Telcos to exempt users from withholding tax

The officials of Federal Board of Revenue (FBR) are planning to propose a legislation in Financial Bill 2017 to exempt mobile phone subscribers—who do not fall under the tax network—from payment of withholding tax.

This was disclosed by FBR while briefing Senate Standing Committee on Information Technology and Telecommunication about the federal budget for 2017-18 that would be announced in the third week of May 2017.

The issue of exemption of withholding taxes (WHT) comes from the fact that billions of rupees are being collected on the account of WHT from poor Pakistanis who don’t even fall under the tax network. The committee members also noted that there was no mechanism to analyze the data of taxes collected by telecom companies.

The committee had previously suggested that a mechanism should be devised for connectivity with the servers of the mobile phone operators for monitoring of withholding taxes. The FBR IT officials briefed the committee that such system had already been established by FBR/PRAL (Pakistan Revenue Automation Limited) which allowed telcos to upload withholding data file on agreed format on both FTP and HTTP-based web service. But the system is currently facing some technical issues for uploading bulk data on the servers.

FBR has already asked all telcos to upload their data on WHT in a correct format. Once the entire date is uploaded, the Large Taxpayers Unit (LTU) would analyze it for further action.

The tax officials of FBR opposed the proposition of exemption from withholding tax, stating that legislation was required to grant such kind of exemption to the consumers having income below taxable limit.