0.3 percent withholding tax on cash withdrawal from banks: FBR may exempt exchange companies

The Federal Board of Revenue (FBR) may exempt exchange companies from 0.3 percent withholding tax on cash withdrawal from banks. Sources told Business Recorder here on Thursday that the FBR is examining a proposal of the exchange companies for abolition of the 0.3 percent withholding tax on cash withdrawal from banks. In this regard, the FBR is co-ordinating with the Ministry of Finance and State Bank of Pakistan (SBP).
In case the Ministry of Finance agrees with the proposal of exchange companies, the FBR will be required to amend the Income Tax Ordinance 2001 to abolish 0.3 percent withholding tax on cash withdrawals from banks by the exchange companies. For this amendment, the FBR has to draft a statutory regulatory order (SRO) for amendment in the relevant provisions of the Income Tax Ordinance 2001. However, an exercise has started in the FBR to explore possibility of extending exemption to exchange companies from 0.3 percent withholding tax on cash withdrawal from banks.
Sources said that the government is looking into the grievances of the exchange companies to suggest measures to facilitate remittances. In the past, the Exchange Companies Association of Pakistan (ECAP) had requested for exemption from 0.3 percent withholding tax on cash withdrawal by ECs from banks, and sought permission to convert their airport booths into exchanges.
The exchange companies have asked the government to allow them to handle inland remittances transactions through which a person selling foreign exchange in one city may receive cash in another city. The companies had also proposed that to curb smuggling of foreign currency by individuals, the central bank/customs of UAE may be approached to check incoming/outgoing individuals carrying foreign currency and authorities of both countries share data with each other.