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:
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
