The National Board of Revenue on Wednesday enforced 10 per cent tax at source on banks, mobile phone operators and service delivery agents on their income derived from mobile banking services, officials of the NBR said. According to NBR decision, banks, mobile phone operators, technology service providers and service delivery agents involved with mobile financial services will have to pay 10 per cent tax at source on their income from the sector, they said.
The NBR on the day issued a set of directives to related organisations including its field offices, said NBR first secretary (tax policy) Md Abdur Rahman Khan.
He said that the revenue board issued the directives to remove confusion among the bodies involved with the services regarding tax at source.
The decision was taken following Article 52AA of Income Tax Ordinance-1984 in which 10 per cent tax at source was imposed on services in any other head not mentioned in the ordinance, officials of the NBR said.
According to NBR directives, mobile banking service providing banks will deduct the tax on behalf of the revenue board while making payment in the form of charge, commission, fees and revenue sharing to the mobile network operators, technology service providers and service delivery agents including businesses, non-government organisations and individuals.
If mobile operator performs the role of the service providing agency, it will deducts the tax while paying charge, commission, or fees to technical service providers and agents.
The payment to the technical support providers for providing services related to software development and information technology enabled services will be exempted from the tax till June, 30, 2015 as per income tax ordinance.
NBR officials said that many banks had already introduced mobile financial services while the remaining banks were ready to do it.
In some cases, mobile operators in association with banks introduced the services. But there is confusion among the agencies involved with the services regarding deduction of tax at source from the services as it was not directly mentioned in the ordinance.
Usually, banks pay the tax on their income from the services, they said.
A leading mobile banking service providing bank sought clarification regarding deduction of tax at source from the commission payable to mobile phone operators as a leading mobile operator denied to pay the tax, a NBR official said.
Under the circumstances, the NBR issued the directive, he said.
-With New Age input
