The Federal Board of Revenue (FBR) is currently exploring options to increase the advance tax on motor vehicle registration as part of the upcoming budget. The proposed changes aim to modify the existing system, which currently bases the tax on engine capacity. The Resource and Revenue Mobilisation Commission (RRMC) has suggested implementing an advance tax structure based on the value of the vehicle.
According to the RRMC’s recommendations, the government is advised to impose a 2% advance tax for the corporate sector and 3% for the non-corporate sector, specifically targeting individuals who have been listed in the active taxpayer’s list (ATL) for the past three years. This tax rate would apply to motor vehicles valued up to Rs10 million. For vehicles valued between Rs10 million and Rs30 million, the proposed tax rates would be 4% and 5% for the corporate and non-corporate sectors respectively, provided they remain in the ATL for 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 respectively. Additionally, the tax rate for individuals in this category is suggested to increase to 30%. For vehicles valued up to Rs100 million, the proposed tax rates would be 8% and 10% for the corporate and non-corporate sectors respectively, with individuals in this category facing a tax rate of 35% if they exist in the ATL for the past three years.
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Furthermore, the RRMC has recommended a minimum tax regime of 3% on the gross turnover for the transport sector, specifically for cases where transport services are provided to a withholding agent. Additionally, transport contractors who render or provide carriage services would be subject to a tax of 3.5% on the gross amount received. Oil tanker contractors, on the other hand, would be subjected to a tax rate of 2.5%.
These proposed changes in the advance tax structure for motor vehicle registration are expected to be revealed in the first week of June, coinciding with the upcoming budget announcement.
