People who sell things online in Pakistan need to know how to handle sales tax and refunds.
Online shopping has grown to be a big part of Pakistan’s economy. Going digital has also changed the way we do business. E-commerce taxes make it even harder to sell things online, which was already hard enough. Online stores (either on their own or through big platforms) and e-commerce sites (on their own) need to know about Sales Tax and Withholding Tax (WHT) to stay in line and grow over time.
You might get fined a lot, get an FBR notice, or have court issues if you don’t pay these taxes. This could put your whole internet business at risk. This guide will help you understand how to pay Sales Tax and Withholding Tax when you do business online in Pakistan.
- Taxes on eCommerce sales
At different points in the supply chain, sales tax is added to some goods and services. The rules for e-commerce can change based on what you sell and how much money you make.
- Making a sales tax account
Do you need to sign up?
Those who make:
There is no limit on how much you can earn if you sell things online. You must register for Sales Tax.
Bring in:
As a foreigner selling things online, you need to sign up.
It is required that you sign up for Sales Tax if your taxable sales go over the limit set by the FBR https://www.fbr.gov.pk/. This limit changes every year, so make sure you always check the most recent Finance Act. That’s correct whether you sell in person or on the web.
Services:
You will usually need to register with the right Provincial Revenue Authority (PRA) if you provide taxable services online, such as IT services, online coaching, or making software. Like, SRB is the PRA for Punjab, KPK is the KPRA, and BRA is the BRA for Balochistan.
Sign up here:
Using the FBR’s IRIS https://iris.fbr.gov.pk/ system, you can sign up online. For services, it’s through the websites for each province in each area.
b. Taking sales tax and depositing it:
If your online sales are taxed, you have to charge sales tax once you’re registered. At the moment, the rate is 18%, but it can change for some things and services. Your bills will tell you about this tax.
Sales Tax paid on taxable goods and services bought for your business can be subtracted from the Sales Tax paid on those same goods and services. This is called an input tax adjustment. An input tax change is what this is called. They won’t have to pay taxes twice because of this.
Depositing:
It is necessary to send the net amount (Output Tax – Input Tax) to the FBR (or PRA) by the due date.
Reporting Income:
Each month, you have to electronically file a Sales Tax Return that shows what you bought, how much you sold, and how much tax you paid or got.
Deadline:
More often than not, between the 15th and 18th of the month following the tax period.
C. Issues that little web stores have
In the beginning, many small online businesses don’t sign up for sales tax because they don’t make enough money or people don’t know about them. It’s easy for them to get too big, though. Online sellers need to keep very close records of their sales and sign up ahead of time to avoid getting fined for not following the rules.
- Withholding tax (WHT) for online sales sites and stores
When you pay someone, they take out withholding tax. This works for a lot of deals in the world of online shopping.
A. WHATTED What online stores need to do
Big online shops like Daraz, Telemart, and others act as withholding brokers. It’s required by the Income Tax Ordinance, 2001. They are responsible for taking taxes out of the money they give buyers.
Point 236V:
Tax on online stores and service providers:
Since a few years ago, this area has been added just for people who make money online. The money that platforms send to online sellers for goods or services sold on their site often has to be tampered with by WHT.
Discount:
Different WHT rates are charged to people who are and aren’t on the Active Taxpayer List (ATL). People who are on the ATL are charged higher rates.
Getting paid and filing:
This tax has to be taken out of users’ funds, sent to the FBR https://www.fbr.gov.pk/, and WHT accounts have to be filed every month or every other month.
Some other parts of the WHT that may apply are: Additionally, a site could take WHT off of
There are service fees and commissions:
This is the VAT that buyers pay to the website as service fees or commissions.
Giving Money to Suppliers:
The site will take out WHT according to the sections that apply when it gets goods or services from other sellers. For example, Section 153 applies when the site pays for goods or services.
B. What do you think WHT means for online sellers?
You will already have some of your money taken out if you sell things online and get paid through a site.
Claim your WHT certificates:
You should definitely buy the Withholding Tax Certificates from the online store. These papers mean you’ve already paid your tax.
Claim WHT on your tax return every year:
When you file your taxes every year, the WHT that the platform and other places like banks took out will be taken off of the amount of tax you owe. Because of this, you will have to pay less tax.
Report:
Always check the Active Taxpayer List (ATL) to make sure you’re on it. It will hurt your cash flow because platforms will take out WHT at a higher rate if you are not on the ATL.
- Sellers on the Internet need to pay taxes on their earnings
Online sellers who make more than the basic exemption amount must file an annual income tax return and show their e-commerce income. This is the case whether they are subject to Sales Tax or WHT.
In most cases, money made from online sales is called “Income from Business.”
Tax Breaks for Expenses:
Legal costs you had to pay for your business in order to make that money can be deducted. These include the price of the goods you sold, the cost of marketing them, the cost of shipping them, the cost of the platform, your salaries, your energy bills, and the value loss of your assets.
A Statement of Wealth:
A Wealth Statement that shows your assets, debts, and income is also required.
- Important Things to Keep in Mind for Legal and Successful Online Shopping
An NTN is needed to file your taxes.
Turnover on the Track:
Constantly check your sales number. You should sign up right away if you’ve already hit the Sales Tax threshold or think you will soon.
Identify WHT:
Platforms will take out taxes, so know that. Make sure you always have your WHT badges and are on the ATL.
Keep Record-Keeping Carefully:
Make a list of all your sales, purchases, platform fees, bank actions, and costs, and save them digitally. It’s very important to do this so that you can file correctly and later check.
Get Help from a Professional:
The taxes on online shopping are changing. You can get help with the hard parts, make the best tax plans, and make sure you follow all the rules if you hire a skilled tax expert.
The e-commerce business in Pakistan is growing quickly, and the government is doing more and more to make sure that online companies pay their taxes. By doing your taxes correctly from the start, you can build a strong, legal, and ultimately more profitable online business.
For such services.contact us at https://taxaccountant.pk/
