KARACHI: The tax authorities have imposed five percent advance tax on remittances sent by Pakistanis abroad to meet education expenditures, an official document revealed on Thursday.

The government introduced the tax in the Finance Bill, 2015 approved by the National Assembly.

According to the new legislation, banks, financial institutions, foreign exchange companies or any other person responsible for remitting foreign currency abroad are required to collect advance tax from remitters.

It said the advance tax will be adjustable against the income of the person remitting the amount for education-related expenses.

The education-related expenses include tuition fee, boarding and lodging expenses, any payment for distant learning to any institution or university in a foreign country and any other expense attributable to foreign education.

Tax experts said the measures will help the authorities to increase tax collection.

Considering the proper check on the outward remittances, the State Bank of Pakistan (SBP) issued a notification to simplify the procedure for sending remittances abroad for education and health purposes.

Under the revised instruction of the central bank, banks have been allowed to remit foreign exchange to foreign educational institutions on behalf of students desirous of studying in foreign institutions up to $70,000, or equivalent per student per calendar year as per the criteria. Banks have further been allowed to release foreign exchange in cash equivalent to $5,000 to the students for meeting their initial living expenses.

The banks have been allowed to remit foreign exchange up to $50,000 or equivalent in other foreign currencies to foreign hospitals on account of medical treatment of resident Pakistanis on the recommendation of concerned medical specialist/hospital in Pakistan.

Tax experts said that the government should consider amending the Section 111(4) of Income Tax Ordinance for identifying the

person sending remittances in Pakistan.

They said the relaxation given by the SBP may be misused as black money generated in the system may be whitened at five percent advance tax.

