Fabrication services withholding tax rate in Pakistan

Question

Registered as Travel and Tour Services / Event Management

Providing all corporate Services

Stall Fabrications

Excursions

Hotel Booking

Airline Tickets

Making payment on behalf of Company and charging our Services charges, what will be with holding tax 6% or 15% also on total amount of invoice or only on Services Charges.

Answer 1

Since you are registered as a Travel & Tour Services / Event Management company and provide services like stall fabrication, excursions, hotel booking, airline tickets, and making payments on behalf of clients, the withholding tax treatment will be as follows under the Income Tax Ordinance, 2001 (Pakistan):

1. Nature of Income:

   • If you are making payments (hotel, airline, vendors, etc.) on behalf of the client and then charging only a service fee/commission, then withholding tax should apply only on your service charges/commission, not on the total reimbursed amount.

   • If your invoice is a composite one (lump sum) without separating reimbursement and service charges, then withholding tax may be applied on the gross amount.

2. Applicable Rate of Withholding Tax:

   • Event Management / Other Services: 15% (for filers) under Section 153(1)(b) (services).

   • Travel Agents / Tour Operators: In practice, when travel agents/tour operators issue invoices with proper bifurcation (air tickets, hotel bookings, etc.), WHT is generally deducted only on the service/commission portion at 8% or 15% depending on classification, not on the full invoice.

   • If you are classified as a service provider (other than specified reduced rates) → 15% on services charges (for filers).

   • If you fall under Travel & Tour Operator special provisions (Circulars/clarifications issued earlier), WHT is usually 8% on commission/service charges only