The Federal Board of Revenue (FBR) has specified that the newly introduced advance income tax on transfer of private motor vehicles would be collected by the motor vehicle authority for a single transfer of registration from such a person applying for transfer in his name under Finance Act, 2014.
According to income tax circular 2 of 2014, issued by the FBR to explain Finance Act, 2014 has explained in detail the mechanism for collection of advance income tax on transfer of private motor vehicles. Under Sub-section (2) of Section 231B, as amended by the Finance Act 2014, advance income tax shall he collected on transfer of private motor vehicles from person in whose name vehicle is being transferred. This is a new provision as previously advance income tax was not collected on transfer of motor vehicles. The collected amount of tax is adjustable against the income tax liability of the person paying tax.
In case a vehicle has been sold many times without being registered equal number of times in the name of persons buying the vehicle, the person approaching the Motor Vehicle Authority for registration of vehicle in his name would not be required to pay tax under sub-section (2) of section 231B pertaining to all the persons who had previously bought the vehicle without registration. Advance tax ruder section 231B (2) is to he collected by the motor vehicle authority for a single transfer of registration from such person applying for transfer in his name. However, for the number of times the vehicle was sold without being registered if the motor vehicle authority has to register all those persons for the period in which the vehicle was owned by them but not got registered, the motor vehicle authority has to collect tax under section 231B from the persons who did not get the vehicle registered in their name hut bought the same.
The FBR has explained the amendments in withholding taxes collected on transaction related to private motor vehicles. The relevant sections are 231B, 234, clause (3) and (4) of Division III of Part IV and Division VII of Part IV of the First Schedule. There have been changes in following five major areas in advance Income tax collected on transactions related to motor vehicles:
Firstly, the rate of advance income tax collected at the time of payment of Motor Vehicle Tax has been revised. Secondly, collection of advance laconic tax on sale of locally manufactured motor vehicles has been introduced. Thirdly, collection of advance income tax on registration of private motor vehicles has been revamped. Fourthly, collection of advance income tax on transfer of private motor vehicles has been introduced.
In each of the above cases separate rate of tax have also been provided for filers and non-filers as explained earlier. Revision of rate of Advance Tax to be collected with payment of private Motor Vehicle Tax: The rates of advance income tax collected at the time of collection of motor vehicle tax were last revised in 2008. In order to account for inflation, the rates of tax collected from private motor cars under this section have been revised through Finance Act, 2014. In addition, separate rates of tax have been provided to filers and non-filers.
Collection of advance income tax on sale of locally manufactured motor vehicles: Under sub-section (3) of Section 231B, as amended by the Finance Act 2014, advance income tax shall be collected by manufacturers from buyers on sale of motor vehicles. This is a new provision and previously advance income tax was not collected on sale of motor vehicles. The tax collected is adjustable against the income tax liability of the person paying the tax.
Separate rate of tax have been provided for filers and non-filers. This advance income tax shall not be collected from the federal government, a provincial government, a local government, a foreign diplomat or a diplomatic mission in Pakistan.
Collection of advance Income tax on registration of private motor vehicles: Previously under section 231B, advance Income tax was collected on registration of locally manufactured motor vehicles. Several changes have been made to this provision through Finance Act 2014.
Under Sub-section (1) of Section 231B, the condition of new locally manufactured vehicle has been omitted and now tax is collectable from both locally manufactured and imported private vehicles when first registered in Pakistan. However, the tax shall not be collected if the person, in whose name vehicle is being registered, provides evidence that advance income tax has been collected from the same person in respect of same vehicle, in case of locally manufactured vehicle by the manufacturer of the vehicle under section 231B or in the case of imported vehicle, on import of the vehicle, under section 148.
If the, person in whose name the vehicle is being registered is not the same as the person who purchased the vehicle from manufacturer or imported it, and paid tax at that stage then the tax will be collected on registration of the vehicle. The rates of tax under this section on registration have also been revised. In addition, separate rates of tax have been provided for filers and non-filers. This advance income tax shall not he collected from the federal government, a provincial government, a local government, a foreign diplomat or a diplomatic mission in Pakistan, the FBR added.