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Streamlined Taxation
for Retailers:
Updated Definition of Tier-1 Retailers in Pakistan for Tax Year
2023-24
The tax authorities (FBR) in Pakistan have recently released a new and updated definition of Tier-1 retailers
for the Tax Year 2023-24. These changes, which took effect on July 1, 2023, are
part of the Federal Board of Revenue's (FBR) efforts to create a fair and
effective taxation system for retailers operating in the country.
The updated definition of Tier-1 retailers includes the following categories:
1. Retailer Operating
as a Unit of a National or International Chain of Stores: This category
comprises retailers that are part of larger retail conglomerates operating
nationally or internationally.
2. Retailer Operating
in an Air-Conditioned Shopping Mall, Plaza, or Center (Excluding Kiosks):
Tier-1 retailers include those operating within air-conditioned shopping malls,
plazas, or centers, except for kiosks.
3. Retailer Whose
Cumulative Electricity Bill Exceeds Rupees Twelve Hundred Thousand in the
Preceding Twelve Consecutive Months: This criterion applies to retailers whose
cumulative electricity bill for the past twelve months surpasses Rupees twelve
hundred thousand, aiming to include larger retailers with significant energy
consumption.
4.
Wholesaler-cum-Retailer Engaged in Bulk Import and Supply of Consumer Goods:
Tier-1 retailers also encompass wholesalers actively involved in bulk import
and supply of consumer goods on a wholesale basis to other retailers and on a
retail basis to the general public.
5. Retailer Accepting
Payment Through Debit/Credit Cards or Digital Payment Services: Any retailer
equipped with a point of sale system for accepting payment through debit/credit
cards or digital payment services authorized by the State Bank of Pakistan is
considered a Tier-1 retailer.
6. Retailer Meeting
Specified Deductible Withholding Tax Threshold: Retailers classified as Tier-1
must have exceeded the specified threshold for deductible withholding tax under
sections 236G or 236H of the Income Tax Ordinance, 2001, during the preceding
twelve consecutive months.
7. Any Other Person
or Class of Persons as Prescribed by the FBR: The FBR has the discretion to
classify any other person or class of persons as Tier-1 retailers as needed.
The FBR's aim with
these updates is to simplify the taxation process for retailers in Pakistan and
ensure that larger retailers and those with significant financial transactions
are appropriately identified and taxed according to their business operations.
By promoting transparency and compliance within the retail sector, these
efforts will contribute to a more equitable tax system, generating revenue for
the country's economic growth and development. Retailers falling under the
Tier-1 category must now comply with the relevant tax regulations to avoid
penalties or legal consequences.
