Federal Board of Revenue tells PTCL – International call traffic revenue sharing under ICH pact

Federal Board of Revenue tells PTCL –  International call traffic revenue sharing under ICH pact
ISLAMABAD (November 23, 2011) : Federal Board of Revenue has informed Pakistan Telecommunication Company Limited (PTCL) that the revenue receipts of the telecom companies from the international call traffic will be shared according to the ratio as decided under the International Clearing House (ICH) Agreement.
The FBR has issued an income tax clarification on the subject of “International Clearing House” to PTCL here on Wednesday.
A tax expert told Business Recorder here on Wednesday that at the moment all revenues on behalf of all telecom operators in Pakistan from the international call traffic is being received by PTCL and subsequently is being distributed between the telecom operators according to their pre-agreed share. The PTCL was facing difficulty as the entire revenue was being treated as their receipt. Moreover, on transfer of revenue to other LDI, the department would ask to withhold tax u/s153 of the Income Tax Ordinance 2001 on the assumption that this was being paid for services rendered by PTCL to other companies.
The FBR has now clarified that the revenue distributed on account of International call traffic by PTCL may be distributed as per the ICH agreement amongst the different telecom companies without being subjected to withholding of tax u/s 153 of the Income Tax Ordinance 2001 and also the gross amount received will not be considered as revenue in the hands of PTCL but only the net amount that would relate to PTCL, tax expert added.
According to the FBR clarification issued to the PTCL dated November 23, 2011, the FBR has provided the following clarifications regarding proceeds received by PTCL under ICH agreement arrangements:
(i) Only, the share retained by PTCL out of LDI Revenue will constitute the revenue receipt for PTCL and will fall under the definition of income as contained in Section 2(20) of the Income Tax Ordinance 2001. The LDIs share collected by the PTCL and distributed to other LDIs by PTCL as per the sharing ratios given in Annexure “A” of ICH Agreement shall constitute the revenue receipts of such other LDIs.
(ii) The payments made to other “LDIs” under (i) above shall not attract the provisions of section 153 of the Income Tax Ordinance, 2001.
In case any further explanation or clarification is needed the PTCL can contact the FBR Income Tax Policy Wing, the FBR added.

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