Taxation

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Payment To Non Residents - Section 152

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Every Person is required to deduct tax while making payment in full or part (including a payment by way of advance)  to non-residents person on account of following nature of payments at mentioned rates.

Royalty or Fee For Technical Services:

Execution of Construction Contracts including related contracts and services  and advertisement services rendered by T.V. Satellite Channels:
Insurance Premium:
  • Tax @ 5 % - Covered under FTR
Others:
  • Tax @ 30 % - Covered under FTR
Circumstances when a person is not required to deduct tax @ 30% while payment to non-resident: When
  1. An amount is subject to deduction of tax under section 149, 150, 153,155 ,156 or 233;
  2. Written approval of the Commissioner provided by non-resident, that amount is taxable to a permanent establishment in Pakistan of the non-resident person;
  3. Amount is payable by a person who is liable to pay tax on the amount as representative of the non-resident person;
  4. Non-resident person is not chargeable to tax in respect of the amount.
Where a person claims to be a representative of a non-resident person in case of non deduction of tax @ 30%, the person shall file a declaration to that effect with the Commissioner prior to making any payment to
the non-resident person.

Can any person make payment of non-resident without deduction of Tax?

Yes, a person intends to make a payment to a non-resident person without deduction of tax, however before making the payment, he would  furnish to the Commissioner a notice in writing setting out –
  • (a) the name and address of the non-resident person; and
  • (b) the nature and amount of the payment.
The Commissioner on receipt of notice shall within thirty days pass an order accepting the contention or making the order of deduction of tax. 

Circumstances, where above mentioned notice is not required to be furnished:

Where payment is made on account of –

(a) an import of goods where title to the goods passes outside Pakistan , except an import that is part of an overall arrangement for the supply of goods, their installation, and any commission and guarantees in respect of the supply where –
  • (i) the supply is made by the head office outside Pakistan of a person to a permanent establishment of the person in Pakistan;
  • (ii) the supply is made by a permanent establishment of the person outside Pakistan to a permanent establishment of the person in Pakistan;
  • (iii) the supply is made between associates; or
  • (iv) the supply is made by a resident person or a Pakistan permanent establishment of a non-resident person; or
(b) educational and medical expenses remitted in accordance with the regulations of the State Bank of Pakistan.

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posted @ 4:08 PM,

1 Comments:

At March 3, 2011 at 10:48 AM, Anonymous Anonymous said...

Question: A foreign supplier (non-resident) i.e.principal has a local agent in pakistan (resident). The principal supplied machinery to an Organization directly from abroad. He says that payment may be made to his local agent in pakistan in pak rupees, who will remit the same to his principal afterwards.

Please intimate whether income tax at source will be deducted from his claim by the paying agency (withholding agency) or not. What will be the rate of withholding tax if tax is to be deducted.

Thanks a lot

Manager Finance

 

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