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ISLAMABAD: The Finance Bill 2024 has proposed to change the tax regime for export of goods from “final tax regime” to “minimum tax”.

According to tax experts, Finance Bill 2024 has introduced minimum tax regime for export of goods.

The export of goods is currently taxable under final tax regime except where the person opts not to be taxed under final taxation. For this purpose, the person is currently required to exercise this option every year at the time of filing of return.

Scope of EFC curtailed

The Finance Bill now proposes to change the tax regime for export of goods to minimum tax. Consequently, the requirement for exercising option to be taxed under normal tax regime proposed to be omitted.

Taxation under minimum tax regime is proposed to apply on income arising from exports of goods. For this purpose, amendments have also been proposed in sections 168 and 169 to exclude tax deducted on exports proceeds from the list of final taxation, tax experts added.

Since early 1990s, export of goods has been subjected to final tax regime whereby withholding tax collected by the Authorized Dealers on remittance of export proceeds is considered to be final discharge of their tax liability irrespective of underlying income/loss. Similar tax regime is also applicable for entities operating in Export Processing Zones (EPZs) as well as indirect exporters.

Whilst the scope of amounts taxable under final tax regimes were brought to normal/minimum tax regime in 2019, exporters remained under such regime.

It is now proposed that tax collected from above-referred persons at the rate of 1% is also to be treated as minimum tax and consequently such persons shall be required to compute their normal taxable income/loss in accordance with applicable provisions and in case 1% withholding tax is lower than tax computed on such taxable income, the incremental tax will have to be paid.

As a result of change in tax regime, exporters will also be liable to pay super tax as against the earlier position regarding non-applicability on their income having been subject to final tax.

Furthermore, in addition to currently applicable 1% withholding tax, an additional advance tax at the rate of 1% shall also be collected from direct exporters of goods, which shall not be treated as minimum tax and in case of any incremental tax liability, the exporter shall be able to adjust such advance tax.

Copyright Business Recorder, 2024

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__pappu_.312 Jun 22, 2024 02:29pm
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Fouzi Jun 22, 2024 08:59pm
old will go abroad and" new generation" will step in with new methods of tax....
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