FBR unveils fixed tax scheme for small traders, invites feedback on draft rules

The Federal Board of Revenue (FBR) has introduced a proposed fixed tax scheme aimed at bringing small traders into the tax net through a simplified and voluntary taxation system.

ISLAMABAD: The Federal Board of Revenue (FBR) has introduced a proposed fixed tax scheme aimed at bringing small traders into the tax net through a simplified and voluntary taxation system. Under the proposed framework, shopkeepers with an annual turnover of up to Rs200 million will be eligible to opt for the scheme, which is designed to reduce compliance burdens while encouraging tax registration.

According to the draft notification issued by the FBR, eligible traders will be required to pay a fixed tax equal to one percent of their total annual turnover. The government expects that successful implementation of the scheme could generate more than Rs50 billion in annual tax revenue while expanding the country’s documented economy.

The FBR clarified that participation in the scheme will remain voluntary, allowing traders to continue filing regular income tax returns if they prefer the existing tax regime. However, traders choosing the new scheme will be required to pay a minimum cash tax of Rs25,000 annually.

The proposed scheme is intended for small, single-shop businesses. Owners of multiple shops will not qualify for the facility. In addition, Tier-1 retailers, jewellers, and professional service providers have been excluded from the scheme due to the nature and scale of their businesses.

The tax authority has invited objections and suggestions within seven days of issuing the draft notification before finalising the rules. Traders will be able to register through the IRIS online portal, the official mobile application, or by visiting their nearest tax office.

To distinguish registered businesses, the FBR plans to issue a “Green Plate” to eligible shopkeepers. Businesses displaying the Green Plate will receive several incentives under the proposed system.

One of the key features of the scheme is that FBR officials will not be allowed to conduct routine tax visits to Green Plate shops regarding tax matters. Furthermore, participating traders will not be required to install Point-of-Sale (POS) machines, and they will generally remain exempt from routine tax audits, reducing administrative and compliance costs.

Despite the simplified structure, traders will still be required to provide essential financial information. The return form will include details of net profit, income from other sources, total tax paid, bank balances, available cash, immovable property, and other assets owned by the taxpayer. The FBR says this information will help maintain transparency while keeping the filing process straightforward.

To further facilitate compliance, the tax authority has also introduced a simple one-page tax return form specifically for small traders. The form requires basic information such as the taxpayer’s name, address, CNIC number, nature of business, annual sales, purchases, and business expenses, making the registration process easier for small business owners.

However, the FBR has made it clear that the scheme will not provide immunity in cases of suspected tax evasion. Businesses showing unusual financial activity, unexplained growth, or large asset purchases may still be selected for audit. The authority warned that strict action will be taken against traders found misusing the scheme or concealing information to avoid paying taxes.

According to the notification, the FBR will also be empowered to verify taxpayers’ declarations using third-party information, enabling it to investigate cases where discrepancies or signs of tax avoidance are identified.

The proposed fixed tax scheme forms part of the government’s broader efforts to increase tax compliance, simplify procedures for small businesses, and expand Pakistan’s tax base while reducing unnecessary interaction between taxpayers and tax officials.