*SWAPS in the Income Tax Ordinance 2001*

Section [(62B) *” Synchronized Withholding Administration and Payment System agent”* or “SWAPS
agent” means any person or class of persons notified by the Board to collect or deduct withholding taxes
through Synchronized Withholding Administration and Payment System;]

The Synchronized Withholding Administration and Payment System (SWAPS) pertains to the income tax
framework outlined in the Income Tax Ordinance, 2001. This system has been introduced by the Federal
Board of Revenue (FBR) to modernize tax administration and enhance transparency in tax collection in
Pakistan. SWAPS focuses on income tax, sales tax, federal excise, and customs. The system is designed to
streamline the withholding tax administration and payment process, primarily by integrating real-time
data exchange and digital invoicing. Businesses are required to comply with regulations related to
SWAPS, including installation and utilization of FBR-approved fiscal devices and software, processing
transactions with digital invoices, and thorough data verification.

*SWAPS Agents' Obligations*

Notified SWAPS Agents, defined in section 2 of the Income Tax Ordinance, 2001, carry significant
obligations as per the notification by the FBR. These obligations include registration and integration with
the FBR's SWAPS platform, using approved fiscal electronic devices and software, processing transactions
only with digital invoices, and verifying key information of withholdees for precise tax deductions.

*Potential Benefits and Considerations*

The introduction of SWAPS is expected to offer several advantages, including enhanced transparency in
business transactions, improved tax collection efficiency, reduced compliance burden, and standardized
SWAPS Payment Receipts (SPR) serving as proof of tax payment. However, businesses need to stay
updated on the implementation timeline, as non-compliance might lead to penalties under the Income
Tax Ordinance, 2001. This shift towards modernizing the tax administration seeks to strengthen oversight
and prevent tax evasion, offering long-term benefits for both the government and businesses.

*Declaration of SWAPS Agents and Monitoring* The FBR has declared multiple banks as SWAPS agents
for the deduction and monitoring of withholding taxes under various provisions of the Income Tax
Ordinance, 2001. The system's enforcement and digital invoicing requirements are documented in *SRO
419(I)/2024* emphasizing strict measures to enhance tax transparency and combat evasion. Future
Actions and Implementation It's paramount for businesses to anticipate the implementation timeline
and any issuance of additional directives by the FBR for necessary adaptations. As SWAPS builds a
turning point for Pakistan's tax ecosystem, stakeholders are encouraged to familiarize themselves with
the framework and prepare for a future where tax transactions are more transparent, efficient, and
digital.