All
Authorised Dealers
in Foreign Exchange,
Dear
Sirs,
Tax
on foreign exchange proceeds on account of export of goods
Through
the Finance Act, 1992, an amendment has been made in the
Income Tax Ordinance, 1979, whereby the existing withholding
tax regime has been extended to include the class of exporters
as well.
2.
With effect from 1st July, 1992, all the authorized
dealers in foreign exchange are required to deduct income
tax at source from the foreign exchange proceeds realized
on account of goods exported at any time by an exporter.
The foreign exchange proceeds will comprise invoice value
of goods exported, customs duty, freight and insurance and
any other charges collected from the foreign buyers to the
credit of the exporter’s bank account.
3.
Withholding tax at the standard rate of 1% on the entire
amount of the foreign exchange proceeds, converted into
Pakistan rupee at the exchange rate prevalent at time of
realization, is required to be collected.
4.
The rate of withholding tax in the case of those exporters,
who prove that the goods exported by them were eligible
for reduction in income tax under normal law, will be as
under:-
|
Type
of Exporters |
Reduced
rate of with holding |
i |
Where
the exporter was entitled to 50% reduction in tax
on export of manufactured goods including refined/treated
salt, barrettes, granite blocks, heat insulating
bricks, and managesite refractories. |
0.75% |
| |
Where
the exporter was entitled to 75% reduction in tax
on export of value-added goods like leather &
textile garments, engineering and electrical goods,
sports goods,surgical goods and pharmaceuticals
etc. |
0.50% |
5.
You are, therefore, advised to collect the aforesaid tax
at source at the prescribed rates on FOB/C&F/CIF value
realized on or after 1st July, 1992 and credited
to the exporters’ accounts by converting the invoice
value at the applicable rate. The tax so collected shall
be deposited with the State Bank of Pakistan and where State
Bank of Pakistan offices are not located, with the National
Bank of Pakistan for credit to Federal Government Account
under the Head "0011 – Taxes on income –
Companies" and "0112 – Taxes on income of
persons other than companies" by the close of business
hours of the working day following the day on which such
tax is collected. Bank Credit Advises/Proceeds Realization
Certificates issued by the Authorized Dealers shall also
indicate deduction of with-holding tax.
6.
We may also add that failure to collect or deposit the tax
may render the person responsible, personally liable to
pay the tax besides exposing him to penal provisions and
prosecution in a court of law. It is, therefore, emphasized
that the instructions should be noted carefully for meticulous
compliance.
7.
The contents of this circular may please be brought to the
notice of your constituents