CIRCULAR NO. 07 OF 2004

(Income Tax)

Subject: WITHHOLDING TAX ON INDENTING COMMISSION AGENTS, ADVERTISING AGENTS, YARN DEALERS, TRAVEL AGENTS AND INSURANCE AGENTS ETC

As per existing provisions, income from commission and brokerage was liable to withholding tax @ 5% of the commission/brokerage income. The said tax was adjustable against final tax liability. Section 233 has been amended through Finance Act, 2004, whereby commission income of indenting commission agents, advertising agents and yarn dealers would continue to be subjected to deduction of withholding tax @ 5% of the gross commission/brokerage. Such deduction would be a final tax in respect of commission income of these categories for tax year 2005 and onward.

2. Moreover, the rate of withholding tax on travel agents, insurance agents and any other commission, would be 10% of the commission income with effect from July 1^st, 2004. This would also constitute final discharge of tax liability for these categories for tax year 2005 and onward. Corresponding amendments in section 115, section 169 and section 233 of the Income Tax Ordinance, 2001 have accordingly been made.

3. It is further clarified that the withholding tax under sub-section (2) of section 154 of the Income Tax Ordinance, 2001, relating to export indenting commission agents shall also be the final tax.

Muhammad Ashfaq Ahmed

Secretary (WHT)