• Rs1m fines proposed for unregistered online vendors in new Finance Bill
• Banks, couriers to deduct withholding tax under new plan
• Fine for failing to submit withholding tax statements raised by 10 times
• Govt to take over property valuation powers from FBR

ISLAMABAD: The federal government has proposed sweeping reforms to tighten tax compliance, including significantly higher penalties for non-compliance and stronger enforcement measures to target under-taxed and digitally active sectors.

The changes, proposed in the Finance Bill 2025, aim to deter non-compliance, discourage cash-based transactions and enh­ance documentation of the economy. Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial said enforcement was the only viable option to boost revenue collection, rather than relying on new taxes.

One of the key amendments is a tenfold increase in the penalty for failure to submit withholding tax statements — from Rs5,000 to Rs50,000. Authorities believe this will compel withholding agents to comply with deadlines and file statements within the due date.

A substantial penalty has been proposed for online marketplaces that allow unregistered, non-resident vendors engaged in e-commerce to sell digitally ord­ered goods without proper registration under the Sales Tax Act and the Income Tax Ordinance.

Under the proposed framework, the first violation would incur a fine of Rs500,000, with subsequent defaults carrying a penalty of Rs1 million. These fines would apply to both online platforms and courier services facilitating such transactions.

According to the Finance Bill, if a banking company, payment gateway or courier service provider fails to deduct tax when making payments to sellers or neglects to remit the deducted tax, the government proposes strict penalties.

In cases involving digitally ordered goods or the provision of digitally delivered services via e-commerce platforms, the government proposed a penalty equal to 100 per cent of the tax amount for violations.

The government has made banks and courier services withholding agents for deducting withholding tax and sales tax from buyers of online goods and services. The collected tax will be submitted to the FBR, while the remaining amount will be transferred to the seller.

The Finance Bill 2025 introduces several revisions across various sections, tightening restrictions on economic transactions by certain individuals. These limitations were initially outlined in the Tax Laws Amendment Bill 2024.

Under the proposed amendments, the federal government — rather than the FBR — will be responsible for notifying the value of immovable property. Until this valuation is officially declared, restrictions on registering, recording or attesting property transfers will not take effect, and no individual will be deemed ineligible for such transactions.

The Finance Bill 2025 also expands exemptions to restrictions on bank account operations. Pensioner accounts, along with previously exempted Aasan accounts, are now explicitly excluded from limitations on opening or maintaining current or savings accounts.

The bill seeks to broaden the definition of an “eligible person” by including individuals who have submitted a statement of investment sources and expenditures, demonstrating sufficient resources and providing an explanation for a specific purchase or investment transaction.

The bill removes “special child” from the definition of immediate family members and eliminates the age limit of 25 years for a child’s classification as an immediate family member. As a result, individuals aged 26 or older who remain financially dependent on their parents will now qualify under this definition.

The definition of “sufficient resources” has also been broadened to encompass cash in local or foreign currency, the fair market value of gold, and the net realisable value of stocks, bonds, receivables or other prescribed cash-equivalent assets.

Individuals may declare these assets in their sources of investment and expenditure statements or their wealth statements filed for the latest tax year.

For companies and associations of persons (AOPs), sufficient resources include cash and equivalent assets reported in financial statements accompanying the income tax return for the latest tax year.

The Finance Bill proposes a proviso in the definition of sufficient resources, specifying that when an asset is acquired through the exchange of capital assets already declared in a wealth statement, financial statement or sources of investment and expenditure statement, the disposed capital assets shall be considered part of cash-equivalent assets, up to the value stated in the agreement.

Published in Dawn, June 12th, 2025