Pakistan: Taxation of Exports in Finance Bill 2024

Exports Treated Under Minimum tax Regime

Introduction:

“The Finance Bill now proposes to change the tax regime for export of goods to minimum tax. Consequently, the requirement for exercising option to be taxed under normal tax regime proposed to be omitted.”

Proposed  Changes to Taxation on Export Income

- The government proposes to apply the minimum tax regime to income from exports of goods, with amendments to sections 168 and 169 to exclude tax deducted on export proceeds from final taxation.

Background:

-  Since the early 1990s, export income has been subject to a final tax regime, where withholding tax collected on remittances is considered the final tax discharge, regardless of underlying income or loss.

- This regime applies to Export Processing Zones (EPZs) and indirect exporters as well.

Recent  Developments:

- In 2019, the scope of amounts taxable under final tax regimes was brought under the normal/minimum tax regime, but exporters remained under the final tax regime.

Proposed  Changes:

-  Tax collected at 1% from exporters will be treated as minimum tax, requiring them to compute normal taxable income/loss and pay incremental tax if necessary.

-  Exporters will now be liable for super tax, unlike the previous final tax regime.

-  An additional 1% advance tax will be collected from direct exporters, which won't be treated as minimum tax, but can be adjusted against incremental tax  liability.

Reference/ Citation

https://www.brecorder.com/news/40309353

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