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March 26, 2024

Pakistan introduces rules for online integration of businesses to process payment of digital invoices and income tax withholding

New rules from the Pakistan Federal Board of Revenue (FBR or the Board) will require withholding agents to update their profiles in the FBR's record and install and integrate FBR-approved software to ensure transactions subject to withholding tax are completed through this software.

The FBR introduced new rules for the Synchronized Withholding Administration and Payment System (SWAPS) by releasing a notification on 21 March 2024. These rules for SWAPS agents will commence on a date designated by the FBR.

Agents are obliged to update their profiles in the FBR's record, integrate FBR-approved software to process transactions subject to income tax withholding and receive a digital invoice in advance of payments. This applies to advance or partial payments, with no exemptions. Transactions are permitted only if the computerized identity card number, tax registration number and bank account number of the withholdee have the same title. A SWAPS Payment Receipt (SPR) provides proof of tax collection or deduction and includes specific information as required by the Board. Agents can request extensions of up to 90 days for SWAPS registration, and penalties will apply for noncompliance. However, the FBR has yet to approve software for this purpose.

As of 22 March 2024, the FBR has also updated its rules concerning the online integration of businesses for payment processing of invoices digitally issued. The amendments have led to the creation of a licensing portal that will provide services for the registration, licensing, suspension, and cancelation of licensed integrators' licenses. Moreover, the portal will cater to the registration of integrated enterprises and ensure real-time recording and reporting of digital invoices to the Board. Further, the updated rules detail the process for licensing integrators and clarify the integrated enterprise's responsibilities. According to the new rules, anyone licensed under the Sales Tax Rules, 2006 will automatically qualify as a licensed integrator.

Note that this Tax Alert is general in nature and is not a substitute for detailed research or the exercise of professional judgment. Accordingly, no decision on any issue should be taken without seeking specific professional advice and further consideration.

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Contact Information

For additional information concerning this Alert, please contact:

EY Ford Rhodes, Karachi

EY Ford Rhodes, Lahore & Islamabad

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor