Income Tax Ordinance, 2001 — Section 152: Payments to non-residents

152. Payments to non-residents.— (1) Every person paying an amount of 1[royalty] or fees for technical services to a non-resident person that is chargeable to tax under section 6 shall deduct tax from the gross amount paid at the rate specified in Division IV of Part I of the First Schedule. 2[(1A) Every person making a payment in full or part (including a payment by way of advance) to a non-resident person on the execution of –

(a)a contract or sub-contract under a construction, assembly or installation project in Pakistan, including a contract for the supply of supervisory activities in relation to such project; or

(b)any other contract for construction or services rendered relating thereto; or

(c)a contract for advertisement services rendered by T.V. Satellite Channels, shall deduct tax from the gross amount payable under the contract at the rate specified in Division II of Part III of the First Schedule.] 3[(1AA) Every person making a payment of insurance premium or re insurance premium to a non-resident person shall deduct tax from the gross amount paid at the rate specified in Division II of Part III of the First Schedule.] 4[(1AAA)Every person making a payment for advertisement services to a non-resident media person relaying from outside Pakistan shall deduct tax from the gross amount paid at the rate specified in 5[Division II] of Part III of the First Schedule.] 6[ ] 1 Substituted for the word “royalties” by the Finance Act, 2002. 2 Inserted by the Finance Act, 2006. 3 Inserted by the Finance Act, 2008. 4 Inserted by the Finance Act, 2012. 5 The expression “Division IIIA” substituted by the Finance Act, 2017. 6 Sub-section (1B) inserted by the Finance Act, 2006. 312 Chapter X – Procedure 1[(1B) The tax deductible under sub-sections (1A), (1AA) and (1AAA) shall be a minimum tax on the income of the non-resident persons in respect of payments mentioned therein. (1BA) Every person responsible for making payment directly or through an agent or intermediary to a non-resident person for foreign produced commercial for advertisement on any television channel or any other media, shall deduct tax at the rate of twenty percent from the gross amount paid. The tax deductible under this sub-section shall be final tax on the income of non-resident person arising out of such payment.] 2[ ] 3[ ] 4[ ] 5[(1C) Every banking company or a financial institution remitting outside Pakistan an amount of fee for offshore digital services, chargeable to tax under section 6, to a non-resident person on behalf of any resident or a permanent establishment of a non-resident in Pakistan shall deduct tax from the gross amount paid at the rate specified in Division IV of Part I of the First Schedule] 6[: Provided that the banking company and financial institution shall not deduct the tax under this sub-section where the recipient is also liable to Digital Presence Proceeds tax and same has been collected.] 7[(1D) Every banking company or a financial institution maintaining 8[, for a period not less than six months,] special convertible rupee account (SCRA) of a 1 Sub-sections (1B), (1BB) and (1BBB) substituted by the Finance Act, 2021. The substituted sub sections read as follows: “(1B) The tax 1[deductible] under sub-section (1A) shall be a 1[minimum] tax on the income of a non resident person arising from a contract 1[.] (1BB) The tax 1[deductible] under sub-section (1AA) shall be a 1[minimum] tax on the income of the non-resident person arising out of such payment.] (1BBB) The tax deductible under sub-section (1AAA) shall be minimum tax on the income of non resident person arising out of such payment.” 2 Proviso omitted by the Finance Act, 2019 omitted proviso read as follow: Provided that the provisions of this sub-section shall not apply in respect of a non-resident person unless he opts for the final tax regime. 3 Sub-section (1BB) inserted by the Finance Act, 2008. 4 The new Sub-section (1BBB) inserted through Finance Act, 2020 dated 30th June, 2020. 5 Inserted by the Finance Act, 2018. 6 Full stop substituted with a colon and thereafter a new proviso added by the Finance Act, 2025. 7 New sub-sections (1D) and (1E) inserted through Tax Laws (Second Amendment), 2019 dated 26th December, 2019. 8 Words inserted by the Finance Act, 2025. 313 Chapter X – Procedure non-resident company having no permanent establishment in Pakistan shall deduct tax from capital gain arising on the disposal of debt instruments and Government securities including treasury bills and Pakistan investment bonds invested through SCRA at the rate specified in Division II of Part III of the First Schedule] 1[: Provided that in case of holding period of debt instruments and Government securities including treasury bills and Pakistan investment bonds is less than six months, the capital gain arising on the disposal of such securities to the non resident person shall be taxed at the rates provided in paragraph (2) of Division II of Part III of the First Schedule of the Ordinance.] 2[(1DA) Every banking company maintaining a Foreign Currency Value Account (FCVA) or a non-resident Pakistani Rupee Value Account (NRVA) of a non-resident individual holding Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) or Computerized National ID Card (CNIC) shall deduct tax from capital gain arising on the disposal of debt instruments and government securities and certificates (including Shariah compliant variant) invested through aforesaid accounts at the rate specified in Division II of Part III of the First Schedule.] 3[(1DB) Every special purpose vehicle or a company, at the time of making payment of a return on investment in sukuks to a non-resident sukuk holder shall deduct tax from the gross amount of return on investment at the rate specified in Division IB of Part III of the First Schedule.] ] 4[(1DC) Every exchange company licensed by the State Bank of Pakistan shall deduct tax at the time of making payment of service charges or commission or fee, by whatever name called, to the global money transfer operators, international money transfer operators or such other persons engaged in international money transfers or cross-border remittances for facilitating outward remittances, at the rates given in Division IV, Part I of the First Schedule: Provided that where such person retains service charges or commission or fee, by whatever name called from the amount payable to the exchange company on any account, the exchange company shall be deemed to have paid the service charges or commission or fee, by whatever name called and the exchange company shall collect the tax accordingly. 1 Full stop substituted with a colon and thereafter a new proviso added by the Finance Act, 2025. 2 Sub-section (1DA) inserted by the Finance Act, 2021. Earlier this insertion was made through Tax Laws (Amendment) Ordinance, 2021. 3 Sub-section (1DB) inserted by the Finance Act, 2021. 4 Sub-sections (1DC) and (1DD) inserted by the Finance Act, 2022. 314 Chapter X – Procedure (1DD) Every banking company while making payment to card network company or payment gateway or any other person, of any transaction fee or licensing fee or service charges or commission or fee by whatever name called or interbank financial telecommunication services, shall deduct tax at the rates given in Division IV, Part I of the First Schedule: Provided that where card network company or payment gateway or any other person retains money in relation to aforementioned services from the amount payable to the banking company on any account, the banking company shall be deemed to have paid the amount and the banking company shall collect the tax accordingly] 1[(1E) The tax deductible under sub-sections (1D), (1DA) 2[(IDB), (1DC) and

(IDD)] shall be a final tax in respect of persons and income mentioned therein.]

(2)Subject to sub-section (3), every person paying an amount to a non-resident person (other than an amount to which sub-section (1) 3[or sub section (1A) 4[, (1AA)] 5[, (1AAA), 6[(1C)] or (2A)] applies)] shall deduct tax from the gross amount paid at the rate specified in Division II of Part III of the First Schedule. Chapter X – Procedure 1[(c)] on the execution of a contract, other than a contract for the sale of goods or the rendering of or providing services, shall, at the time of making the payment, deduct tax from the gross amount payable (including sales tax, if any) at the rate specified in Division II of Part III of the First Schedule.] 2[(2AA) sub-section (1AA) shall not apply to an amount, with the written approval of the Commissioner, hat is taxable to a permanent establishment in Pakistan of the non-resident person.] 3[(2B) the tax deductible under sub-section (2A) shall be minimum tax: Provided that tax deductible under clause (a) of sub-section (2A) shall not be minimum tax where payments are received for sale of goods by a company being a manufacturer of such goods.]

(3)Sub-section (2) does not apply to an amount

(a)that is subject to deduction of tax under section 149, 150, 4[ ] 5[ ] 156 6[or 233];

(b)with the written approval of the Commissioner, that is taxable to a permanent establishment in Pakistan of the non-resident person;

(c)that is payable by a person who is liable to pay tax on the amount as representative of the non-resident person under sub section (3) of section 172; or

(d)where the non-resident person is not chargeable to tax in respect of the amount.

(4)Where a person claims to be a representative of a non-resident person for the purposes of clause (c) of sub-section (3), the person shall file a declaration to that effect with the Commissioner prior to making any payment to the non-resident person. Chapter X – Procedure 1[2[(4A) The Commissioner may, on application made 3[in the prescribed form] by the recipient of payment referred to in sub-section (1A) having permanent establishment in Pakistan, or by a recipient of payment referred to in sub-section (2A), as the case may be, and after making such inquiry as the Commissioner thinks fit, allow by order in writing, in cases where the tax deductable under sub section (1) or sub-section (2A) is 4[not minimum tax], any person to make the payment 5[after deduction of tax at a reduced rate but such reduction shall not exceed eighty percent of the rate specified in the said Division].] ] 6[(4B) The Commissioner may, in case of payment that constitutes part of an overall arrangement of a cohesive business operation as referred to in paragraph (ii) of sub-clause (g) of clause (41) of section 2, on application made by the person making payment and after making such inquiry, as the Commissioner thinks fit, allow by order in writing, the person to make payment after deduction of tax equal to 7[twenty] percent of the tax chargeable on such payment under sub section (1A): Provided that the credit of the tax so deducted shall be available to the permanent establishment of the non-resident accounting for overall profits arising on the overall cohesive business operation.]

(5)Where a person intends to make a payment to a non-resident person without deduction of tax under this section,8[other than payments liable to reduced rate under relevant agreement for avoidance of double taxation,] the person shall, before making the payment, furnish to the Commissioner a notice in writing setting out

(a)the name and address of the non-resident person; 9[ ] 1 Inserted by the Finance Act, 2015. 2 Sub-section (4A) substituted by the Finance Act, 2017. The substituted sub-section (4A) reads as follows: “(4A) The Commissioner may, on application made by the recipient of a payment referred to in sub-section (2A) and after making such inquiry as the Commissioner thinks fit, may allow in cases where the tax deductable under sub-section (2A) is adjustable, by order in writing, any person to make the payment, without deduction of tax or deduction of tax at a reduced rate.”;] 3 The words inserted through Finance Act, 2020 dated 30th June, 2020 4 The word “adjustable” substituted through Finance Act, 2019. 5 The expression “without deduction of tax or deduction of tax at a reduced rate” substituted by the Finance Act, 2024. 6 New sub-section (4B) inserted through Finance Act, 2019. 7 The word “thirty” substituted by “twenty” through Finance Act, 2020 dated 30th June, 2020 8 Inserted by the Finance Act, 2008. 9 The word “and” omitted through Finance Act, 2020 dated 30th June, 2020 317 Chapter X – Procedure

(b)the nature and amount of the payment 1[;and

(c)such other particulars as may be prescribed.] 2[(5A) The Commissioner on receipt of notice shall 3[, within thirty days,] pass an order accepting the contention or making the order under sub-section (6)] 4[: Provided that the Commissioner shall be deemed to have issued the exemption certificate upon the expiry of thirty days and the certificate shall be automatically processed and issued by Iris subject to the condition that in computing the said period of thirty days, there shall be excluded days taken for adjournment by the applicant: Provided further that the Commissioner may modify or cancel the certificate issued automatically by Iris on the basis of reasons to be recorded in writing after providing an opportunity of being heard.]

(6)Where a person has notified the Commissioner of a payment under sub-section (5) and the Commissioner has reasonable grounds to believe that the non-resident person is chargeable to tax under this Ordinance in respect of the payment, the Commissioner may, by 5[order] in writing, direct the person making the payment to deduct tax from the payment in accordance with sub-section (2).

(7)Sub-section (5) shall not apply to a payment on account of – 6[(a) an import of goods where title to the goods passes outside Pakistan and is supported by import documents, except where 1 The “full stop” substituted by “semi colon” and the word “and” thereafter new clause (c) added through Finance Act, 2020 dated 30th June, 2020. 2 Inserted by the Finance Act, 2003. 3 Inserted by the Finance Act, 2004. 4 Full stop substituted with a colon and new provisos added by the Finance Act, 2023. 5 The word “notice” substituted by the Finance Act, 2004. 6 Clause (a) substituted by the finance Act 2018, the substituted clause (a) is read as follows “(a) an import of goods where title to the goods passes outside Pakistan6[and is supported by import documents], except an 6[ ] import that is part of an overall arrangement for the supply of goods, their installation, and any commission and guarantees in respect of the supply where –

(i)the supply is made by the head office outside Pakistan of a person to a permanent establishment of the person in Pakistan;

(ii)the supply is made by a permanent establishment of the person outside Pakistan to a permanent establishment of the person in Pakistan;

(iii)the supply is made between associates; or

(iv)the supply is made by a resident person or a Pakistan permanent establishment of a non resident person; or” 318 Chapter X – Procedure

(i)the supply is made in connection with the overall arrangement for the supply of goods, installation, construction, assembly, commission, guarantees or supervisory activities and all or principal activities are undertaken or performed either by the associates of the person supplying the goods or its permanent establishment, whether or not the title passes outside Pakistan and whether or not the goods are imported in the name of the associate or any other person; or

(ii)the supply is made by a resident person or a Pakistan permanent establishment of a non-resident person in connection with the overall arrangement as referred to in sub-clause (i); or” ]

(b)educational and medical expenses remitted in accordance with the regulations of the State Bank of Pakistan. In this section “prescribed person” means a prescribed person as Chapter X – Procedure