Withholding-NR-S152 Flashcards
How is N/R taxed wrt
Residency status
OR
Source
Mixture
RP———-> PSI+FSI (Residence Principle)
NRP————————>PSI (Source Principle)
Resident——-Residence or Source??
Non-Resident——-Residence or Source??
Resident——–Both
Non-Resident——-Source basis (as ITO has effect in Pakistan only)
What are two ways of taxation of N/R’s income (or income sources)
& Which Regime do they fall (generally)
- Has fixed place of business in Pakistan? Yes PE PE becomes person taxation in S105 PE Income from Business NTR
- Does not have fixed place of business? No S6 (&S7), S8, S152 Withholding from Income FTR NTR MTR
Does N/R’s Fixed Place of Business means building?
Can service provision/provider be fixed place of Business
Fixed Place means (generally, specifically defined in ITO)
Even a hair-dresser on roadside - Chair a PE
Service provider - Service based PE
N/R Taxation Sections
S 44 exemptions under International Treaties
S 107 DTT
S 6&7 Charging sections
S 8 Regime
S 152 Withholding
S105 PE
Rtaes
S6 - FFTS/Royalty 15%
S6 - OSDS 5%
When does S6 (FFTS/Royalty/FODS earned by NR) does not apply
- NR has PE & services provided by PE of NR
- NR has PE & income related property (asset) owned by PE of NR
- Exmpt under Ordinance
- Exempt under DTT
Royalty/FFTS/FFODS
Regime??
(Sec 8 & Sec 152)
NR has PE - S105 NTR
NR has no PE - S8 FTR (Sec 8 has same liability as sec 152 dedcuted)
What is regime for NR’s
below
SERVICES
construction, assembly or installation, supervisory activitiesof project
MTR
What is regime for NR’s
below
SERVICES
advertisement on
TV
MTR
What is regime for NR’s
below
SERVICES
insurance premium or re-insurance premium
MTR
What is regime for NR’s
below
SERVICES
advertisement services (general, any medium)
MTR
What is regime for NR’s
below
CAPITAL GAIN
of a non-resident company having (no permanent establishment in Pakistan)
arising on the disposal of debt instruments and Government securities including treasury bills and Pakistan investment bonds (invested through SCRA)
FTR
Are there any payments to NR where WHA is not payer
&
who is WHA in those cases
FFODS & Capital gain (Govt securities through NR Rs A/C)
BC/FI
What about other transactions (not specifically defined in 152)
Other than
Royalty, FFTS,FFODS,CAI & Supervisory serv, Advertisement TV/Other, Insurance/Re-ins/Capital gain
like PoD, etc
NTR with 20% rate
Are there any exclsuions / exceptions available to N/R
i.e.
No deduction on payments to N/R
Exclusions from sub-Sec 2 of S152 (in other words exclusions from Sec 152 as (2) of 152 covers all transactions to NR other than specifically mentioned)
- Deductions covered u/other Sections; Salary, dividend, prizes & winnings, commission payments
- Amounts taxable to PE (received by NR through PE), with Comm. Approval
- Representative (of NR, sec 172) e.g foreign actors/singers’ representative etc
- N/R not chargeable to tax e.g under DTT or under ITO
Exclusions from sub-Sec 2 of S152 (in other words exclusions from Sec 152 as (2) of 152 covers all transactions to NR other than specifically mentioned)
- Deductions covered u/other Sections; Salary, dividend, prizes & winnings, commission payments
- Amounts taxable to PE (received by NR through PE), with Comm. Approval
- Representative (of NR, sec 172) e.g foreign actors/singers’ representative etc
- N/R not chargeable to tax e.g under DTT or under ITO
Are there any payment to NR where
No tax deduction required
&
No need to intimate (send notice) to comissioner
- import of goods where title to the goods passes outside Pakistan and is not part of Cohesive arrangement
- educational and medical expenses remitted in accordance with the regulations of the State Bank of Pakistan
When to apply tax & take comissioner’s approval
even if title passes outside Pakistan
Payer thinks payment to NR is not subject to tax
When supply part of overall arrangement or Supply by local person/PE
Import of goods whether or not title passes outside Pakistan;whether or not tilte passes in the name of associate/PE (when part of overall arrangement)
When to give notice (intimate) comissioner in connection with NR payment (foreign payment)
Subsec 5
Where payer wants to make payment without deduction of tax (e.g exclusions from 152 like exempt u/DTT or exempt u/ITO)
(5) Where a person intends to make a payment to a non-resident person without deduction of tax under this section, other than payments liable to reduced rate under relevant agreement for avoidance of double taxation,] the person shall, before making the payment, furnish to the Commissioner a notice in writing setting out -
(a) the name and address of the non-resident person;
(b) the nature and amount of the payment and
(c) such other particulars as may be prescribed.
The Commissioner on receipt of notice shall, within thirty days, pass an order accepting the contention or making the order under sub-section.
Where a person has notified the Commissioner of a payment under sub-section (5) and the Commissioner has reasonable grounds to believe that the non-resident person is chargeable to tax under this Ordinance in respect of the payment, the Commissioner may, by order in writing, direct the person making the payment to deduct tax from the payment in accordance with sub-section (2).
When can be 80% reduction in withholding Tax amount on Payment to NR (Foreign Payment)
80% reduction on tax amount
- Payment related to sub sec 1A i.e. construction assembly installation Supervisery
- Payment is part of paymnent related to overall cohesive arrangement (NR & PE of NR)
- PE will take credit of withholding tax, against overall profit of the whole arrangement
e.g contract of C,A, I+SS in the name of PE; NR also part of arrangement; part of contract payment is made to NR
20% of withholding tax to be deducted
Reduction in withholding tax or No withholding on payment to NR
OR
Exemption Certificate for PE Manuf Co.
Comissioner May, when tax is not MTR, on Application for 1A (C,A,I,SS contract) or 2A (PE, payments)
However both are MTR so practically only possible
for PE that is a Company & is manufacturer (i.e. tax dedcuted is NTR/not MTR)
This will be similar situation as Withholding Exemption (like S153)
(where advance tax+tax deducted in last Q > expected tax liability for year)
What is withholding when making payment to PE
Who will withhold
Is there withholding? or Not
Which transactions are subject to Withholding
Is there any exemption
What Regime
Prescribed person will withhold
3 transactions
-Sale of goods (except commercial importer)
services
execution of contracts (goods+services)
Exemption -Commercial importer selling in same condition
MTR, except Company PE which is manufacturer for sale of goods
Who are prescribed persons for withholding when making payment to PE
as defined in sub-section (7) of section 153.
Regimes
When is Withholding from NRs Payments FTR, MTR, NTR
NR
FTR - NR - Royalty, FFTS, FFODS, Capital gain on Govt bonds through PKR A/C
MTR - NR - C,A, I, SS, Adv-TV, Adv-general,Insurance Re-insurance,
NTR - All other than above
PE
NTR - Sale of goods by manufacturer PE which is legally a Co.
MTR - All Other
All MTR
Why
Salary, Dividend, Commission & Prizes are excluded from S152 &
What about their taxation? Exempt
Salary, Dividend, Commissio & Prizes are exempt from S152 however covered u/relevant sections and taxed their
Dividend - S5 - covers all dividends including foreign Co. (No dividend u/IFOS S39) - FTR
Foreign Prize & Winnings - Sec39 - IFOS - NTR (local P&W-FTR)
Commission-MTR
Foreign source Salary of residnt- Exempt if paid foreign tax or citizen leaves Pakistan during tax year and remains aborad
