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ISLAMABAD: The Federal Board of Revenue (FBR) has asked the foreign exchange dealers to approach the relevant Chief Commissioners (CCs) in the field formations to resolve the past issue of 16 percent Federal Excise Duty (FED) on service charges.

Sources told Business Recorder that under Table-II (excisable services) of the Federal Excise Act, 2005, 16 percent FED of the charges is applicable on services provided or rendered by foreign exchange dealers. The FED is applicable on service charges and not annual income of the exchange dealers.

This FED is only applicable on service charging and not on the value of foreign currency sold to the customers.

The exchange dealers mostly do not provide any service but only engage in buying and selling of foreign currencies. Therefore, this tax is not applicable on buying and selling of dollars.

FBR chief has pledged to withdraw notices against exchange companies: Malik Bostan

This FED was applicable where provinces are not charging FED at the provincial level. However, no new FED on withholding tax has been levied on the exchange companies.

The FBR is not collecting this FED from the exchange companies after transfer of services to the provinces under the 18th Amendment.

The exchange companies had received notices of the FBR’s field formations in the past during 2013 and 2014 for the recovery of the FED. The said FED was applicable in the past for only 1-2 years.

During a recent meeting of the FBR and the foreign exchange dealers, the FBR has asked them to directly approach the relevant Chief Commissioner and clarify their position in writing to them. Recently, the FBR has decided to document transactions of the foreign exchange dealers/exchange companies, and directed them to online integrate with the FBR’s computerised system.

According to the FBR, the board has included foreign exchange dealers/exchange companies in the list of the businesses that are required to online integrate their businesses.

Copyright Business Recorder, 2022

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