Exporters in Pakistan are required to follow the updated tax rules for export proceeds under Section 154 of the Income Tax Ordinance, 2001, revised by the Federal Board of Revenue (FBR) for the tax year 2026. The provision ensures proper deduction of tax at source on export proceeds, helping exporters remain compliant with tax regulations.
Section 154 outlines how tax, including advance tax, is deducted when export proceeds are realized. This involves multiple channels, including banks, EPZ authorities, direct exporters, and customs.
Authorized dealers in foreign exchange must deduct tax at the rate specified in Division IV of Part III of the First Schedule when realizing export proceeds, applicable to both full and partial payments. Banking companies are also required to deduct tax when realizing proceeds from goods sold under inland back-to-back letters of credit or other arrangements prescribed by the FBR.
Industrial undertakings within Export Processing Zones (EPZs) are subject to tax deduction on exports, which is collected by the EPZ Authority at the prescribed rate. Direct exporters and registered export houses operating under the Duty and Tax Remission for Exports Rules, 2001, and the Export Facilitation Scheme, 2021, must deduct tax when paying indirect exporters under firm contracts, following the same prescribed rate.
Customs authorities are responsible for collecting tax at the point of export clearance. The Collector of Customs collects tax on the gross value of exported goods at the rate specified in Division IV of Part III during clearance.
Tax deducted under Section 154 is treated as minimum tax on income arising from export transactions. Exporters can account for this deduction while calculating their total income tax liability.
Key points for exporters in 2026 include: tax is deducted at source by authorized dealers, banks, EPZ authorities, direct exporters, and customs; the deduction rate is uniformly prescribed; and compliance with Section 154 is required to avoid penalties and ensure smooth repatriation of export proceeds. Exporters should review export invoices, banking remittances, and customs documentation to ensure correct deductions.
Disclaimer: This article is for general information and educational purposes only. It does not constitute legal, tax, or financial advice. Consult a tax professional or official FBR resources for compliance.
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