Issuance of Tax Deduction Certificate by Agents

[awaisaftab]

I am working with an advertising agency. In fact advertising agencies work as agent of both advertiser and electronic and print media. The share of advertising agencies is fixed @15%.

Suppose Pakistan Tobacco Company wants to publish its ad of specific size in tree newspapers namely

1.The News
2.Dawn
3.Jang

The rate of each newspaper is different assume the invoice amount becomes Rs.100,000/- the advertising agency submit the invoice alongwith the cuttings of newspapers .

Here the share of agency is Rs. 15,000/- and the remaining portion i.e. 85,000/.

The Pakistan Tobacco Company whose ad has been published through agency will devide the invoice amount in two portion and deduct withholding tax at the rates specified in ITO,2001. The calculation of WHT wiil be as follows

15,000 X 5% =750/- (U/S 233 of ITO 2001)
85,000 X 6% = <u>5,100/-</u> (U/S 153 of ITO 2001)
Withholding Tax<u>5,850/</u>

After deducting the tax of Rs. 5,850 the Pakistan Tobacco Company ( Advertiser) will make payment to the advertising agency . After receiving the payment the agency will pay the share of newspaper after adjusting 6% tax deducted by the Pakistan Tobacco Company (Advertiser)

Know the question arises here that who shall issue the Deduction and Collection Certificate to newspapers/TV Chaneels currently we are using our own format for issuing Deduction and Collection Certificate to newspaper . But these certificates are not accepted by some newspapers and TV Channel they demand from us issuance of Deduction and Collection Certificate on the prescribed format. We are unable to issue them such certificate because this certificate can only be issued by the person deducting the tax actually and being an agent we do not deduct tax rather we adjust the amount of tax deducted by the advertiser.

My question is that can we issue a certificate of Deduction and Collection Certificate on any other format (other than the format specified in tax law) on behalf of our principal (advertiser)?

Can we issue a certificate with the wording that " clients have deducted Rs. XXX while making payment to Daily Jang Rawalpindi"

If any one know about any circular/SRO of CBR/FBR or rule/section of IT Law , regarding the issuance of certificate by agent on behalf of Principal, then please inform me about the same with refereces.

If some one know about the practice of other type of commission agents, in this regard, such as travelling agents then please inform me.


Regards,

Awais

[m_zeeshanuddin_sa]

Advertising agency should not issue certificate of tax withheld, Client should be issuing such certificate who actually is withholding the tax

[awaisaftab]

On the above mentioned issue we have obtained a legal opinion on the tax deduction case from an international affiliated Chartered Accountant firm. Any one who wants to get information in this regard I can send this legal opinion to him.

Regards,

Awais

[Star]

Dear Awais,

You have not mentioned in your post which action is suggested in the legal opinion from CA.

You may collect the certificate from Pakistan Tobbaco and forward it to concerned newspaper organization.......

Is it not possible?

As for as issuance of certificate of deduction of tax is concerned i understand that this is responsibility of the person actually deducting income tax.

Rule 42 of Income Tax Rules, 2002 clearly states who shall issue the certificate of deduction of income tax.

Regards,

*

[awaisaftab]

Dear Star

Legal opinion of charted accountant is consisted of on several pages and two case law also included in it. It allow us issuance of tax collection and deduction certificate with the information about date of deposit,chalan no,branch and city, these information is obtained from clients but the certificate is issued with our company name by using prescribed format.

Regards,

Awais Aftab.

[m_zeeshanuddin_sa]

Well when u are not deduction & paying any tax why should you be doing all documentation work for that??? thats not clear to me, wud u please kindly explain it a little

[awaisaftab]

If you send me your email ID then I would able to send the soft copy of professional opinion of my charted accountant.

Regards,

Awais Aftab

[Shafiq]

I'm also working in a Media Buying House and facing the same problem. I will be thankful if you send the soft copy of opinion at my e-mail address [email protected]

[m_zeeshanuddin_sa]

awais Bhai,

I have sent you my email, did u receive it?

[awaisaftab]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by m_zeeshanuddin_sa</i>
<br />awais Bhai,

I have sent you my email, did u receive it?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Yes, I am getting scaned the copy of legal opinion I will deliver the same to you soon.


Regards,

Awais Aftab

[LapTop]

In view of your question, who will issue tax deduction certificate, you need to understand SPECIAL PROCEDURE FOR PERSONS PROVIDING OR RENDERING SERVICES SUBJECT TO SALES TAX UNDER THE PROVINCIAL LAWS, ADVERTISEMENTS ON TELEVISION AND RADIO, PART.- 1 CHAPTER VI, of The Sales Tax Special Procedures Rules 2007.

Because you are following wrong procedure, According to procedure.

<b>29. Application</b>.—The provisions of this Chapter shall apply for collection and payment of sales tax by the persons providing or rendering services chargeable to sales tax under the respective Provincial laws. ( This procedure will apply on who is providing Advertising Service, Other then advertising agencies)

<b>34. Invoicing.—(</b>1) A service provider, providing or rendering taxable services shall issue serially numbered sales tax invoices to its customers or clients or members, for the services provided or rendered, containing all the particulars as prescribed under section 23 of the Act
(According to Section 34 Service provider shell issue Invoice, all invoices issued by the service provider are in accordance with the specimen invoice set out at Annex-B. Advertising agent cannot issue invoice behalf of the service provider)

<b>36. Scope and value.— </b> (1) In relation to advertisements, the expression “taxable services” means the services in respect of advertisements—
(a) broadcast or telecast by TV or radio stations based in Pakistan;
(b) booked in Pakistan for broadcasting or telecasting on TV or radio stations based abroad, whether or not possessing landing rights in Pakistan; and
(c) transmitted on closed circuit T.V. or cable T.V. network.]
(2) “Value of taxable service” for the purposes of levy of sales tax shall be the total consideration in money received or the gross amount charged by a service provider from his clients for broadcasting or telecasting of any advertisement on radio or television, including all Federal and Provincial levies but excluding the amount of sales tax.

Now you can understand about procedure.

<b>First step</b>
Service provider will issue an invoice 100,000. Like this format,

<b><center>NAME OF THE COMPANY</center></b>
Address______________________________________________________
Phone No. ____________________ Fax No._______________________
Sales Tax Registration No.________________________________________
Invoice No._____________
Date of Issue___________
M/s.__________________________________________________________ ______________________________________________________________
(Name & address of client) Through
M/s.__________________________________________________________ _____________________________________________________________
(Name & address of advertising agency)
Agency Code___________ [TV Channel]

Advertiser
M/s._________________________________________________________
(Name of client)
Client’s Sales Tax Reg. No._______________________________________
Consumer Product ______________________________________________

GROSS AMOUNT Rs. 100,000/=
ADD 16% Sales Tax Rs.16,000/=
Total Rs. 116,000/=
LESS 15% Agency Commission (Rs.15,000)
Net Payable Rs.101,000/=
1. Kindly make payment of this invoice by crossed cheque [Payee’s Account only] in favour of M/s._______________________________


M/s ———————————————.
(Name of telecasting company)

<b>Second Step-</b>Advertising Agency collect invoice above mention from service provider and along with his own invoice for commission 15,000/=, will send to the client / customer.

<b>Third Step-</b>While Client / customer received 2 invoices 1 for Service, 2nd for Commission, He shell pay separate cheque for service amounting 94940/= namely Service provider & deduct 6% WHT 6060/=, and pay separate cheque for commission amounting 14250/= namely Advertising agent & deduct 5% WHT 750/=,

<b>Fourth step-</b>After deposit WHT deducted by Clint / customer to the FBR, Cline shell issue separate certificate for Service provider & Advertising Agency.
<b>
Note- </b> If service is exempt from sales tax then sales tax shell not apply

[awaisaftab]

Mr. Laptop I really appreciate your view and indepth understanding.
Dear our 90% clients are government and it will be amazing for you that FBR is also our client. In a circular CBR had mentioned that separate cheques should be made both for advertising agency and electronic and print media for their respective share and tax should also be deducted separately.According to this circular the advertisor will issue separate tax deduction certificate to agency and media. But unfortunately FBR itself don't follow this circular.


Regards,

Awais Aftab

[LapTop]

hahahahahah, Charagh taly Andhayra

[owais33]

Dear Awais Aftab you have mentioned That <b>"In a circular CBR had mentioned that separate cheques should be made both for advertising agency and electronic and print media"</b>

Could you kindly quote the circular number?

Regards,
Owais Sufi

[kinzamalik01]

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