Withholding tax on five items, transport service reduced

The government has reduced withholding tax on transport services from 6 to 2 percent; WHT reduced to 2 percent on import of energy saver lamps; bitumen; fixed wireless terminal and pesticides.
Withholding tax on import of edible oils including crude oil imported as raw material for manufacturer of ghee or cooking oil were brought down from 3 to 2 percent. The CBR circular 1 of 2007 has clarified the changes in the withholding tax regime introduced in budget (2007-2008).
The board has extended WHT exemption on payments/remittances made to non-resident news agencies/syndicate services and individual contributors/writers.
A uniform adjustable withholding tax at 1 percent on import of capital goods and raw material imported, exclusively for its own use, has been introduced for a manufacturer registered with sales tax department.
Manufacturer-cum-exporters registered with sales tax department will not be subject to WHT at import stage pertaining to capital goods and raw material.
Inter corporate dividend was liable to WHT at 5 percent which was final tax liability in the case of a company. Amendments have been made to exclude dividend received by a company from the ambit of PTR and provide for an adjustable uniform rate of 10 percent applicable for transactions made on or after July 1, 2007.
According to circular, transport services were subjected to reduced rate of 2 percent, which was consequently enhanced to 6 percent in budget. The issue was re-examined and resultantly WHT on goods transport was reduced to 2 percent as final tax liability. The passenger transport remained outside the purview of this amendment. An amendment has been made in Income Tax Ordinance, 2001 whereby the rate of withholding tax on all types of transport services has been reduced to 2 percent.
An amendment has been made in section 153(6) to exclude non-corporate (Individual and AOP) owners of newspapers and magazines from the ambit of PTR. A uniform one percent withholding tax rate of 1 percent on export proceeds of all sorts of exports has been introduced from July 1, 2007. Law provides exemption from withholding tax on any payment received by an oil distribution company or an oil refinery for supply of its petroleum products.
In order to bring at par the non-resident petroleum exploration & production companies, permanent establishments of the non-resident companies have also been exempted from withholding tax on supply of crude oil and gas.
Similarly, a new clause has been added to exempt payments/remittances made to non-resident from withholding tax under section 152(2), in respect of news agencies; syndicate services and individual contributors/writers; who do not have permanent establishment in Pakistan.
Public limited companies listed on a registered stock exchange in Pakistan have been excluded from PTR in respect of payments received for sale of goods and execution of contracts to bring this income under the normal mode of taxation. Tax deducted from listed companies on account of sale of goods and execution of contracts from July 1 2007 onwards shall be adjustable.
Previously, employers while making deduction of tax, from salary paid to employees were authorised to adjust withholding tax collected on telephone subscription and private motor cars only. Amendment has been made in section 149, empowering the employer to adjust tax withheld under other heads and allow tax credits available to an employee on donations to approved NPOs; investment in shares; contribution to approved pension funds and profit on debt.
The employers shall, however, be responsible to obtain documentary evidence and for correct application of relevant provisions of law. This amendment will be effective from the tax year 2008 and onward.
Advance income tax @ 6% of the value of goods was collected on import (except edible oil) which was adjustable in the case of manufacturer and final tax liability for commercial importers.
The salient feature of amended withholding tax regime under section 148 is the standard rate of WHT on import has been reduced from 6% to 5% of the value of goods.
The commissioner shall issue a reduced rate certificate to a person whose income is not subject to final taxation and is not likely to pay any tax (other than tax under section 113), allowing payment of tax collectable under this section at a reduced rate of 0.5 percent.
The tax collected from the manufacturers of motor vehicles on import of all types of motor vehicles (in CBU condition) shall not be treated as discharge of final tax liability.
The importer companies of bulk industrial raw material shall fall out side the ambit of PTR, provided laid down conditions have to be fulfilled. Provides that such importers will be exempt from withholding tax under section 153 on "sale of goods" and not be "prescribed persons" as envisaged in section 153(9).
Amendment has been made in section 153 allowing ginners to pay withholding tax instead of deduction being made from payments by the withholding agents.
Section 153(6A) was introduced last year, which excluded all manufacturers from presumptive tax regime in respect of sale of goods. A new sub-section (6B) has been added which provides that tax deductible on sale of goods will be discharge of the final tax liability in the case of an individual and AOP being a manufacturer.
Thus the application of sub-section (6A) has now been restricted to corporate manufacturers only. This provision will be effective from tax year 2007.