Move to streamline collections, deposits: FBR to introduce SWAPS to large WHT agents

ISLAMABAD: The Federal Board of Revenue (FBR) will introduce Synchronized Withholding Administration and Payment System (SWAPS) to check practice of large withholding tax agents such as banks, power distribution companies, telecom companies and government institutions, etc, who are still depositing withholding tax through a single payment receipt for multiple taxpayers.

According to an Income Tax Circular 15 of 2022 issued by the FBR to explain the Finance Act 2022, currently, withholding agents are required to collect and deduct tax at the time of making payment and deposit the same in government treasury within the prescribed time period.

Similarly, withholding agents are also required to file quarterly and annual withholding statements, which consumes time and resources of taxpayers leading to increased compliance cost.

Moreover, certain large withholding tax agents like banks, DISCOs, TELCOs, Government institutions etc. are still depositing tax through a single payment receipt for multiple taxpayers.

In order to streamline withholding tax collection and deduction mechanism, enabling provision for the placement of a fully automated system by the name Synchronized Withholding Administration and Payment System (SWAPS) has been introduced under section 164A of the Ordinance. A withholding agent notified under section 164A will be called a SWAPS agent.

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The notified SWAPS agent will be integrated with Board and withholding tax will be deposited in government treasury on real-time basis simultaneously at the time of making third party payment processed through SWAPS by the SWAPS agent. It will also result in auto populated withholding statements thereby saving time and reducing cost of compliance for the business.

The SWAPS Payment Receipt (SPR) will be generated upon deposit of tax in this manner which will be a valid document for the purpose of claiming credit against tax payable under the provisions of this Ordinance.

In case if a notified SWAPS agent fails to integrate with the Board in the manner prescribed, the said agent will not be eligible for credit under Part X of Chapter III of the Ordinance and exemption under any of the provisions of the Ordinance.

Copyright Business Recorder, 2022