Introduction
The tax rate for payment to non resident under Section 152 of the Income Tax Ordinance, 2001 is given in the First Schedule of the Income Tax Ordinance 2001.
Table of Contents
Tax Rate for Payment to Non Resident for Royalty and Fee for Technical Services
The withholding tax rate on payment of royalty and fee for technical services to non residents is 15%.
- One may not take the technical services for engineering services. The withholding tax rates are different for both of the services. One may refer to Section 2 (23) of the Income Tax Ordinance, 2001 for the definition of fee for technical services.
Tax Rate for Payment to Non Resident for Contracts
The withholding tax rate on gross payment to non resident on account of contracts Section 152 (1A) of the Income Tax Ordinance, 2001 is 7%.
Tax Rate for Payment of Insurance Premium to Non Resident
It’s 5% under Division II of Part III of the First Schedule of the Income Tax Ordinance, 2001.
Tax Rate for Payment to Non-resident for Advertising Services
The withholding tax rate on payment to non residents on account of advertising services relaying outside Pakistan under Section 152 (1AAA) of the Income Tax Ordinance, 2001 is 10% as specified in Division II of Part III of the First Schedule.
Tax Rate for Payment to Non Resident for Off-Shore Digital Services
The withholding tax rate on payment to non resident for off-shore digital services under Section 152 (1C) is 10%.
Tax Rate for Payment to Non Resident-Capital Gains
The withholding tax rate on capital gains on SCRA and Foreign Currency Value Account maintained by non-residents is 10% under Section 152 (1D) and (1DA) respectively of the Income Tax Ordinance 2001.
Tax Rate for Payment of to Non Resident for Return on Sukuk
The withholding tax rate on payment of a return on Sukuk to non-residents is mentioned in Division IB of Part III of the Income Tax Ordinance, 2001.
Tax Rate for Payment to Non-Resident for International Money Transfers
The withholding tax rate for payment to non resident through international money transfers under Section 152 (1DC) and (1DD) is 10%.
Tax Rate for Payment to Permanent Establishment of Non Resident
The withholding tax rate for payment to the permanent establishment of a non resident under Section 152(2A) of the Income Tax Ordinance 2001 on the gross amount is as given below:
| Description | Company | Association of Persons (AOP) | Individual |
| Goods (Section 152 (2A)(a)) |
5% |
5.5% |
5.5% |
| Services (Section 152 (2A)(b))
Transport services, freight forwarding services, air cargo services, courier services, manpower outsourcing services, hotel services, security guard services, software development services, IT services, and IT enabled services, tracking services, advertising services (other than by print or electronic media), share registrar services, engineering services, car rental services, building maintenance services, services rendered of Pakistan Stock Exchange Limited and Pakistan Mercantile Exchange Limited inspection and certification, testing and training services, oilfield services |
4% |
4% |
4% |
| Services-Others (Section 152 (2A)(b)) |
9% |
11% |
11% |
Execution of a contract other than a contract for the sale of goods or the rendering of services (Section 152 (2A)(c))
|
10% 8% |
10% 8% |
10% 8% |
- Gross amount means including sales tax.
Example
If a prescribed person makes a payment of Rs.100,000 for the supply of goods to a non-resident company which involves Rs. 18,000. The withholding tax will be deducted on Rs. 118,000 (including sales tax) @5% which will be Rs. 5,900.
Tax Rate for Other Payments to Non Resident
The withholding tax rate for all other payments to non resident persons is 20% under Section 152 (2) of the Income Tax Ordinance, 2001.
- The withholding tax rate will be increased by 100% for payment to non-resident persons not appearing in the Active Tax Payers List (ATL).
Conclusion
The incidence of withholding tax rate for payment to a non resident under Section 152 is given below:
| Royalty and Fee for Technical Services-Section 152 (1) | Final |
| Contract-Section152 (1A) | Minimum |
| Insurance Premium-Section 152 (1AA) | Minimum |
| Advertising Services-Section 152 (1AAA) | Minimum |
| Foreign Produced Commercial-Section 152 (1BA) | Final |
| Special Convertible Rupee Account (SCRA)-Section 152 (1D) | Final |
| Foreign Currency Value Account (FCVA)-Section 152 (1DA) | Final |
| Return on Investment in Sukuk-Section 152 (1DB) | Final |
| International Money Transfer-Section 152 (1DC) | Final |
| Payment through International Gateway, Card Network Company-Section 152 (1DD) | Final |
| Payment to the Permanent Establishment-Section 152 (2A) | Minimum |