Pkrevenue.com

Month: February 2020

  • No service charges allowed for collecting withholding tax

    No service charges allowed for collecting withholding tax

    KARACHI: Federal Board of Revenue (FBR) has not allowed deduction of service charges by withholding agents for collecting/deducing withholding tax on behalf of the federal tax authority.

    According to an official document, under the Income Tax Ordinance, 2001 the withholding agents are not entitled to receive any service charges for collection or deduction of tax as a withholding agent.

    However, it has been noticed that certain withholding agents including provincial governments and other autonomous organizations are claiming service charges for acting as withholding agents.

    In order to expressly disallow such claims, new sub-section (6) and (7) have been inserted in section 168 which provides that notwithstanding anything contained in any other law or any rules, for the time being in force, no amount is to be deducted on account of service charges from the tax withheld or collected by any person under the provisions of this Ordinance.

    As provided in sub-section (7) in case any amount is deducted on account of service charges by the person, the said person will be liable to pay this amount to the Federal Government and all the provisions of the Ordinance shall apply in so far as they apply to the recovery of tax.

  • Commercial importers, traders require filing annual returns, maintain complete record

    Commercial importers, traders require filing annual returns, maintain complete record

    KARACHI: Commercial importers and individual traders are required to file income tax return and maintain complete records of transactions, a tax analyst said.

    Murtaza Qurban, Executive Manager, EY Ford Rhodes highlighted the application of minimum tax on commercial importers and individual traders in an event recently organized by Karachi Tax Bar Association (KTBA).

    He said that commercial importers / traders are now required to prepare financial statements / accounts. Further filing of return of income is also mandatory instead of statement under section 115 of Income Tax Ordinance, 2001.

    Maintenance of proper and complete records (earlier no expense was being claimed therefore there was no risk of disallowance of expenses), he said.

    The tax authorities may raise questions regarding transfer pricing (earlier tax paid on assessed value of goods was final tax – largely applicable on multinationals). While, payment of advance tax under section 147 in respect will also applicable, he added.

    H e said that the Finance Act, 2019, however, again introduced amendments through which tax collection at import stage is made minimum tax instead of final tax. As a result of this change, Commercial Importers are now required to compute their financial results for comparison of tax on profits with minimum tax.

    He said that sale by commercial Importer would still not be subject to withholding tax in terms of section 153(5) where tax at import stage has already been collected.
    Two regimes of minimum tax would be applicable:

    Under section 113

    Under section 148

    If minimum tax liability under 148 > minimum tax liability under 113 > tax liability under Normal Tax Regime. Carry forward of minimum tax under 113 would be available, he questioned.

    Alternative Corporate Tax would also be applicable. Thereafter, carryforward under ACT will be available, if ACT under section 113C is > minimum tax under section 148, he further questioned?

    Similar to the implications as discussed above, contractors and service providers would also be required to prepare financial statements / accounts and file return of income.

    However, one major problem that is being faced is that since tax deductible under section 153(1)(b) and (c) is minimum tax, whether it would be computed on actual receipts or its accrual would also entail such income to be offered under MTR. Specially in case of companies, where accrual method of accounting is mandatorily followed, he said.

    If tax under MTR is worked out on accrual basis, actual receipts would also be subjected to withholding of tax, which would not be refundable being minimum tax. In other words, such tax may be lapsed if income in subsequent year is less than the prior year, he added.

  • FBR starts examining incomes of debt, credit card holders

    FBR starts examining incomes of debt, credit card holders

    ISLAMABAD: Federal Board of Revenue (FBR) has started examining incomes of persons making payments through debt and credit cards.

    Sources in the FBR said that banks had provided details of persons, who made payments through debit and credit cards above Rs200,000 in a month.

    The banks have provided information of transactions made through payment cards during July 01 – December 31, 2019.

    The sources said that the banks are required to file bi-annual statement included a list of payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to rupees two hundred thousand or more during the preceding calendar month.

    The banks are also provide of withholding tax deducted on persons remitting amounts abroad through credit or debit or prepaid cards.

    According to Section 236Y of Income Tax Ordinance, 2001, every banking company shall collect advance tax at the rate of one percent at the time of transfer of any sum remitted outside Pakistan, on behalf of any person who has completed a credit card transaction, a debt card transaction, or a prepaid card transaction with a person outside Pakistan.

    The tax collected under this head is adjustable against the payable tax by a person filing income tax return.

  • Weekly Review: Market likely to stay positive on FATF decision

    Weekly Review: Market likely to stay positive on FATF decision

    KARACHI: The stock market likely to stay positive during next week on back of conclusion of the FATF review and expected approval of IMF’s third tranch, analysts said.

    The analysts at Arif Habib Limited further said that the market would also respond positively to the imposition by the Federal Government on export of essential food items (Onions, Potatoes and Tomatoes) so as to control rising inflation along with deferment of hikes in utility rates till June 2020.

    Moreover, improvement witnessed on macroeconomic front, with the Current Account Deficit (CAD) shrinking by 72 percent in 7MFY20 and rising foreign investment in debt securities exceeding the USD 3 billion mark, also augur well.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 6.9x (2020) compared to Asia Pac regional average of 12.2x while offering a dividend yield of ~6.8 percent versus ~2.8 percent offered by the region.

    This week trading activity remained dull and index movement was mixed attributable to concerns over a meeting of the Financial Action Task Force (FATF), convened to ascertain Pakistan’s status (Grey or White List); it became evident by Thursday evening that Pakistan is likely to stay in the Grey List.

    On the other hand, investors remained cautious on the back of a strict stance of the International Monetary Fund (IMF) staff to keep the budgeted revenue targets for FY20 unchanged while talks regarding the release of the third tranche remain ongoing. Despite increase in international oil prices by 4.5 percent WoW, Oil and Gas Exploration sector remained under pressure due to foreign selling. As a result, the benchmark KSE-100 index closed at 40,249 points, merely increased by 6 points or 0.01 percent WoW.

    Contribution to the upside was led by i) Commercial Banks (+133 points) due to financial result of HBL and UBL was better than expectation, ii) Cements (+20 points), iii) Textile Composite (+15 points), iv) Leather and Tanneries (+11 points), and v) Automobile Parts and Accessories (+9 points).Scrip wise major gainers were HBL (+70 points), UBL (+53 points), OGDC (+37 points), MCB (+34 points), and FFC (+30 points). Whereas, scrip wise major losers were ENGRO (-65 points), PAKT (-54 points), and PSO (-48 points).

    Foreigners offloaded stocks worth of USD 8.57 million compared to a net sell of USD 11.15 million last week. Major selling was witnessed in Oil and Gas Exploration Companies (USD -3.02 million) and Cement (USD -2.77 million).

    On the local front, buying was reported by Insurance Companies (USD +7.84 million) followed by Other Organizations (USD +3.81 million). That said, average daily volumes for the outgoing week were down by 37 percent to 106 million shares likewise value traded decreased by 23 percent to USD 31.2 million.

  • Customs stops export consignments of onion after ban decision

    Customs stops export consignments of onion after ban decision

    KARACHI: Pakistan Customs stopped export consignments of onion to comply with government decision to impose ban on the vegetable to meet local demand.

    In an letter issued by Model Customs Collectorate (MCC) Exports on Friday to Pakistan International Container Terminal (PICT) stated: “In compliance of directive received from the Headquarters, the loading of all the consignments / containers declared to contain ‘fresh onion’ falling under PCT 0703.1000 stopped immediately till further orders.”

    The Economic Coordination Committee of the Cabinet in its meeting on February 19 decided to impose ban on export of onion till May 30, 2020 in order to meet local demand and stabilize prices.

    Exporters claimed that due to immediate ban imposed by the customs authorities above 300 containers amounting $3.2 million were stuck up, where loading already allowed and about to load on vessel.

    Earlier, on February 20 All Pakistan Fruit and Vegetable Exporters, Importers and Merchants Associations (PFVA) in an SOS to the Advisor to the Prime Minister on Commerce Abdul Razzak Dawood, said that the sudden stoppage would have serious repercussion.

    The association said that the exporters on onion had already received advance payments from their foreign buyers for export of onion and with immediate ban, they would be unable to honor their business commitment which would not only put a question mark on their credibility, it would also terribly shake confidence of the foreign buyers.

    It further said that the onion exporters had already procured quantity of onion according to orders from foreign buyers for processing the same in their pack houses and the sudden ban on export would lead to colossal financial losses to the exporters due to limited shelf life of the onion.

  • Engro Corp declares 32% revenue growth

    Engro Corp declares 32% revenue growth

    KARACHI: Engro Corporation has posted consolidated annual revenue growth of 32 percent for the period ended December 31, 2019 as compared with the revenue of the last year.

    The significant growth in revenue mainly driven by energy projects in Thar coming online during July 2019 and augmented by higher turnover of Fertilizers and Petrochemicals businesses, a statement said on Friday.

    The Company posted a consolidated profit after tax (PAT) of Rs30.288 billion compared to Rs23.632 billion for last year. Profit attributable to the owners was recorded at Rs16.533 billion compared to Rs12.708 billion for last year.

    This growth in profitability is after accounting for a provision of Rs1.224 billion relating to impairment of the Company’s investment in FrieslandCampina Engro Pakistan Limited, under the requirements of International Accounting Standard 36 (Impairment of Assets).

    On a standalone basis, the Company posted a PAT of Rs14.303 billion against Rs12.720 billion for the comparative year, translating into earnings per share of Rs24.83 per share. This increase is primarily attributed to higher dividends from subsidiaries as well as higher interest income on investable reserves.

    The company announced a final cash dividend of Re1.00 per share for the fourth quarter, bringing the cumulative payout for the year to Rs24.00 per share.

    Fertilizer business achieved a historic milestone of highest ever Urea production of 2 million tons due to better plant efficiency and higher gas availability.

    This, coupled with higher fertilizer prices, has resulted in an increase of 11 percent in sales revenue over the prior year.

    The business recorded a PAT of Rs16.871 billion – down by 3 percent from last year – decrease mainly attributed to a one-off deferred tax impact of higher future corporate tax rates introduced through Finance Act, 2019.

    Urea prices are expected to remain under pressure following a prospective reduction in GIDC. In response to this reduction, the business passed on the benefit to the end consumer through a price reduction of Rs160/bag.

    Furthermore, the fertilizer industry continues to face challenges in the recovery of long outstanding subsidy and retrospective settlement of GIDC.

    Polymer business recorded a revenue growth of 7 percent, while PAT was Rs3.661 billion compared to Rs4.930 billion for last year.

    This fall in profits is attributable to inflationary impacts in the form of higher energy prices and interest rates coupled with one-off gains recorded in 2018.

    In line with its long-term strategy, the business successfully initiated commercial production and commenced exports from its Caustic Flake plant.

    Development of the 3.8 Mt per annum mine at Thar concluded with the successful ‘Test on Completion’ on June 3, 2019. Thereafter, Commercial Operations Date (COD) was declared on July 10, 2019 for both mining and power projects and the Thar power plant has been running smoothly ever since.

    Further, the project commenced construction of Phase II of the mine expansion and achieved Financial Close on December 31, 2019, which will enhance production of coal from the mine to 7.6 Mt per annum.

  • FBR considers transfer back customs officials

    FBR considers transfer back customs officials

    The Federal Board of Revenue (FBR) is actively reviewing requests for the transfer back of Pakistan Customs officials who were posted to outstations in 2019. This move comes in response to a significant number of appeals submitted by affected officials over the years.

    (more…)
  • FATF maintains Pakistan’s grey list status till June 2020

    FATF maintains Pakistan’s grey list status till June 2020

    KARACHI: Financial Action Task Force (FATF) on Friday maintained Pakistan’s status of grey list till June 2020 and asked the country to complete its full action plan.

    “To date, Pakistan has largely addressed 14 of 27 action items, with varying levels of progress made on the rest of the action plan. The FATF strongly urges Pakistan to swiftly complete its full action plan by June 2020,” a statement received from Paris, France after conclusion of FATF plenary meeting (February 19-21, 2020).

    The statement said:

    “Since June 2018, when Pakistan made a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime and to address its strategic counter-terrorist financing-related deficiencies, Pakistan’s political commitment has led to progress in a number of areas in its action plan, including risk-based supervision and pursuing domestic and international cooperation to identify cash couriers. Pakistan should continue to work on implementing its action plan to address its strategic deficiencies, including by:

    (1) demonstrating that remedial actions and sanctions are applied in cases of AML/CFT violations, relating to TF risk management and TFS obligations;

    (2) demonstrating that competent authorities are cooperating and taking action to identify and take enforcement action against illegal money or value transfer services (MVTS);

    (3) demonstrating the implementation of cross-border currency and BNI controls at all ports of entry, including applying effective, proportionate and dissuasive sanctions;

    (4) demonstrating that law enforcement agencies (LEAs) are identifying and investigating the widest range of TF activity and that TF investigations and prosecutions target designated persons and entities, and those acting on behalf or at the direction of the designated persons or entities;

    (5) demonstrating that TF prosecutions result in effective, proportionate and dissuasive sanctions

    (6) demonstrating effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services;

    (7) demonstrating enforcement against TFS violations including administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases;

    (8) demonstrating that facilities and services owned or controlled by designated person are deprived of their resources and the usage of the resources.

    “All deadlines in the action plan have expired. While noting recent and notable improvements, the FATF again expresses concerns given Pakistan’s failure to complete its action plan in line with the agreed timelines and in light of the TF risks emanating from the jurisdiction.

    The statement said that in case the country failed to comply the FATF will take action, which could include the FATF calling on its members and urging all jurisdiction to advise their FIs to give special attention to business relations and transactions with Pakistan.

  • FBR chairperson to inaugurate International Tax Operations directorate on Feb 22

    FBR chairperson to inaugurate International Tax Operations directorate on Feb 22

    KARACHI: Ms. Nausheen Amjad, Chairperson, Federal Board of Revenue (FBR) will inaugurate directorate of international tax operations in Karachi on Saturday February 22, 2020.

    Member Inland Revenue (IR) and Director General Offshore Taxation will also accompany the FBR chairperson.

    Office of the Directorate of International Tax Operation Karachi (Sindh) located at PNSC building.

    The directorate of international tax operations has mandate to receive and send information from other jurisdictions under spontaneous, automatic and on demand exchange of information under exchange of information agreements.

    The directorate has been authorized to levy and recover tax by passing an assessment order under section I23 (1A) of Income Tax Ordinance, 2001 in case of undeclared off-shore assets and incomes.

    It has also been authorized to receive, transmit and exchange country reports to the jurisdictions that are parties to international by country agreements with Pakistan.

    Further the FBR has empowered the directorate to conduct transfer pricing audit in cases selected for such audit.

  • Stock market falls by 232 points on selling pressure

    Stock market falls by 232 points on selling pressure

    KARACHI: The stock market fell by 232 points on Friday owing to selling pressures during the trading sessions.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 40,249 points as against 40,482 points showing a decline of 232 points.

    Analysts at Arif Habib Limited said that the market faced selling pressure and saw a drawdown of 311 points during the session, closing -232 points.

    Market kept waiting for the official version of FATF plenary session till the close but merely got positive hints rather than an official statement.

    E&P, Refineries, OMCs, Steel and Fertilizer bore selling pressure. MUGHAL announced financial results, which showed significant tax reversal that caused Investors to stay cautious and sell the stock, which brought stock price down in the closing half hour.

    Trading activity in banking sector stocks remained muted. Cement Sector led the volumes with 19.6 million shares, followed by Food (9.8 million) and Power (9.1 million). Among scrips, MLCF topped the volumes with 8.1 million shares, followed by KAPCO (7.5M) and FFL (5.9 million).

    Sectors contributing to the performance include Fertilizer (-92 points), Banks (-64 points), E&P (-49 points), Inv Banks (-35 points), Power (+24 points) and Cement (+21 points).

    Volumes slipped further from 112.1 million shares to 85.6 million shares (-24 percent DoD). Average traded value also declined by 24 percent to reach US$ 23.2 million as against US$ 30.6 million.

    Stocks that contributed significantly to the volumes include MLCF, KAPCO, FFL, UNITY and DGKC, which formed 36 percent of total volumes.

    Stocks that contributed positively include HUBC (+24 points), LUCK (+18 points), SHFA (+8 points), HMB (+7 points) and PMPK (+6 points). Stocks that contributed negatively include ENGRO (-66 points), MCB (-44 points), DAWH (-34 points), OGDC (-31 points), and HBL (-24 points).