Q. 04. What is the definition of a contract?

No definition of “contract” has been provided in the Income Tax Law 2009. The following definition given in The Contract Law is, therefore, the accepted basis for withholding income tax:

“A contract is an agreement between two or more parties, which is enforceable by the law. A business transaction to buy and sell goods or services is a contract between the buyer and the seller.”

An offer and acceptance of business transactions or sale and supply of goods and services constitute a contractual arrangement. Such arrangement may be in writing or verbal and the method of payment may be in cash or on credit. The transaction is a contract and withholding provisions under Article 72 of the Income Tax Law 2009 apply.