How much advance tax is charged on international debit and credit card transactions?

What does the law say?

Section 236Y of the Income Tax Ordinance, 2001 requires every banking company to collect advance tax “at the time of transfer of any sum remitted outside Pakistan” on behalf of any person who has completed a credit card, debit card or prepaid card transaction with a person outside Pakistan. The rate is the one in Division XXVII of Part IV of the First Schedule. Section 236Y(2) adds that the advance tax collected “shall be adjustable”.

Division XXVII, headed “Advance tax on amount remitted abroad through credit, debit or prepaid cards”, sets the rate at 0.5% of the gross amount remitted abroad. The Ordinance used here is amended to 30 June 2026, so 0.5% is the rate for tax year 2027 (1 July 2026 to 30 June 2027).

How has the rate changed?

The footnotes to Division XXVII and the Finance Acts in this corpus show the history:

Change	Rate
Section 236Y and Division XXVII inserted by the Finance Act, 2022	1%
Finance Act, 2023 substituted “5%” for “1%”	5%
Finance Act, 2026, section 5, clause (44)(c)(iii) substituted “0.5%” for “5%”	0.5%

Anyone comparing a card statement from tax year 2026 with one from tax year 2027 will see the drop from 5% to 0.5%.

What if I am not on the Active Taxpayers List?

Section 100BA says the collection of advance tax from a person not appearing in the Active Taxpayers List is determined under the Tenth Schedule. Rule 1 of that Schedule says the rate of tax required to be collected from such a person “shall be increased by hundred percent of the rate specified in” the Ordinance.

Rule 10 of the Tenth Schedule lists the collections and deductions to which the Schedule does not apply. Section 236Y is not in that list. On the text of rule 1, the 0.5% rate therefore becomes 1% for a cardholder whose name is not on the Active Taxpayers List.

How does it work in practice?

The tax is collected by the bank that issued the card, at the time it transfers the money abroad for the transaction. The base is “the gross amount remitted abroad”. The cardholder does not pay it separately to the Federal Board of Revenue.

Because section 236Y(2) makes the tax adjustable, section 168 applies. Section 168(1)(b) treats tax collected under Chapter XII, where section 236Y sits, as tax paid by the person from whom it was collected. Section 168(2) gives a credit for it against the tax due on taxable income for the tax year in which it was collected. A credit that cannot be used in that year is refunded under section 170, as section 168(5) states.

Worked example (illustrative figures)

Ayesha is a graphic designer in Karachi. In tax year 2027 she pays foreign merchants with her debit card for design software subscriptions totalling Rs. 40,000 and an online course of Rs. 160,000. The amounts are invented; the rates are from Division XXVII and rule 1 of the Tenth Schedule.

If her name is on the Active Taxpayers List:

1. Gross amount remitted abroad: Rs. 40,000 + Rs. 160,000 = Rs. 200,000.
2. Tax: 0.5% x Rs. 200,000 = Rs. 1,000.

If her name is not on the Active Taxpayers List:

1. Rate: 0.5% increased by one hundred percent = 1%.
2. Tax: 1% x Rs. 200,000 = Rs. 2,000.

In either case, when she files her return for tax year 2027, section 168 lets her claim the amount collected as a credit against the tax due on her taxable income for that year.

What if the payment is in rupees to a foreign website, or a refund comes back?

Section 236Y is framed around a card transaction “with a person outside Pakistan” and a “sum remitted outside Pakistan”. It does not define when a payment counts as remitted abroad, and it does not deal with refunds or reversals of card transactions. The corpus does not answer these cases, and this page does not guess at how banks handle them. State Bank of Pakistan rules on card transactions are outside this corpus.

Common mistakes

• Using the old 5% rate. The Finance Act, 2026 cut it to 0.5% for tax year 2027.
• Assuming only credit cards are covered. Section 236Y names credit, debit and prepaid cards.
• Forgetting the non-ATL increase. Rule 1 of the Tenth Schedule doubles the rate, and section 236Y is not excluded by rule 10.
• Treating the tax as a charge that cannot be recovered. It is adjustable, and section 168 credits it in the return.

What to check in the official text

Read section 236Y, Division XXVII of Part IV of the First Schedule and rules 1 and 10 of the Tenth Schedule in the source PDF, since our site copy does not reproduce the schedules as tables. Section 5 of the Finance Act, 2026 contains the change to 0.5%. The card issuer’s statement is the record of how much was collected; the bank’s certificate format is outside this corpus.