Motor vehicle tax increased by 200% for non-ATL

August 02, 2023 (MLN): The Finance Act, 2023, has introduced significant changes to the advance tax collection on motor vehicles with engine capacities of 2001cc and above, replacing the previously fixed amount of withholding tax under section 231B of the Income Tax Ordinance.

As per the circular issued by the Revenue Division on July 26, the new tax rates are as follows:

• For motor vehicles with engine capacity ranging from 2001cc to 2500cc, the tax rate is 6% for ATL (Active Taxpayer List) persons and 18% for non-ATL persons.
• For motor vehicles with engine capacity ranging from 2501cc to 3000cc, the tax rate is 8% for ATL individuals and 24% for non-ATL individuals.
• For motor vehicles with engine capacity above 3000cc, the tax rate is 10% for ATL individuals and 30% for non-ATL individuals.

The rates mentioned above will apply only to persons on the Active Taxpayer List.

For non-ATL individuals, the rates are increased by two hundred percent (200%) as per the second proviso to rule 1 of the Tenth Schedule to the Ordinance.

This is to encourage individuals and entities to be part of the Active Taxpayer List and avail the reduced tax rates.

The value of the motor vehicle for the purpose of collecting withholding tax is determined as follows:

• For imported vehicles: The import value assessed by the Customs authorities, increased by customs duty, federal excise duty, and sales tax payable at the import stage.
• For vehicles manufactured or assembled locally in Pakistan: The invoice value, inclusive of all duties and taxes.
• For auctioned vehicles: The auction value, inclusive of all duties and taxes.

Furthermore, in cases where the engine capacity is not applicable, and the value of the vehicle is Rs5 million or more, the tax rate collectible will be 3% of the import value (increased by customs duty, sales tax, and federal excise duty in case of imported vehicles) or the invoice value (in case of locally manufactured or assembled vehicles).

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