tax on forex to be 1 percent of export proceeds: FBR

RECORDER REPORT

ISLAMABAD: The Federal Board of Revenue (FBR) has clarified that income tax at the rate of 1 percent under sub-section (1) of section 154 of the Income Tax Ordinance 2001 will be deducted on the foreign exchange proceeds realised in Pakistan.

Sources told Business Recorder here on Saturday that Towel Manufacturers' Association of Pakistan, Karachi has received an income tax clarification from the FBR that the rate of income tax to be deducted under sub-section (1), (3), (3A), (3B) or (3C) of section 154 shall be 1 percent of the proceeds of the export.

According to the FBR clarification received by the said association, the FBR has referred to the provisions of Sub-section (1) of Section 154 of the Income Tax Ordinance, 2001 which read as under:

"154 Exports.- (1) Every authorized dealer in foreign exchange shall, at the time of realization of foreign exchange proceeds on account of the export of goods by an exporter, deduct tax from the proceeds at the rate specified in Division IV of Part III of the First Schedule".

It said that the tax under sub-section (1) of section 154 is to be deducted as per Division IV of Part III of the First Schedule to the Income Tax Ordinance, 2001 which reads as under:

"(1) the rate of tax to be deducted under sub-section (1), (3), (3A), (3B) or (3C) of section 154 shall be 1% of the proceeds of the export".

In the light of the legal position discussed above, it is clarified that tax under Sub-section (1) of Section 154 will be deducted on the foreign exchange proceeds realized in Pakistan, the FBR added.