KARACHI: The Federal Board of Revenue (FBR) has placed significant responsibility on both buyers and sellers in the supply chain for any instance where the payment of tax fails to be deposited into the national treasury.
(more…)Year: 2019
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FBR explains chargeability of tax on income from property
KARACHI: The rent received or receivable by a person during a tax year is chargeable to tax under head of income from property.
The FBR issued Income Tax Ordinance, 2001 updated June 30, 2019 and explained the taxability on income from property under Section 15.
Section 15: Income from property
Sub-Section (1): The rent received or receivable by a person for a tax year, other than rent exempt from tax under this Ordinance, shall be chargeable to tax in that year under the head “Income from Property”.
Sub-Section (2): Subject to sub-section (3), “rent” means any amount received or receivable by the owner of land or a building as consideration for the use or occupation of, or the right to use or occupy, the land or building, and includes any forfeited deposit paid under a contract for the sale of land or a building.
Sub-Section (3): This section shall not apply to any rent received or receivable by any person in respect of the lease of a building together with plant and machinery and such rent shall be chargeable to tax under the head “Income from Other Sources”.
Sub-Section (3A): Where any amount is included in rent received or receivable by any person for the provision of amenities, utilities or any other service connected with the renting of the building, such amount shall be chargeable to tax under the head “Income from Other Sources”.
Sub-Section (4): Subject to sub-section (5), where the rent received or receivable by a person is less than the fair market rent for the property, the person shall be treated as having derived the fair market rent for the period the property is let on rent in the tax year.
Sub-Section (5): Sub-section (4) shall not apply where the fair market rent is included in the income of the lessee chargeable to tax under the head “Salary”.
Sub-Section (6): Income under this section derived by an individual or an association of persons shall be liable to tax at the rate specified in Division VIA of Part I of the First Schedule.
Sub-Section (7): The provisions of sub-section (1), shall not apply in respect of an individual or association of persons who derive income chargeable to tax under this section not exceeding two hundred thousand rupees in a tax year and does not derive taxable income under any other head.
Section 15A: Deductions in computing income chargeable under the head “Income from Property”
Sub-Section (1): In computing the income of a company chargeable to tax under the head “Income from Property” for a tax year, a deduction shall be allowed for the following expenditures or allowances, namely:-
(a) In respect of repairs to a building, an allowance equal to one-fifth of the rent chargeable to tax in respect of the building for the year, computed before any deduction allowed under this section;
(b) any premium paid or payable by the company in the year to insure the building against the risk of damage or destruction;
(c) any local rate, tax, charge or cess in respect of the property or the rent from the property paid or payable by the company to any local authority or government in the year, not being any tax payable under this Ordinance;
(d) any ground rent paid or payable by the company in the year in respect of the property;
(e) any profit paid or payable by the company in the year on any money borrowed including by way of mortgage, to acquire, construct, renovate, extend or reconstruct the property;
(f) where the property has been acquired, constructed, renovated, extended, or reconstructed by the company with capital contributed by the House Building Finance Corporation or a scheduled bank under a scheme of investment in property on the basis of sharing the rent made by the Corporation or bank, the share in rent and share towards appreciation in the value of property (excluding the return of capital, if any) from the property paid or payable by the company to the said Corporation or the bank in the year under that scheme;
(g) where the property is subject to mortgage or other capital charge, the amount of profit or interest paid on such mortgage or charge;
(h) any expenditure, not exceeding six per cent of the rent chargeable to tax in respect of the property for the year computed before any deduction allowed under this section, paid or payable by the company in the year wholly and exclusively for the purpose of deriving rent chargeable to tax under the head, “Income from Property” including administration and collection charges;”
(i) any expenditure paid or payable by the company in the tax year for legal services acquired to defend the company’s title to the property or any suit connected with the property in a court; and
(j) where there are reasonable grounds for believing that any unpaid rent in respect of the property is irrecoverable, an allowance equal to the unpaid rent where—
(i) the tenancy was bona fide, the defaulting tenant has vacated the property or steps have been taken to compel the tenant to vacate the property and the defaulting tenant is not in occupation of any other property of the company;
(ii) the company has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or has reasonable grounds to believe that legal proceedings would be useless; and
(iii) the unpaid rent has been included in the income of the company chargeable to tax under the head “Income from Property” for the tax year in which the rent was due and tax has been duly paid on such income.
Sub-Section (2): Where any unpaid rent allowed as a deduction under clause (j) of sub-section (1) is wholly or partly recovered, the amount recovered shall be chargeable to tax in the tax year in which it is recovered.
Sub-Section (3): Where a person has been allowed a deduction for any expenditure incurred in deriving rent chargeable to tax under the head “Income from Property” and the person has not paid the liability or a part of the liability to which the deduction relates within three years of the end of the tax year in which the deduction was allowed, the unpaid amount of the liability shall be chargeable to tax under the head “Income from Property” in the first tax year following the end of the three years.
Sub-Section (4): Where an unpaid liability is chargeable to tax as a result of the application of sub-section (3) and the person subsequently pays the liability or a part of the liability, the person shall be allowed a deduction for the amount paid in the tax year in which the payment is made.
Sub-Section (5): Any expenditure allowed to a person under this section as a deduction shall not be allowed as a deduction in computing the income of the person chargeable to tax under any other head of income.
Sub-Section (6): The provisions of section 21 shall apply in determining the deductions allowed to a person under this section in the same manner as they apply in determining the deductions allowed in computing the income of a person chargeable to tax under the head “Income from Business”.
Sub-Section (7): Notwithstanding sub-section (6) of section 15, the provisions of this section shall apply to an individual or an association of persons deriving income exceeding Rs. 4 million under section 15, who opts to pay tax at the rate specified in Division I of Part I of the First Schedule.
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Customs empowered to stop vessel departure till payment of dues
KARACHI: Pakistan Customs has been empowered to refuse clearance of vessel until payment of dues including port dues and other charges and penalties.
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MoneyGram, BankAlfalah sign contract to send money to any bank account in Pakistan
ISLAMABAD: MoneyGram and BankAlfalah signed an agreement to create a new bank deposit, which will allow customers to send money to any bank account in Pakistan.
A statement on Saturday said that the contract was signed between the Alex Holmes Chairman & CEO of MoneyGram, and Bilal Asghar CEO of BankAlfalah in London to create a new bank deposit and this will allow customers to send money to any bank account in Pakistan.
The ceremony was presided over by Sahibzada Jahangir, Spokesperson of Prime Minister on Trade & Investment for UK & Europe.
While addressing the media, he said “Pakistan is a key market that is positioned for growth especially in terms of receiving remittances.”
He said in line with Prime Minister Imran Khan policies to eliminate money laundering and ease the facilitate the overseas Pakistanis in remitting their hard earned remittances back to Pakistan this new arrangement between MoneyGram & BankAlfalah will provide customised solutions that best serve their needs. The ceremony was attended by senior bankers.
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Weekly Review: FATF meeting outcome to drive market
KARACHI: The outcome of FATF meeting will move the direction of the stock market during next week, analysts said.
The analysts at Arif Habib Limited said that the market to remain positive on the back of improving external account position, country witnessing foreign net inflows in T-bills and lower inflationary reading expected in October 2019.
On the other hand, government is focusing to manage twin deficits and to meet IMF’s second quarterly revenue and tax collection targets.
However, FATF review is scheduled on 13-18th October to discuss Pakistan’s progress to control terror financing and corrective measures.
“Any favorable or unfavorable outcome could pose upside or downside risks to market performance.”
This week trading commenced on positive note attributable to Asia Pacific Group’s report on money laundering in which Pakistan was found partially compliant on majority of the issues which improved investors’ confidence.
On the other hand, Prime Minister Imran Khan’s successful visit to China in which they expressed satisfaction on CPEC progress further improved overall sentiment.
Moreover, news of increase in cement prices in the Northern Region as per PBS was the major driver for the Cement sector throughout the week.
Decline in money market yields and inversion of the yield curve continued to attract investors back to equities.
As a result, the benchmark KSE-100 index closed above the 34,000 mark at 34,476 points, increased by 1,442 points or 4.37 percent WoW.
Contribution to the upside was led by i) Commercial Banks (+492 points) amid expectation of healthier financial result, ii) Oil and Gas Exploration Companies (+270 points) due to attractive valuation, iii) Fertilizer (+146 points), iv) Pharmaceuticals (+90 points), and v) Cement (+87 points).Scrip wise major gainers were HBL (+153 points), MARI (+116 points), UBL (+104 points), POL (+83 points), and HUBC (+76 points). Whereas, scrip wise major losers were ISL (-11 points), PMPK (-11 points), and EFUG (-8 points).
Foreign offloaded stocks worth of USD 4.15 million compared to a net sell of USD 4.7 million last week. Major selling was witnessed in Commercial Banks (USD 4.56 million) and Exploration & Production (USD 1.73 million).
On the local front, buying was reported by Companies (USD 3.91 million) followed by other organizations (USD 3.59 million).
That said, average daily volumes for the outgoing week were massively up by 28 percent to 284 million shares likewise value traded increased by 42 percent to USD 56.9 million.
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FBR outlines revised regime of zero-rate sales tax
KARACHI: Federal Board of Revenue (FBR) has outlined the revised regime of zero rating of sales tax on supply of various goods.
The FBR issued Sales Tax Act, 1990 updated till June 30, 2019 amended through Finance Act, 2019.
Section 4 of the Act explained the zero-rating of sales tax on supply of various goods.
Section 4: Zero rating:
Notwithstanding the provisions of section 3 except those of sub-section (1A), the following goods shall be charged to tax at the rate of zero per cent:–
(a) goods exported, or the goods specified in the *Fifth Schedule;
(b) supply of stores and provisions for consumption aboard a conveyance proceeding to a destination outside Pakistan as specified in section 24 of the Customs Act, 1969 (IV of 1969);
(c) such other goods, as the Federal Government may specify by notification in the official Gazette, whenever circumstances exist to take immediate action for the purposes of national security, natural disaster, national food security in emergency situations and implementation of bilateral and multilateral agreements:”
*FIFTH SCHEDULE
01. (i) Supply, repair or maintenance of any ship which is neither;
(a) a ship of gross tonnage of less than 15 LDT; nor (b) a ship designed or adapted for use for recreation or pleasure.
(ii) Supply, repair or maintenance of any aircraft which is neither;
(a) an aircraft of weight-less than 8000 kilograms; nor
(b) an aircraft designed or adapted for use for recreation or pleasure.
(iii) Supply of spare parts and equipment for ships and aircraft falling under (i) and (ii) above.
(iv) Supply of equipment and machinery for pilot age, salvage or towage services.
(v) Supply of equipment and machinery for air navigation services.
(vi) Supply of equipment and machinery for other services provided for the handling of ships or aircraft in a port or Customs Airport.
02. Supply to diplomats, diplomatic missions, privileged persons and privileged organizations which are covered under various Acts, Orders, Rules, Regulations and Agreements passed by the Parliament or issued or agreed by the Government of Pakistan.
3. Supplies to duty free shops, provided that in case of clearance from duty free shops against various baggage rules issued under the Customs Act, 1969, (IV of 1969), the supplies from duty free shops shall be treated as import for the purpose of levy of sales tax.
5. Supplies of raw materials 3[, components and goods for further] manufacture of goods in the Export Processing Zones.
6. Supplies of such locally manufactured plant and machinery to petroleum and gas sector Exploration and Production companies, their contractors and sub-contractors as may be specified by the Federal Government, by notification in the official Gazette, subject to such conditions and restrictions as may be specified in such notification.
6A. Supplies of locally manufactured plant and machinery of the following specifications, to manufacturers in the Export Processing Zone, subject to the conditions, restrictions and procedure given below, namely:-
(i) Plant and machinery, operated by power of any description, as is used for the manufacture or production of goods by that manufacturer;
(ii) Apparatus, appliances and equipments specifically meant or adapted for use in conjunction with the machinery specified in clause (i);
(iii) Mechanical and electrical control and transmission gear, meant or adapted for use in conjunction with machinery specified in clause (i); and
(iv) Parts of machinery as specified in clauses (i), (ii) and (iii), identifiable for use in or with such machinery.
Conditions, restrictions and procedures:-
(a) the supplier of the machinery is registered under the Act;
(b) proper bill of export is filed showing registration number;
(c) the purchaser of the machinery is an established manufacturer located in the Export Processing Zone and holds a certificate from the Export Processing Zone Authority to that effect;
(d) the purchaser submits an indemnity bond in proper form to the satisfaction of the concerned Commissioner Inland Revenue that the machinery shall, without prior permission from the said Commissioner, not be sold, transferred or otherwise moved out of the Export Processing Zone before a period of five years from the date of entry into the Zone;
(e) if the machinery is brought to tariff area of Pakistan, sales tax shall be charged on the value assessed on the bill of entry; and
(f) breach of any of the conditions specified herein shall attract legal action under the relevant provisions of the Act, besides recovery of the amount of sales tax along with default surcharge and penalties involved.
7. Supplies made to exporters under the Duty and Tax Remission Rules, 2001 subject to the observance of procedures, restrictions and conditions prescribed therein.
8. Imports or supplies made to Gawadar Special Economic Zone, excluding vehicles falling under heading 87.02 of the Pakistan Customs Tariff, subject to such conditions, limitations and restrictions as the 2[Board] may impose.
9. Goods exempted under section 13, if exported by a manufacturer.
10. Petroleum Crude Oil (PCT heading 2709.0000).
11. Raw materials, components, sub-components and parts, if imported or purchased locally for use in the manufacturing of such plants and machinery as is chargeable to sales tax at the rate of zero percent, subject to the condition that the importer or purchaser of such goods holds a valid sales tax registration showing his registration category as “manufacturer”; and in case of import, all the conditions, restrictions, limitations and procedures as are imposed by notification under section 19 of the Customs Act,1969(IV of 1969), shall apply.
12. The following goods and the raw materials, packing materials, sub-components, components, sub-assemblies and assemblies imported or purchased locally for the manufacture of the said goods, subject to the conditions, limitations and restrictions as prescribed by the Board:–
(xvii) Preparations suitable for infants, put up for retail sale] (PCT Heading 1901.1000)
(xix) Bicycles (PCT heading 87.12).
(xx) Colors in sets (PCT heading 3213.1000).
(xxi) Writing, drawing and marking inks (PCT heading. 3215.9010 and 3215.9090)
(xxii) Erasers (PCT heading 4016.9210 and 4016.9290)
(xxiii) Exercise books (PCT heading 4820.2000)
(xxiv) Pencil sharpeners (PCT heading 8214.1000)
(xxv) Geometry boxes (PCT heading 9017.2000)
(xxvi) Pens, ball pens, markers and porous tipped pens (PCT heading 96.08)
(xxvii) Pencils including color pencils (PCT heading 96.09)”.
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FBR sacks senior auditor for availing plea bargain benefit
ISLAMABAD: The Federal Board of Revenue (FBR) has imposed major penalty of ‘dismissal from service’ upon a senior auditor for availing plea bargain benefit in corruption case.
The FBR on Friday said that Kashif Naseer, Senior Auditor, BS-16 posted at Corporate Regional Tax Office, Lahore had availed the benefits of plea bargain in terms of section 25(b) of National Accountability Ordinance, 1999 as per Accountability Court-III, Sindh, Karachi judgment dated May 23, 2019.
Member (Admn), FBR after examining the case in light of provisions of the Government Servants (Efficiency & Discipline) Rules 1973 imposed the major penalty of “Dismissal from Service” upon Kashif Naseer, Senior Auditor with effect from the date of conviction May 23, 2019.
The FBR said that Kashif Naseer, Senior Auditor had a right to file an appeal to Appellate Authority under Civil Servants (Appeal) Rules, 1977 within a period of 30 days from the date of communication.
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SECP registration reaches to 105,407 companies
ISLAMABAD: The total number of registered companies with Securities and Exchange Commission of Pakistan (SECP) has topped at 105,407 with addition of 1,392 new companies in September 2019, according to a statement issued on Friday.
The SECP registered a total 1,392 new companies in September 2019, raising the total number of incorporated companies to 105,407.
The incorporation in September 2019 comprises 69 percent private limited, 27 percent single member companies.
The remaining 4 percent companies include public unlisted companies, trade organizations, foreign companies, Limited Liability Partnership (LLP) and not for profit associations.
During the month, 51 new companies have been incorporated with foreign shareholders mainly from China, Denmark, Germany, Hong Kong, Japan, Korea South, Malaysia, the Netherlands, Nigeria, Poland Singapore, South Africa, Switzerland, Turkey, the UAE, UK the US and Yemen.
Digital solutions deployed by the regulator made companies registration and post incorporation compliance simple, faster and cost effective.
In September 2019, 96 percent of companies registered online through SECP’s eService and 50 percent of companies incorporated the same day.
Most importantly, 85 foreign applicants completed registration of companies from overseas using eService.
In new registrations, trading sector took lead with 239 companies, construction and services with 173 each, information technology with 148, tourism with 79 and real estate development with 54 companies.
Similarly, 52 companies were registered in food and beverages, 48 in education 38 each in engineering and textile, 37 in corporate agricultural farming, 32 in marketing, 24 in transport, 21 in healthcare, and pharmaceutical each, 20 in communication, 17 companies registered in logging.
Moreover, 16 companies were each from chemical, auto and allied, cosmetics and toiletries, and steel and allied sector and 15 each, power generation with 13, broadcasting and telecasting with 12 and 92 companies were registered in other sectors.
During the month, the highest numbers of companies i.e. 503 were registered in CRO Islamabad.
The CROs in Lahore, Karachi, Peshawar, Multan, Faisalabad, Gilgit-Baltistan, Quetta, and Sukkur registered, 413, 247, 78, 69, 40, 28, 12 and 2 companies respectively.
The increasing trend in online registration of companies demonstrates success of reforms and digitalization recently undertaken by SECP. It is to emphasize that through SECP’s eService, registration of a company is now a simple one-step procedure that can be completed within four working hours.
The steps of company name reservation, incorporation application, appointment of Chief Executive Officer are now merged. By providing additional information in online company incorporation form, a company can also get registration with FBR, EOBI and provincial social security, labor department and excise & taxations departments of Punjab and Sindh.
Moreover, the browser compatibility of SECP’s eServcies portal has also been improved to match with all commonly used browsers.
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Stock market gains 448 points on positive expectations of FATF meeting
KARACHI: The stock market gained 448 points on Friday on expectations of positive outcome of FATF meeting.
The benchmark KSE-100 of Pakistan Stock Exchange (PSX) closed at 34,476 points as against 34,028 points showing an increase of 448 points.
Analysts at Arif Habib Limited said that the market continued the uptrend today, expecting positive outcome of the FATF meeting in the coming week.
They said that mid of the month is also going to see several corporate announcing financial results, which also had the market trade, largely in positive direction.
Cement and Steel sector braced decline following the trend in the past couple of sessions.
During the session, the news of Iranian oil tanker explosion had international crude oil prices spike resulting positively on the E&P sector.
Refinery sector lagged behind due to concerns on upcoming quarterly results. Traded value hit the highest level in rupee terms during 2019.
Besides, Technology sector led the volumes table with 56.4 million shares, followed by Cement (35 million) and Chemical (31.9 million).
Among scrips, WTL ranked top with 30.8 million shares, followed by LOTCHEM (19.1 million) and TRG (18.8 million).
Sectors contributing to the performance include Banks (+170 points), E&P (+89 points), Fertilizer (+39 points), Cement (+38 points) and Power (+31 points).
Volumes increased again from 261.6 million shares to 287 million shares (+10 percent DoD). Average traded value also increase by 25 percent to reach US$ 677 million as against US$ 54.2 million.
Stocks that contributed significantly to the volumes include WTL, LOTCHEM, TRG, UNITY and BOP, which formed 33 percent of total volumes.
Stocks that contributed positively include HBL (+75 points), OGDC (+36 points), HUBC (+33 points), UBL (+30 points) and LUCK (+29 points). Stocks that contributed negatively include FFC (-8 points), NESTLE (-8 points), AGP (-6 points), KEL (-4 points), and PIBTL (-4 points).
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Significant decline in import bill sharply narrows trade deficit by 35 percent in first quarter
ISLAMABAD: Significant decline in import bill helped to sharply narrow the trade deficit by 35 percent during first quarter of current fiscal year, according to data released Pakistan Bureau of Statistics (PBS) on Friday.
The trade deficit narrowed by 35 percent to $5.72 billion during July – September 2019 of current fiscal year as compared with deficit of $8.79 billion in the corresponding period of the last fiscal year.
The total import bill of the country fell by 21 percent to $11.25 billion during first quarter of the current fiscal year as compared with $14.16 billion in the same period of the last fiscal year.
Meanwhile, the exports have posted 3 percent growth to $5.52 billion during July – September 2019 as compared with $5.37 billion in the same period of the last fiscal year.