Income Tax Ordinance, 2001 — Section 154A: Export of Services

2[154A. Export of Services. — (1) Every authorized dealer in foreign exchange shall, at the time of realization of foreign exchange proceeds on account of the following, deduct tax from the proceeds at the rates specified in Division IVA of Part III of the First Schedule –

(a)exports of computer software or IT services or IT enabled services 3[where the exporter is registered with and duly certified by the Pakistan Software Export Board (PSEB).];

(b)services or technical services rendered outside Pakistan or exported from Pakistan;

(c)royalty, commission or fees derived by a resident company from a foreign enterprise in consideration for the use outside Pakistan of any patent, invention, model, design, secret process or formula or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided to such enterprise;

(d)construction contracts executed outside Pakistan 4[:

(da)foreign commission due to an indenting commission agent;]

(e)other services rendered outside Pakistan as notified by the Board from time to time;

(2)The tax deductible under this section shall be a final tax on the income arising from the transactions referred to in this section, upon fulfilment of the following conditions –

(a)return has been filed; 1 Sub-section (5) omitted by the Finance Act, 2024. The omitted sub-section read as follows: “[(5) The provisions of sub-section (4) shall not apply to a person who opts not to be subject to final taxation: Provided that this sub-section shall be applicable from tax year 2015 and the option shall be exercised every year at the time of filing of return under section 114: Provided further that the tax deducted under this sub-section shall be minimum tax.]” ” 2 Section 154A inserted by the Finance Act, 2021. 3 The expression “in case tax credit under section 65F is not available” substituted by the Finance Act, 2022. 4 The expression “; and“ substituted with colon and new clause (da) inserted by the Finance Act, 2022. 330 Chapter X – Procedure 1[(b) withholding tax statements for the relevant tax year have been filed if required under the Ordinance;] and

(c)sales tax returns under Federal or Provincial laws have been filed, if required under the law 2[: Provided that this condition shall not apply in case of an exporter mentioned in clause (a) of sub-section (1) of this section.]

(d)no credit for foreign taxes paid shall be allowed.

(3)The provisions of sub-section (2) shall not apply to a person who does not fulfill the specified conditions or who opts not to be subject to final taxation: Provided that the option shall be exercised every year at the time of filing of return under section 114. 3[ ]

(5)The Board in consultation with State Bank of Pakistan shall prescribe mode, manner and procedure of payment of tax under this section.

(6)The Board shall have power to include or exclude certain services for applicability of provisions of this section.] 155. 4[Rent of immoveable] property.— (1) 5[Every] prescribed person making a payment in full or part (including a payment by way of advance) to any person on account of rent of immovable property (including rent of furniture and fixtures, and amounts for services relating to such property) shall deduct tax from the gross amount of rent paid at the rate specified in Division V of Part III of the First Schedule. 6[Explanation.- “gross amount of rent” includes the amount referred to in sub section (1) or (3) of section 16, if any.] 1 Clause (b) substituted by the Finance Act, 2022. The substituted clause read as follows: “(b) withholding tax statements for the relevant tax year have been filed;” 2 Full stop substituted with a colon and proviso added by the Finance Act, 2023. 3 Sub-section (4) omitted by the Finance Act, 2022. The omitted sub-section read as follows: “(4) Where a taxpayer, while explaining the nature and source of any amount, investment, money, valuable article, expenditure, referred to in section 111, takes into account any source of income which is subject to final tax in accordance with the provisions of this section, he shall not be entitled to take credit of a sum that can be reasonably attributed to the business activity or activities mentioned in sub section (1).] 4 The words “income from” substituted by the Finance Act, 2021. 5 The words, brackets, figure and comma “Subject to sub-section (2), every” substituted by the Finance Act, 2006. 6 Inserted by the Finance Act, 2006. 331 Chapter X – Procedure 1[Explanation.— For removal of doubt, it is clarified that the sub section (1) shall apply when a payment is made on account of rent of immoveable property irrespective of head of income] 2 [ ] 3[(3) In this section, “prescribed person” means –

(i)the Federal Government;

(ii)a Provincial Government;

(iii)4[Local Government];

(iv)a company;

(v)a non-profit organization5[or a charitable institution];

(vi)a diplomatic mission of a foreign state; 6[ ] Chapter X – Procedure gross amount paid at the rate specified in Division VI of Part III of the First Schedule.

(2)Where a prize, referred to in sub-section (1), is not in cash, the person while giving the prize shall collect tax on the fair market value of the prize. 1[(3) The tax 2[deductible] under sub-section (1) or collected under 3[sub-]section (2) shall be final tax on the income from prizes or winnings referred to in the said sub-sections.]