FBR Establishes a Deadline for Filing Income Tax Returns for Tax Year 2023
July 24, 2023Property transactions in Pakistan are halted due to Section 7E compliance
August 3, 2023FBR Describes New Motor Vehicle Withholding Tax Regime
Pakistan, July 27, 2023, With the goal of streamlining the taxation process and generating income for the government, the Federal Board of Income (FBR) has developed a new withholding tax regime for motor vehicles.
The Finance Act of 2023, which amended the Income Tax Ordinance of 2001, is explained in FBR Circular No. 2 of Income Tax, which was released on July 26, 2023.
Previously, when buying or registering a motor vehicle with an engine capacity of 2001 cc and above, a predetermined sum of withholding tax was assessed under section 231B of the Income Tax Ordinance, 2001.
The Finance Act of 2023, however, makes considerable adjustments to this tax system. The FBR will now collect taxes based on a percentage of the value of the vehicle, divided into categories according to engine capacity, as opposed to a fixed amount:
6% of the vehicle’s value will be taxed on motor vehicles with engines between 2001 and 2500 cc.
Motor vehicles with an engine displacement of 2501 cc to 3000 cc will be subject to an 8% tax on their value.
Vehicles having engines larger than 3000cc will be subject to taxation at a 10% of value rate.
It is critical to remember that people on the Active Taxpayer List (ATL) are subject to these tax rates. Individuals who do not reside in Atlanta, however, will pay withholding tax at higher rates, which will climb by 2000%. According to the second proviso of rule 1 of the Tenth Schedule to the Income Tax Ordinance of 2001, the amended rates for non-ATL individuals are 18%, 24%, and 30%, respectively.