Individuals making foreign payments using debit and credit cards in Pakistan are subject to a 10% withholding tax. On Friday, Finance Minister Ishaq Dar announced an increase in tax rates during the presentation of the budget for fiscal year 2023-24.
Pakistan subjects to 10% WHT
The goal of this measure is to address existing loopholes in order to reduce dollar outflows and increase the country’s foreign exchange reserves.
In order to achieve these objectives, the government has decided to increase the withholding tax rate on foreign payments made through banking channels using debit/credit cards.
The withholding tax rate for individuals on the Active Taxpayers List (ATL) has been increased from 1% to 5%. Individuals who are not listed on the ATL, on the other hand, will be subject to a 10% withholding tax.
The tax increase is intended to encourage individuals to use formal banking channels for foreign currency transactions, thereby promoting transparency and accountability in financial transactions.
The government intends to discourage dollar outflows and strengthen the country’s foreign exchange reserves by imposing higher taxes on foreign payments made with cards.
Minister Dar emphasized the significance of closing gaps and strengthening the country’s financial stability. This measure is part of a larger effort to manage foreign currency outflows and maintain a healthy balance of payments.
The government intends to ensure that individuals contribute their fair share to the national tax system and support the country’s economic growth by instituting a withholding tax on foreign payments.
The imposition of a withholding tax on card-based foreign payments reflects the government’s commitment to maintaining a stable foreign exchange reserve and improving Pakistan’s overall financial health.
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