The Federal Board of Revenue (FBR) is exploring various options to increase the advance tax on motor vehicle registration. The proposed changes involve adjusting the rates for non-filers based on the value of their vehicles, potentially increasing them by 10 to 35%.
Currently, the advance tax is determined by engine size. However, significant and transformative alterations are being planned for the upcoming budget, which is expected to be announced in the first week of June.
The Resource and Revenue Mobilisation Commission (RRMC) has recommended an advance tax based on the vehicle’s value. According to their proposal, a 2% advance tax should be levied on the corporate sector.
During the previous three years, a 3% advance tax should apply to the non-corporate sector and individuals on the active taxpayers’ list (ATL). These rates would apply to motor vehicles valued up to Rs10 million.
For individual taxpayers, the proposed tax rate is 10%. Motor vehicles valued between Rs10 million and Rs30 million would be subject to a 4% tax for the corporate sector and a 5% tax for the non-corporate sector, rates which have remained unchanged in the ATL over the past three years.
For vehicles valued between Rs30 million and Rs100 million, the proposed tax rates would be 6-7% for the corporate and non-corporate sectors. In comparison, the individual tax rate would increase to 30%.
For motor vehicles valued up to Rs100 million, the proposed tax rates would be 8% for the corporate sector and 10% for the non-corporate sector, consistent with the rates in the ATL for the previous three years. The individual tax rate for such vehicles is proposed to be 35%.
The RRMC has also recommended the implementation of a minimum tax regime of 3% on the aggregate revenue of transport services provided to withholding agents.
Furthermore, transport contractors would be subject to a tax of 3.5% on the total amount received for their carriage services. However, a lower tax rate of 2.5% is proposed for oil tanker contractors.
