KARACHI: The governments intends to introduce multi-fold increase in the tax rate applicable, gross receipts from services rendered and construction contracts executed outside Pakistan.
Presently, gross receipts from services rendered and construction contracts executed outside Pakistan are taxed at the rate of 1.0 percent, provided the receipt from services, and income from construction contract are brought into Pakistan through normal banking channel.
The tax rate of 1.0 percent is now proposed to be increased and linked with 50 percent of the withholding rate applicable on services and contracts under section 153 of the Income Tax Ordinance.
Based on the existing withholding rates prescribed for section 153, the tax rate applicable on services rendered and construction contract executed outside Pakistan will increase significantly.
For companies receipts against services rendered outside Pakistan will be subject to 4.0 percent tax i.e. 50 percent of 8.0 percent, the withholding tax rate applicable on services.
For non-corporate sector, receipts against services rendered outside Pakistan will be subject to 5.0 percent tax i.e. 50 percent of 10 percent, the withholding tax rate applicable on services.
For companies, receipts against construction contracts executed outside Pakistan will be subject to 3.5 percent tax instead of existing 1.0 percent and for non-corporate sector, receipts against construction contracts executed outside Pakistan will be subject to 3.75 percent tax.