All
Authorised Dealers
in Foreign Exchange,
Dear
Sirs,
WITHHOLDING
TAX ON FOREIGN EXCHANGE PROCEEDS
Attention
of Authorized Dealers is invited to F.E.
Circular No.60 of 24th June, 1992 regarding
deduction of withholding tax on foreign exchange proceeds
realized against export of goods.
2.
We had sought certain clarification from the Central Board
of Revenue. Our queries and clarifications thereto given
by the Central Board of Revenue are appended for guidance
of the Authorized Dealers:-
| |
State
Bank of Pakistan’s Queries |
Central
Board of Revenue’s clarifications |
i |
Whether
withholding tax on the amount of export proceeds
will be deducted at the time of crediting the same
to exporters' accounts irrespective of the fact
whether foreign Exchange is realized at some later
date due to negotiation/usance period involved. |
Yes,
Tax on export proceeds will be deducted from all
receipts on or after 1-7-1992 irrespective of the
period. |
| ii |
Whether
the tax is to be deducted on gross proceeds i.e. Bill
amount or on such amount which is being credited to
exporter’s account after deduction on account
of (I) Discount/ agency commission paid or payable
to foreign importer/ agents, (II) Foreign Bank charges,
and (III) local bank charges (other than interest). |
Tax
is to be deducted from gross proceeds. |
| iii |
Exporters
are permitted to retain certain portion of agency
commission (not exceeding 5% of FOB value Realized)
in their Foreign Currency Accounts maintained In Pakistan
for export Promotional activities. Will the withholding
tax be deducted on such commission credited to exporters’
Foreign currency accounts? |
Tax
will be deducted from total proceeds and no reduction
or deduction therefrom shall be allowed. |
| iv |
Payment
for local supplies against international tenders qualifies
for all export incentives. Is the withholding tax
regime applicable on such receipts? |
Withholding
tax regime shall be applicable to payments for local
sales against International tenders. |