FBR sets deadline for nationwide tax integration of professional services

The Federal Board of Revenue (FBR) has announced a July 1 deadline to activate a long-pending plan linking professional services across Pakistan with its tax net.

Initiated four years ago, the implementation of this strategy gained momentum following the publication of initial draft rules on December 22, 2023.

Subsequent amendments were outlined in Notification SRO428 of 2024, setting a clear schedule for the enforcement starting July 1.

Sources revealed that the Special Investment Facilitation Council (SIFC), under the interim government, expressed concerns over the delayed execution of this initiative, particularly in metropolitan areas.

The aim is to enhance income tax collection from service providers who predominantly operate with cash transactions and evade taxation.

Originally, in August 2020, tax authorities identified 12 categories of sales and service providers for integration with the FBR system through SRO779, with plans to track their transactions using electronic devices and software.

This list later expanded to include foreign exchange businesses and private educational entities, with taxation thresholds set for educational institutions charging more than Rs1,000 per student monthly.

The latest directive from the FBR, issued on March 22, revised the criteria for service providers’ eligibility for this integration, thereby broadening the tax base.

Exemptions have been tightened; for instance, only air-conditioned establishments like restaurants and clubs remain outside the tax scope.

Additionally, road travel services with a fleet of fewer than five vehicles, reduced from the previous ten, will now fall under the tax regime.

Healthcare professionals, including dentists and surgeons, must align with the FBR, eliminating the previous consultation fee threshold of Rs1,500, now lowered to Rs500.

The updated policy mandates all medical and diagnostic labs, private hospitals, and medical centers to register with the FBR, regardless of their location or branch number.

The tax net also extends to fitness and leisure clubs, and even event-related services like photography and event management, now taxable for charges exceeding Rs50,000 per event, a significant reduction from the earlier Rs100,000 limit.