ISLAMABAD: The Federal Board of Revenue (FBR) will roll out the Synchronized Withholding Administration and Payment System (SWAPS) to monitor large withholding tax agents’ practices of depositing withholding tax through a single payment receipt for a number of taxpayers, including banks, power distribution companies, telecom companies, and government institutions.
Withholding agents are presently obliged to collect and deduct tax at the time of making payment and deposit the same in the government treasury within the statutory time frame, under Income Tax Circular 15 of 2022 published by the FBR to clarify the Finance Act 2022.
Similar to this, withholding agents must also provide quarterly and yearly withholding statements, which takes up taxpayers’ time and resources and raises the cost of compliance.
Furthermore, certain significant withholding tax agents, such as banks, DISCOs, TELCOs, and government agencies, continue to deposit the tax for many taxpayers using a single payment receipt.
Synchronized Withholding Administration and Payment System (SWAPS), a completely automated system, has been developed under section 164A of the Ordinance in order to simplify the withholding tax collection and deduction method. A SWAPS agent is a withholding agent who has been alerted in accordance with section 164A.
FBR will impose severe sanctions on withholding agents who fail to operate in accordance with SWAPS.
When a third-party payment is handled via SWAPS by the SWAPS agent, the alerted SWAPS agent will be integrated with the Board, and withholding tax will be placed in the government treasury concurrently on a real-time basis. Additionally, the withholding statements will be automatically filled out, saving the firm time and money on compliance fees.
The SWAPS Payment Receipt (SPR), which shall be a legal document for the purpose of claiming credit against tax due under the terms of this Ordinance, will be created upon the deposit of tax in this way.
A SWAPS agent will not be eligible for credit under Part X of Chapter III of the Ordinance or exemption under any of its provisions if they fail to integrate with the Board in the manner specified after being advised to do so.