Day: January 4, 2020

PTBA demands probe into fake FBR’s date extension letters

LAHORE: Pakistan Tax Bar Association (PTBA) has approached law enforcement agencies to probe circulation of fake/forged circulars related to date extension in income tax return filing.

The PTBA – the apex trade body of the country – in an application for lodging FIR against culprits on Saturday informed Federal Investigation Agency (FIA) about the circulation of forged/fake circulars through WhatsApp groups and on Facebook (FB) regarding extension of date for filing of income tax return for tax year 2019.

The said that the last date for filing of income tax returns for tax year 2019 was extended till December 16, 2019 through Circular No. 16/2019 dated November 29, 2019. The date was further extended till December 31, 2019 through circular No. 17/2019 dated December 16, 2019 but a forged /fake circular with similar signature of a government official was circulated in different WhatsApp groups on December 16, 2019 around 2:15pm and TV channels have also broadcasted the same news without verification, whereas the original circular No. 17/2019 dated December 16, 2019 was uploaded on FBR’s official portal around at 5:15pm.

The tax consultants/taxpayers were busy in filing for returns 2019 on December 12, 2019 because of last date for filing returns but suddenly at 3:45pm another forged / fake circular 18/2019 dated December 12, 2019 showing extension till January 31, 2020 was again circulated approx at 8:55 pm in WhatsApp groups, whereas the original circular No. 18/2019 dated December 12, 2019 was uploaded on FBR portal at around 10:55pm.

The PTBA provided fake letters and screenshots of TV channels to the FIA authorities.

“The fake circulars created miserable situation for tax consultants, FBR and taxpayers,” the PTBA said and also suggested media should on air such new after confirmation with relevant authorities,

The PTBA complained that due to such criminal activities the reputation of FBR as well as of tax bars was tarnished.

It is also matter of due consideration that leakage of confidential information affects the goodwill of an institution and it also against the constitution of Pakistan.

The tax bar said that such act of a person circulating the forged/fake extension circular attracts various offences under Prevention of Electronic Crime Act, 2016 as well as offences under Pakistan Penal Code, 1860.

January 4, 2020
Weekly Review: Equity market to move with escalating Middle East tension

KARACHI: The stock market likely to move with the development in mounting tension in the Middle East following killing of Iranian leader in US air strike.

Analysts at Arif Habib Limited said that market to remain in the green zone next week. Oil scrips may manage to attract the limelight following renewed tension in the Middle East which is likely to fuel international oil prices.

Additionally, fresh portfolio allocations and inflow of funds with the advent of the New Year should support the momentum. The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 7.4x (2020) compared to Asia Pac regional average of 12.5x and while offering DY of ~6.4 percent versus ~2.7 percent offered by the region.

Overall optimism in the equity markets continued this week. Investors welcomed the New Year with a spectacular two-day rally of 1,746 points on the first two days of the New Year.

Abu Dhabi Crown Prince’s one day visit and continuously improving macros with further improvement in SBP reserves (+5.5 percent WoW) helped to sustain the bullish run of the KSE-100 Index.

Albeit, the last trading day witnessed profit taking in the wake of a US strike in Iraq to kill a key Iranian army commander. Inflation reading for Dec’19 settled at 12.63 percent YoY, declining 0.34 percent MoM. The KSE-100 Index settled at 42,323 points, up 1,475 points WoW.

Sector-wise positive contributions came from i) Commercial Banks (261 points), ii) Fertilizer (218 points), iii) Oil & Gas Exploration Companies (208 points), iv) Power Generation (184 points), and v) Cement (171 points). Whereas, negative sector-wise contribution came from Tobacco (27). Scrip-wise positive contributions were led by HUBC (138 points), LUCK (124 points), ENGRO (102 points), OGDC (85 points) and PSO (79 points).

Foreign selling continued this week clocking-in at USD 7.3 million compared to a net sell of USD 2.9 million last week. Selling was witnessed in Commercial Banks (USD 4.7 million) and Fertilizer (USD 1.4 million).

On the domestic front, major buying was reported by Mutual Funds (USD 8.6 million) and Banks/DFI (USD 4.2 million). Average Volumes settled at 282 million shares (up by 23 percent WoW) while average value traded clocked-in at USD 69 million (up by 29 percent WoW).

January 4, 2020
FBR empowered for closure of automatic audit selection

ISLAMABAD: Federal Board of Revenue (FBR) has been empowered to conclude cases which were automatic selected for audit.
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January 4, 2020
Massive tax relief announced for foreign investment in debt securities

KARACHI: The government has announced massive tax relief to foreign investment in debt securities considering the attractive environment due to higher interest rate in the country.

The foreign investment in domestic debt market including government securities including Market Treasury Bills and Pakistan Investment Bonds, is around $1.5 billion during first six month (July – December) of 2019/2020 and in total it is around $2 billion when investment included in the equity market.

Through Tax Laws (Second Amendment) Ordinance, 2019, the government facilitated the foreign investment by making significant changes to Income Tax Ordinance, 2001.

A commentary released by Pwc A F Ferguson Chartered Accountants on the tax ordinance 2019 explained the tax relief on the foreign investment through changes brought into the main statute.

The chartered accountancy firm said that foreign investors particularly foreign institutional investors invest in Pakistan’s capital market through Foreign Portfolio Investment (FPI) scheme, which allows such investors to invest in equity and debt securities (including Government Bonds, Term Finance Certificates, Pakistan Investment Bonds) without any physical presence.

The FPI scheme makes it mandatory for foreign investors to open Special Convertible Rupee Account (SCRA).

The requirement for non-residents to open SCRA is provided in Chapter 20 of the Foreign Exchange Manual issued by the State Bank of Pakistan (SBP).

The funds available in SCRA can be transferred outside Pakistan or credited to a foreign currency account of non-resident investor maintained in Pakistan at any time without prior approval of SBP.

Such non-resident corporate investors not having a Permanent Establishment in Pakistan are hereinafter referred to as NRI.

The tax incidence applicable on NRI on return from their investment in equity instruments, either as dividend or capital gains, is largely aligned and same (being 15 percent).

However, tax incidence applicable on return from investment in debt securities by NRI is not aligned. Interest income from debt investment is subject to final tax upon tax withholding at 10 percent whereas capital gains from disposal of debt instruments are taxable at corporate rate of tax which is presently 29 percent.

The Second Amendment Ordinance has aligned and rationalized the tax incidence through following amendments, apart from relieving NRI from certain compliances:

(i) Banking company / financial institution maintaining SCRA of NRI is now required to deduct tax from capital gains arising on disposal of debt instruments and Government securities (including Treasury Bills and Pakistan Investment Bonds) @ 10 percent.

Such tax deduction constitutes final tax on such capital gains. It appears that tax withholding is required to be made at the time when proceeds from disposal are accounted for in the SCRA and also that no adjustment for any capital loss may be made by the Banking company / financial institution while deducting tax @ 10 percent from capital gains earned by NRI on disposal of debt securities.

(ii) The requirements to obtain tax registration [under Section 181 of the Income Tax Ordinance, 2001 (‘ITO 2001’)] and also to file statement of final taxation [under Section 115(4)] will no longer apply, in case capital gains or profit on debt is earned from investments made through SCRA (maintained with a banking company or financial institution) in debt instruments & Government securities (including treasury bills and Pakistan investment bonds).

Despite not appearing on Active Taxpayers List (ATL), they will not be subjected to higher tax withholding under the Tenth Schedule on interest income and capital gains relating to such securities.

(iii) Advance tax under section 147(5B) will also be not payable in respect of capital gains arising on investment made through SCRA (maintained with a banking company or financial institution) in debt instruments and Government securities (including treasury bills and Pakistan Investment Bonds).

(iv) Tax withholding applicable on banking transactions by those not appearing on ATL (under section 236P) will not apply to SCRA. This is a blanket exemption for companies maintaining SCRA regardless of whether investment is made in equity or debt securities.

January 4, 2020