The National Board of Revenue has decided to deduct advance income tax on commission or profit of outsourcing service providing companies that they get for supplying manpower to different organisations, officials of the NBR said.
The decision came from the latest board meeting of the NBR, they said.
Like security service providers, outsourcing companies will have to pay income tax at source at the rate of 10 per cent on commission or profit they get for providing manpower to any company.
In this regard, the NBR has also fixed profit for the security service providers and outsourcing companies at the rate of 15 per cent on gross receipt, terming the profit conceptual.
According to article 52AA of the Income Tax Ordinance-1984, security service providing companies have to pay 10 per cent AIT on commission.
But most of the time, the service receiving organisations pay the commission and salaries of provided security personnel and other manpower under a package, officials said.
In that case, the companies will have to pay 10 per cent AIT on conceptual profit of 15 per cent, they said.
They said that though it was clearly mentioned in the income tax ordinance for deducting AIT on commission of security services companies, outsourcing companies were not clearly mentioned in the law.
Currently, many government and private organisations depend on private outsourcing companies for their required manpower, particularly for lower-grade employees, instead of permanent recruitment.
In this process, the service receiving organisations usually pay a lump sum amount to service providing companies for providing the service.
Sometimes, the service receiving companies directly pay the salary to the hired manpower and pay commission to the service providing companies.
Difference in payment system has created confusion on how the taxpayers will pay AIT, NBR officials said.
According to the NBR decision, now, service providing companies will have to pay 10 per cent AIT on commission or on 15 per cent conceptual profit on gross receipt.
-With New Age input
