FBR Introduces New Penalty Regime for Withholding Agents

The Federal Board of Revenue (FBR) has introduced a new penalty regime for withholding agents including government departments and private companies, who would fail to collect or deduct withholding taxes through the new Synchronized Withholding Administration and Payment System from July 1, 2022.

The new regime would be applicable on government departments, engineering departments, registrar of properties, registering, recording or attesting transfer of any immovable property, motor vehicles registration authorities, the Accountant General Pakistan Revenues (AGPR) and private sector companies, and other categories of withholding agents.

In this connection, the FBR has established a new Directorate-General for Synchronized Withholding Agents System to document withholding transactions in future. The system has yet to become fully operational, but necessary staff has been appointed at the FBR Headquarters.

Under the Finance Act 2022, the “Synchronized Withholding Administration and Payment System agent” or “SWAPS agent” means any person or class of persons notified by Board to collect or deduct withholding taxes through Synchronized Withholding Administration and Payment System.

As per the new procedure, the Board may, by notification in the official gazette, notify any person or class of persons required to deduct or collect tax under the Ordinance to integrate with Synchronized Withholding Administration and Payment System and to act as SWAPS agent within the time and in the manner as may be prescribed.

The tax collected or purported to be collected or deducted or purported to be deducted under the Ordinance by a notified SWAPS agent and credited to the Commissioner through digital mode shall be treated to have been paid under section 160 of the Ordinance.

Where tax has been paid by a notified SWAPS agent in accordance with sub-section (2) of this section, a copy or number of SWAPS Payment Receipt (SPR) shall replace the copy or number of Computerized Payment Receipts (CPR) for the purposes of the Ordinance. Any notified SWAPS agent shall not be eligible for tax credit under Part X of Chapter III of the Ordinance and exemption under any of the provisions of the Ordinance if notified SWAPS agent fails to integrate with Board.

All persons from whom the tax has been collected or deducted by the notified SWAPS agents shall be eligible for credit of tax withheld against SPR issued by SWAPS Agent. All other provisions of the Ordinance, not specifically dealt with in this section, shall, mutatis mutandis, apply to the notified SWAPS agents, FBR added.

Any person who fails to integrate or perform roles and functions as specified, after being duly notified by the Board as SWAPS Agent, such person shall pay a penalty of Rs.50,000 for first default of 07 days and Rs. 100,000 for second default of next 07 days, Rs. 50,000 for each week after the second consecutive week of default: Provided that no penalty shall be imposed for the period for which extension from integration is granted by the Commissioner subject to the condition that, if the SWAPS Agent fails to integrate within such extended time, penalties shall be imposed as if no extension was granted, Finance Act 2022 added.

Published by
ProPK Staff