Punjab brings Forex Transactions into Tax Net with 3percent Levy

LAHORE (Web Desk) – Punjab Revenue Authority (PRA) decided to bring foreign exchange services into the provincial sales tax net for the first time to expand the documented economy and tightening oversight of financial transactions.

Under proposed framework, foreign exchange services will be subject to sales tax equivalent to 3 percent of spread charges, while all exchange companies and related service providers will be required to register with the tax authorities. Officials have recommended making registration mandatory by July 1, signaling an accelerated implementation timeline.

The move is to formalize Pakistan’s foreign exchange market at the provincial level. Authorities believe the new tax regime will strengthen monitoring mechanisms, ensure comprehensive recording of transactions, and improve transparency across the sector.

The proposed measures go beyond taxation. The framework will require supplier verification, detailed documentation of business transactions, enhanced record-keeping practices, and the adoption of tax compliance systems. Exchange companies have been directed to immediately assess and upgrade their tax reporting and record management processes to meet the new requirements.

Revenue authorities argue that the initiative will help curb tax evasion, reduce undocumented financial activity, and broaden the provincial tax base. The government also expects the reforms to generate additional revenue while improving regulatory oversight of a sector that plays a critical role in the movement of foreign currency.

The proposed changes are likely to have far-reaching implications for exchange companies and service providers, who will now face stricter compliance obligations as Punjab pushes to bring more segments of the economy into the formal tax framework.