Do you have withholding obligations?
There are two sides to every deduction, and only one of them carries the compliance burden.
The business making the payment deducts tax before paying and sends that tax to the government. In the law this business is a withholding agent. The person being paid simply receives less than the invoice value and gets credit for the difference.
This page is for the first group. If your business deducts tax from payments it makes, the obligations are yours: deducting correctly, depositing on time, reporting the deductions, and being able to show your working if FBR asks.
If tax is being deducted from payments made to you and you want to understand or recover it, that is a different question and a different service. Our income tax return filing service is the right place to start.
Not sure which provisions apply to you?
This is the most common question we get, and it has no single answer. Withholding provisions apply differently depending on who is paying, what the payment is for, and the facts of the transaction. No business is subject to every provision.
The rates differ between provisions, and so does the treatment. For some provisions the amount deducted is a final discharge of the liability. For others it is adjustable against the final tax liability. Getting this wrong in either direction causes problems later.
If you are unsure whether any of it applies to your business, that assessment is the first thing we do, before any filing work.
What withholding tax compliance actually involves
Most businesses think of this as one task. It is four, and they fail independently. You can deduct perfectly and still be exposed by what happened at the third step.
Working out the obligation
Each payment stream has to be matched to the provision that governs it. Payments to suppliers, contractors, service providers, landlords and employees are treated differently. This step determines everything downstream, and it is the one businesses most often skip.
Deducting the right amount
The rate depends on the applicable provision and on the circumstances of the payment and the payee. Deducting too little creates a shortfall that someone has to make good. Deducting too much creates a problem for your supplier and an awkward conversation.
Depositing the tax
Tax deducted has to be paid to the government within the time the rules prescribe, and the deposit produces a payment receipt. That receipt is your evidence. The timing is not the same for every type of withholding agent, so we confirm the position that applies to your business rather than working from a general rule.
Reporting the deductions
Sections 165 and 165C of the Income Tax Ordinance, 2001 require withholding agents to file withholding statements with their Commissioner for the period prescribed. The statement sets out, payee by payee, what was paid, what was deducted, and under which provision.
Reconciling the records
The last step is professional practice rather than a statutory duty, and it is where most problems surface. Your deductions, your deposit receipts and your filed statement should tell the same story. When they do not, the gap tends to become visible at the worst possible moment.
Much of what has been recorded against you is visible through FBR's Maloomat portal and the tax payments section of your IRIS account. We work from those alongside your own records.
How we help
Ongoing compliance
You send us the payment data for each period. We check the deductions against the applicable provisions, confirm the deposits are documented, prepare the statement, file it, and give you back a clean record of what was filed and when. Most clients want this as a standing arrangement rather than a scramble each period.
Catching up on earlier periods
If statements were not filed, or were filed with gaps, we work backwards. We establish what was actually paid and deducted, trace the deposits, and bring the filings up to date in the right order. You will know what the exposure looks like before you commit to the work.
Reconciliation and correcting earlier errors
Where deductions, deposits and filed statements do not agree, we find out why. The usual causes are a provision applied to the wrong payment type, a deduction made but never deposited, a deposit made without a traceable receipt, or a payee recorded under the wrong details. Once the cause is clear, the correction route follows from it.
What happens when it goes wrong
This matters more than most businesses expect, because the liability does not stay with the person whose tax it was.
Under sections 161 and 162 of the Income Tax Ordinance, 2001, a withholding agent is personally liable for the tax where the correct amount is not deducted, or where tax is deducted but not paid to the Federal Government. In practical terms your business can end up paying tax from its own funds that it was only ever meant to collect and pass on.
Filing failures carry separate consequences. According to FBR, not filing statements may lead to penalty proceedings under section 182, and may also render a person inactive for sales tax purposes under section 2(1A) of the Sales Tax Act, 1990. That second consequence catches people out. An unfiled income tax statement can affect your sales tax standing, which affects how your customers deal with you.
We cannot promise that FBR will not issue a notice or raise a demand, and you should be wary of anyone who does. What we can do is make sure your deductions, deposits and statements are correct, consistent and defensible.
Working with us
What we need from you
The list depends on your situation, but it usually starts here:
- Your NTN and access to your IRIS account
- A record of payments made during the period, by payee
- Details of tax deducted, and the provision applied if you have it
- Deposit receipts for tax already paid
- Payroll records, if you deduct from salaries
- Statements filed for earlier periods, if any
- Any correspondence received from FBR
If you do not have all of this, say so. Incomplete records are a normal starting point for catch-up work, not a reason to put off the conversation.
How an engagement starts
Initial review.
You tell us what your business pays out and what has been filed so far. We establish which provisions are in play and what state your records are in.
Scope and quotation.
We set out what the work involves, what it will cost and what we need from you. Nothing proceeds until you agree.
The work itself.
We prepare and file, and keep you informed of what is filed and when.
A standing arrangement, if you want one.
Most businesses move to this once the first period is done.
What this service does not cover
General information on a website cannot account for your particular circumstances. Withholding obligations depend on the applicable provision, the nature of the payment, the parties involved, and the law as it currently stands. Anything on this page is a starting point for a conversation rather than advice on your position. We give case-specific advice only once we have seen your actual records.
Our work also depends on what you give us. It is based on the payment records and information you provide, and the completeness of those records affects what we can stand behind.
What affects the fee
We quote per engagement rather than from a price list, because this work varies more than most services do. What moves the number:
- How many payees and transactions there are in a period
- How many different provisions apply to your payments
- Whether your records are current or need rebuilding from source documents
- Whether we are filing for the current period or catching up on several
- Whether payroll deductions are included
- Whether there is an open FBR matter to deal with
A short conversation about your payment volumes is usually enough for us to give you a figure.
Common questions
Practical help for a business that has to deduct tax when it pays others. That covers identifying which provisions apply, checking deductions, keeping deposit records in order, preparing and filing withholding statements, and reconciling the three against each other.
Businesses that make payments subject to deduction at source. Whether a particular provision applies to your business depends on who you are paying and what for, which is why we assess that before quoting.
A periodic return filed with FBR setting out the tax you deducted or collected, payee by payee, with the provision applied to each. The requirement sits in sections 165 and 165C of the Income Tax Ordinance, 2001.
No, and leaving them is worse than addressing them. We establish what should have been filed, work out the exposure, and bring the filings up to date. You will know what you are facing before committing to anything.
This is common and usually fixable. Deposits can often be traced through your IRIS account and FBR's records. If you want to retrieve payment receipts yourself, our guide to downloading your CPR from FBR walks through it.
There is a route for revising a statement that has already been filed, and a time limit applies to it. We confirm the current position for your case before acting, because these rules change with amendments.
Yes. The work is done through IRIS and we act for clients across Pakistan. Our office is in Islamabad if you would rather meet in person.
Get your withholding position reviewed
If you are not certain that your deductions, deposits and statements line up, a review is the sensible first step. Tell us what your business pays out and what has been filed so far, and we will tell you where you stand and what it would cost to put right.
Contact Information
TaxConsultancy.pk
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