FBR Wants to Increase Withholding Tax Rate to 10% On Non-Filer Traders

The Federal Board of Revenue (FBR) now wants to increase the withholding tax (WHT) rate to 10 percent for non-filer traders as part of its Tajir Dost Scheme (TDS) after the voluntary registration failed to add a desirable number of taxpaying businesses to the new scheme.

The proposed tax is expected to be announced in the 2024-25 federal budget and will help boost tax compliance among wholesalers and traders, reported a national daily.

The scheme targets unregistered traders, dealers, and importers, providing easy registration through the Tajir Dost module in the Tax Asaan app.

With the proposed WHT, the withholding tax rate on manufacturer supplies to distributors not registered with TDS is set to rise significantly from the current 0.2 percent to 10 percent. This increase will subsequently be reflected in the prices paid by retailers.

Meanwhile, manufacturers will apply a 10 percent tax on supplies to distributors, and importers will impose a 10 percent withholding tax on supplies throughout the supply chain.

The FBR will now begin mandatory registration and levy penalties for non-compliance. Despite efforts to expand the tax net, challenges persist, with only a fraction of retailers currently filing tax returns.