As per Lawkidunya, Here’s a comprehensive guide to sales tax regulations for foreigners in Pakistan:

Registration Requirements

1. Mandatory Registration: Foreigners engaged in a taxable activity with an annual turnover exceeding PKR 5 million (approximately USD 30,000) must register for sales tax.
2. Voluntary Registration: Foreigners with an annual turnover below the threshold can also register voluntarily.
3. Registration Procedure: Foreigners must submit an application to the Federal Board of Revenue (FBR) along with required documents, such as a copy of their passport, visa, and proof of business address.

Tax Rates

1. Standard Rate: The standard sales tax rate in Pakistan is 18%.
2. Reduced Rates: Lower rates apply to certain goods and services, such as:
– 5% on food items, medicines, and educational services
– 10% on textiles, leather goods, and other specified items
3. Exemptions: Certain goods and services are exempt from sales tax, including:
– Basic necessities like wheat, rice, and sugar
– Goods exported from Pakistan
– Sales to diplomatic missions and international organizations

Compliance Requirements

1. Monthly Returns: Registered foreigners must file monthly sales tax returns by the 15th of each month.
2. Tax Invoices: Foreigners must issue sales tax invoices for all taxable supplies, including their name, address, and tax number.
3. Record-Keeping: Accurate records of sales, purchases, and tax payments must be maintained.

Penalties and Fines

1. Late Payment: A penalty of 1.5% per month or part of a month is applicable on late payment of sales tax.
2. Non-Registration: A penalty of PKR 50,000 (approximately USD 300) is applicable for non-registration.
3. Incorrect Returns: A penalty of PKR 10,000 (approximately USD 60) is applicable for incorrect returns.

Additional Requirements

1. National Tax Number (NTN): Foreigners must obtain an NTN from the FBR.
2. Sales Tax Number: Foreigners must obtain a sales tax number from the FBR.
3. Tax Consultant: It is recommended that foreigners hire a tax consultant to ensure compliance with sales tax regulations.

Conclusion

Foreigners doing business in Pakistan must comply with sales tax regulations to avoid penalties and fines. It is essential to register for sales tax, file monthly returns, and maintain accurate records. Hiring a tax consultant can help ensure compliance with sales tax regulations.