Government Introduces 5% Tax on Foreign Education Fees

The government has introduced a 5% withholding advance tax on remittances sent by Pakistanis in other countries to meet expenses related to education. The tax was introduced in the Finance Bill 2015.

All financial institutions (banks, foreign exchange companies and others) and people remitting foreign currency abroad will be required to collect advance tax from remitters. The tax will be adjustable against the income of the person remitting the money.

It will be applicable on all educational expenses which include:

  • Tuition fee
  • Boarding and lodging expenses
  • Payment for distant learning to any institute in a foreign country
  • Any expense that can be attributed to foreign education

The State Bank of Pakistan last month issued a notification for simplification of the procedure for sending remittance abroad for education and health sector.

Under the revised regulations, banks are allowed to remit foreign exchange to educational institutions on behalf of students who want to study abroad up to $70,000, or equivalent per student per calendar year as per the criteria. Furthermore, banks can release foreign exchange in cash equivalent to $5,000 to students for initial living expenses.

In the health sector, banks are allowed to remit foreign exchange up to $50,000 or equivalent in other foreign currencies to hospitals for medical treatment of Pakistanis based on the recommendation of relevant medical specialists or hospitals in Pakistan.

Tax experts said that the government should consider amending the Section 111(4) of Income Tax Ordinance for identifying the person sending remittances in Pakistan. They added that the relaxation given by the SBP may be misused as black money generated in the system may be whitened at five percent advance tax.

via The News

Talal is a Director at ProPakistani. Reach out at [email protected]

  • Mudassar

    iathy rekhooo. Kch yaad aya Pakistanioo

  • How about sending money without labeling it as education money?

    • May

      Is it possible??wht shoukd i mention as purpose of transfer??i hv to send it in college account wnt thy know whete the money is being transferred? I hv to send 65000 dollars for fee,but the tne money changers R demanding 5 percent Tax payment on fee

      • May

        I meant 6500 us dollars I typed 65000 by mistake

  • Muhammad Aamir

    If our government keeps the education budget only 5%, our whole nation will become educated. But what our government knows only one thing TAX LAGAO TAX!!!!!!!!!!!!!!!


    • College Student

      Govt here is not introducing new tax its only an effort to get tax from wealthy people

      We should support this move

      Once tax collection from influential and wealthy people is streamlined Govt may extra resources for education budget

      • Muhammad Aamir

        I will be very happy if the tax is used in a proper way otherwise it will be a waste of money.

        • awan

          is tax say metro k kiray mai subsidy de jay ge (ghoomo phiro) ticket sirf 20 rupay

          • College Student

            Metro is not property of any Party its ours and you may travel with “Dignity” for Rs 20.

            Is this a bad thing?

            I am not with the present Govt but have welcoming attitude to better change

            • awan

              they built metro well nd good, as provides segregation for male and female,provides comfortable jorney ,, but the worst scenerio is that daily we are at a lost of a thousand dollars revenue due to subsidy in fairs. these bulky busses go half empty with 20 rupee ticket,,atleast every one should pay for his own things, why extra budget on others

              • Arham Infada

                what if some students have worked hard and saved money to go abroad for a study? Shit Government. It is not necessary everyone whos going abroad are wealthy enough. There are ppl who put their little wealth at stake just to get higher studies.

            • Farrukh Siddiqui

              Long term planning kerni ha to us pe subsidy khattam kerain or uska proper charges lein warna ye Metro next government band ker ke he jayege.

              • College

                Subsidy, if any is paid from revenue collected through taxes and not through pocket of any politician

                If tax money if being spent on General Public it is good otherwise that money may go to some pocket silently

                By the way do any body have information how much subsidy is being given and what should be the fare instead of Rs: 20?

        • Saleem

          What about those who are just keeping money in Pakistan but don’t earn in Pakistan. It is a shame for Pakistan to discourage education in foreign countries. It is insane when someone is not even entitled to pay Income Tax but Govt is deducting at source for no reason.

          • Muhammad Aamir

            It’s nothing, Brother! Our government keeps the education budget too low, don’t you know? Only 1.625 % budget (71.5/4400Rs) for education looks a joke which clearly indicates the government doesn’t want the nation to be educated.

            • Saleem

              Thank you for nice comments. Do you have any mobile application to read posts on iPhone or iPad too? It would be awesome to read posts. I suggest you to try iClarified app. It is only for iPhone news but awesome. We must come up with same solution to increase readers.

              • Muhammad Aamir

                Sorry! I don’t know :) I’m a 2nd-year pre-medical student, not a developer. :D

      • Nauman Shafique

        bhai g ameeron k bache wese e chale jate hen bahr unko kya zrurt h education k naam pe bhejne ki,

      • Faraz Masood Khan

        How can you reapply taxed income another tax than another tax than another tax, its for education you idiot a right for everyone. Foreign education is not service this government has provided to you than how come another tax on it that money for education!!!!!!!!!!!!!!!!!!!!!!

  • College Student

    As its adjustable/advance income tax its OK to collect

    Its time to get income tax from of wealthy people

    • awan

      other nations are giving loans to their scholars or yeh hum say bhutta lay rahay hain, still u r with them…amazing just have a look at kaist site, if u succed to get their ,korean government would afford ur living and tution fee+ air return ticket….still stay with the “robin hoods”,my parents are sending me after taking a heavy loan so that i may survive.. in kutton ko to mai aik phooti kori nah doun chahay apni scholarship he nah cancel krni the way wt laptop scheme has done..mairay sath jitnay lrkay hain in laptops pay movies daikhtay hain, it has no other use..
      ayaashi maro

      • College Student

        Dear awan

        Please complete your studies as planned and don’t worry about the 5% WHT. Your father will get adjustment in his income tax return. So WHT is not any additional tax its only advance income tax.

        Its good that Laptops are being used for Edutainment (Education and entertainment)

        • Junaid

          Sir in kanjron ki waja se hum logon ko visa nahi milta aur ap baat kar rahay ho k abroad ja reply karo after 6 months. Agar main bhi bahar hota tou apki tarhan positive baatein karta, bur unfortunately main sacha pakistani hon isi liye govt k against hon. Na light, na gas, na paani, na job, phir bhi pakistan zindabad? Wah

        • May

          There is no justification what so ever to collect advance income tax on education whn u dnt evn fall in tax bracket n nt even untitled to pay income tax!!!Rich il still be rich they il pay the tax easily it il go into govt pocket Only middle-class families il suffer as thy hardly scrape enough money so there children can get good education better job opportunities better future prospects!!!Many of students do it fr visa purposes to support their parents also!!It il only effect them!!Politician children have their palaces here n also abroad there children get foreign degrees n hardlr ever use it!!on the other hand a student from average family work very hard to gt a degree n actually use it!!#callous govt!!!

          • May

            All of us already know where the major chunk of taxes we pay goes!!!In corrupt govt pocket or swiss accounts!!!,the facilities provided to us in form of education n health r nt up to par so the politician basically use our money to get foreign education n health checkups only for themselves awaam is subdued to get substandard education n use inadequate health facilities from govt run institutes!!

    • M Waseem Akhtar

      Sure, common people don’t study abroad.

      • Farrukh Siddiqui

        Acha Common people ager apna kuch beech ker bhi is Mulk se jana chahay to bhi 10 bar sochay kyunki is Tax ke ragray me sab ne ana ha.

        • College

          It is common sense, that Common man don’t have huge assets/spare assets to sell and go abroad for studies.

    • Junaid

      Bhai jan hundi karo, kya zarorat hai Is kanjar govt ko tax dene ki. Tax lagaya hi is liye jata hai k log legal way main payments na karen.

  • Awais Hussain

    shair bno shair :D

  • Karim Jindani

    this is an adjustable tax – which means if you file tax returns you can claim it back – Better, you can ask your HR not to deduct the tax lesser in last month. Its a good move by government because if someone can afford education outside PK, they should be filing tax returns.

    • shoaib

      Isn’t this like tax on income that has already been taxed for some individuals? If you don’t own a business and you get your paycheck after tax has been deducted, then you should 5% more tax on it, and may be you’ll get that back later? This is another scheme whereby focus is not on fixing the problem.

      It will definitely hamper the education of a lot of international students from pakistan who by the way come abroad and face a lot of challenges to make their ends meet, living away from their families to get a decent education, only to later payback their country through remittances. Pakistan receives a lot of funding from non-resident Pakistanis to maintain its gdp. What’s the point of creating hurdles for them. Again this is a shortsighted vision. Couldn’t have expected anything more.

      • Karim Jindani

        Nopes. See its like this. Suppose your monthly tax liability is 25,000 – When you pay your electricity bills or you rmobile bills you are charged some advance taxes (as witholding) – You can record them and go to your Finance and tell them to adjust these amounts and deduct less tax in the last few months of financial year. This is true for investments in mutual funds, investments & donations also – If you donate to a charity which is tax exempted then your donation amount is not counted in the taxable amount.

        Unfortunately most of the people who even pay tax are not income tax filers. Even though the process is now completely online. I still think its a good way to capture people who are not paying tax

        • Nabeel

          The process is not optimized. See this, if someone’s income is being taxed before it is transferred to the individual, then the government should have a record of the tax history via his/her NTN. Why introduce a hectic procedure known as ‘Tax Filing’ ?

          • Karim Jindani

            I agree this is not optimized however filing of return is not hectic and is a standard process even im advanced economies like USA. The reason is that it is impractical to link automatically all the systems in private sector with government. For eg you pay withholding on your mobile bill. The filing process helps individual to recover those amounts based on submission of return

  • Javed Khan

    People will simply refer to using “Hundi” from now on. Already overwhelming majority of people uses it due to Government’s extortionist practices. While I’m not against collection of taxes, I know it too damn well where all that tax money would go, i.e, in their bloody pockets.

    • AbdulBaqi1

      one must not forget these smugglers and hawalas are part of political parties.

    • irfanzone

      You nailed it there. The real problem is not that we don’t want to pay tax, but that we hate to see our hard earned money going down the throats of sharifs n Zardaris clan. TRUST is lacking big time and unless these thugs and croonies lead by example a common man will always hesitate to give any tax.

  • Na parhaen ge na parhne den ge!

  • AWAISassassin

    Bitcoins Zindabad!

  • Saleem

    Now Govt can not collect taxes, so started doing Withholding Tax on everything… Witholding tax on Mobile Bills, Withholding on Bank Transactions, Withholding on Tution Fees, Withholding on Internet usage…and much more. By the way, Govt never returns back this withholding even if you prove that you paid more withholding tax than actual income tax due on you…

    But in your so called Kafir countries like UK and US, they returns you back VAT on all purchases you do in their countries as a tourist… Still you are not their citizen but they care your human rights.

    • Muhammad Aamir

      By reading the comments, I have come to know that I can take back my tax from the government, but you say it’s not possible, really?

      • Saleem

        I experienced it during my career in Pakistan. My company deducted more income tax on my salary and I also paid withholding taxes on different bills. Finally, in tax claim, I come to know that I have paid above 10,000 tax to Govt than my actual due amount. I filed for a refund but FBR replied that it will be adjusted next year… And next year same cycle of tax deductions at source so how to claim it back. This is a trick that government plays. In UK, Tax counters work at airport and couple of other places. It refund you back 20% VAT that we pay as tourist on shipping in UK… This is called one window operation and justice with people. In Middle East, we don’t pay a single penny even but enjoy subsidies of governments as equally as their own citizen. This is a reason of brain drain too.

        • Muhammad Aamir

          Thanks for sharing your experience!!