First Schedule.
Final tax regime for electronic and print media
In section 153, in sub-section (3) a new clause (e) has been inserted through which tax deducted under section 153(1)(b) from payments made to print and electronic media for providing advertising services has been prescribed as final tax. Resultantly, from July 01, 2016 tax deducted for advertising services from payments made to print and electronic media shall be final tax. Moreover the rate for filer has been increased from one percent to 1.5 percent.
