Author: Mrs. Anjum Shahnawaz

Rupee depreciates by 31 paisas against dollar

KARACHI: The Pak Rupee ended down by 31 paisas against the dollar on Monday owing to demand of the foreign currency on the first day of the week.

The rupee ended at Rs158.18 to the dollar from last Friday’s closing of Rs157.87 in the interbank foreign exchange market.

Currency experts said that the demand for the foreign currency was high as the market was opened after two weekly holidays.

They hoped that the local currency would make gain in coming days on back of substantial inflows of remittances and export receipts.

July 5, 2021
Banks to pay income tax on advance to deposit ratio

KARACHI: The Federal Board of Revenue (FBR) has said that in order to facilitate banking companies on payment of additional tax on earning arising from investment in government securities, a new regime has been introduced.

The FBR said that the income of banking companies earned from additional investment in federal government securities for tax year 2020 and onwards was taxable at the rate of 37.5 per cent instead of rates provided in Division II of Part I of First Schedule.

This provision has been further streamlined for prospective application. For tax year 2022 and onwards, the income arising from federal government securities shall be taxable on the basis of advances to deposit ratios of banks as under:

— 40 per cent instead of rate provided in Division II of Part I of the First schedule if advances to deposit ratio as on last day of the tax year is up to 40 per cent

— 37.5 per cent instead of rate provided in Division II of Part I of the First schedule if the advances to deposit ratio as on last day of the tax year exceeds 40 per cent but does not exceed 50 per cent

— at the rates provided in Division II of Part I of the First schedule if advances to deposit ratio as on last day of the tax year exceeds 50 per cent.

The amendments would reduce disputes regarding the calculation of additional investment and additional earning. Furthermore, the cut off rate to calculate advances to deposit ratio has been specified as last day of tax year.

These changes have been incorporated by amending Rule 6C of the Seventh Schedule.

July 5, 2021

SBP issues customers exchange rates on July 05, 2021

KARACHI: The State Bank of Pakistan (SBP) on Monday issued customers’ exchange rates on the basis of weighted average rates of commercial banks.

The SBP said that the data is compiled and disseminated for information only. These Exchange Rates are an estimate of the Exchange Rates quoted by various Commercial Banks to their clients.

They are compiled from the Exchange Rate sheets issued daily by various Commercial Banks providing their indicative Exchange Rates for commercial transactions with customers.

CURRENCY	BUYING	SELLING
AED	43.0063	43.1013
AUD	118.6700	118.9271
CAD	127.9000	128.1731
CHF	171.1654	171.5309
CNY	24.4594	24.5100
EUR	187.1909	187.6133
GBP	218.3152	218.7980
JPY	1.4205	1.4237
SAR	42.0931	42.1838
USD	157.8287	158.1920

July 5, 2021

Additional tax on transfer of unregistered motor vehicles to continue

ISLAMABAD: The levy of withholding tax to discourage on money on transfer of motor vehicles will continue beyond July 01, 2021.

The Federal Board of Revenue (FBR) in an explanation to Finance Act, 2021 said that application of withholding tax on motor vehicles transferred without registration will continue during current fiscal year and onwards.

The FBR said that in order to discourage ‘on’ money, additional tax of Rs.50,000 , Rs.100,000 and Rs.200,000 for vehicles upto 1000 cc, between 1000cc and 2000cc and beyond 2000cc respectively was imposed where a vehicle is sold within 90 days of its ownership.

This was introduced vide Tax Laws (Amendment) Ordinance, 2021. It was applicable till 30.06.2021. Due to its positive impact, it has been continued. Further, the period of 90 days has been withdrawn.

Now the persons buying motor vehicles would be required to get them registered in their own names otherwise, this tax would be collectable.

July 4, 2021
FBR highlights automation of procedures through Finance Act 2021

ISLAMABAD: The Federal Board of Revenue (FBR) has highlighted measures taken through Finance Act, 2021 to automate the procedures for facilitating taxpayers.

The FBR through an income tax circular highlighted the following measures taken for automation of procedures:

Automated issuance of refunds

In order to claim refunds, a taxpayer has to file refund application and provide documents for physical verification. To facilitate taxpayers, centralized automated refund system has been introduced where there will be no requirement for application and verification. The system based verified refunds would be issued directly into the bank accounts of taxpayers without any face to face contact. Enabling legal framework has been provided through insertion of section 170A in the Ordinance.

Prompt issuance of exemption certificate

The delay in the issuance of exemption certificate is a major concern of taxpayers. Time limitation of fifteen days shall be observed for issuance of exemption certificate for all corporate taxpayers which was earlier available to public listed companies only. After the lapse of statutory time limit, the web portal would automatically issue exemption certificate to the taxpayers. Necessary changes have been introduced in Section 153 and 159 of the Ordinance. However, commissioner has been empowered to cancel or modify the certificate with reasons in writing.

E-hearing

In order to provide faceless tax administration, reducing compliance cost and saving precious time of the taxpayers, the mechanism of e-hearing has been devised. Enabling legal provisions for admissibility of evidence collected during e-hearing have been introduced through 227E of the Ordinance.

Minimizing requirements for tax compliance

Taxpayers are subject to multiple compliances. Currently they are required to update their profile periodically. This requirement costs time, energy and resources. In order to facilitate taxpayers in line with ease of doing business this requirement has been withdrawn through substitution of section 114A of the Ordinance.

Electronic filing of appeal

The mechanism of online filing of appeals has been made available to taxpayers. However, enabling legal provisions were lacking which have been introduced through section 127 in the Ordinance.

Removal of requirement of multiple notices in concealment cases

It has been provided under law that where notice for amendment of assessment has been issued confronting taxpayer regarding concealment of income, no separate notice under section 111 will be required.

July 4, 2021
Scope of withholding agents expanded for collection on immovable properties transactions

ISLAMABAD: The Federal Board of Revenue (FBR) has said that certain persons/authorities have been brought in to the definition of withholding agents for collection of tax on immovable property transactions.

In this regard the FBR said that changes have been made to Income Tax Ordinance, 2001 through Finance Act, 2021.

The FBR said that all persons effecting sale and purchase of properties are required to collect tax under section 236C and 236K of the Ordinance.

However, due to the lack of explicit provision certain persons like public and private real estate projects, joint ventures and private commercial concerns are not collecting these taxes which is giving rise to undue litigation.

These have been added in the list of withholding agents in section 236C and 236K.

Law provides mechanism for collection of tax on purchase of property in installments where payment for purchase of property is made in installments.

Such taxpayers have to pay withholding tax again at the time of transfer. It has been made possible that such person may not be subjected to double withholding tax collection by amending explanation in section 236K .

July 4, 2021

Withholding tax rates for industrial, commercial consumers revised

ISLAMABAD: The Federal Board of Revenue (FBR) has said that withholding tax rates for industrial and commercial consumers have been revised.

Withholding tax on domestic electricity consumption was collected at the flat rate of 7.5% if the monthly domestic electricity bill exceeded Rs. 75,000.

In order to promote documentation and broadening of tax base this withholding tax has been:

— done away with in case of persons appearing on Active Taxpayer’s List irrespective of amount of bill.

— threshold for collection of tax has been reduced from Rs. 75,000 to Rs. 25,000.

The new rate of collection of tax from commercial and industrial consumers from gross amount of bills shall be as set out in the following Table, namely :-

TABLE

S.No	Gross amount of Bill	Tax
1	upto Rs. 500	Rs. 0
2	exceeds Rs. 500 but does not exceed Rs. 20,000	10% of the amount
3	exceeds Rs.20,000	Rs. 1950 plus 12% of the amount exceeding Rs. 20,000 for commercial consumers Rs. 1950 plus 5% of the amount exceeding Rs. 20,000 for industrial consumers

Taxpayer’s are entitled for exemption certificate under section 235 on discharge of their advance tax liability. However the language of law was constructed to the effect that advance tax liability for the whole tax year was required to be discharged to obtain this certificate. Now this ambiguity has been resolved by making necessary changes in sub section (3) of section 235 of the Ordinance. Now the taxpayer can obtain certificate for a quarter by discharging their advance tax liability for the quarter.

July 4, 2021

Services export brought under final tax regime

ISLAMABAD: The Federal Board of Revenue (FBR) has said that export of services has been brought under final tax regime effect from July 01, 2021.

The FBR in an explanation to Finance Act, 2021 stated that in line with the policy of the government to attract legal flow of remittances into the country and to promote export of services in all sectors of economy, a special regime at par with export of goods regime has been introduced through insertion of section 154A of the Income Tax Ordinance, 2001.

The service providers would be subjected to 1 per cent withholding tax under Division IVA of Part III of First Schedule of the Ordinance on their export proceeds remitted in Pakistan through Banks and authorized dealers of foreign exchange. This would be final tax.

The Board has also been empowered to include or exclude certain services from operation of this section. Moreover, the Board may prescribe rules for the purposes of this section.

July 4, 2021
Changes made to minimum tax regime through Finance Act 2021

ISLAMABAD: The Federal Board of Revenue (FBR) has issued explanation to changes made through Finance Bill, 2021 in Income Tax Ordinance, 2001 related to minimum tax regime.

The FBR said that previously, minimum tax on turnover at the rate of 1.5 per cent of turnover was payable by all companies and individuals/ Association of Persons (AOPs) having turnover exceeding Rs. 10 million. This is an alternative tax. It is payable when the normal tax liability in cases of exemption, loss, tax credits or for any other reason, is less than tax payable on turnover basis.

It can be carried forward for adjustment against next year’s tax liability however it cannot be carried forward if person has sustained loss for a year. 4 different types of changes have been made in this regime which are summarized below:

— Generalized reduction in minimum turnover tax paid from 1.5 per cent to 1.25 per cent

— Enhanced threshold for individuals and AOPs from Rs10 million to Rs100 million to pay minimum tax

— Allowing carrying forward of minimum tax for adjustment against normal tax liability even in cases of loss to provide relief to businesses sustaining loss and to maximize equity

Division IX of Part I of First schedule has been substituted as below:

1. 0.75 per cent minimum tax to be applicable on:

(a) Oil marketing companies, Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited (for the cases where annual turnover exceeds rupees one billion.)

(b) Pakistan International Airlines Corporation; and

(c) poultry industry including poultry breeding, broiler production, egg production and poultry feed production

2. 0.5 per cent to be applicable as minimum tax on:

(a) oil refineries

(b) motorcycle dealers registered under the Sales Tax Act, 1990

3. 0.25 per cent to be applicable as minimum tax on:

(a) Distributors of pharmaceutical products, fast moving consumer goods and cigarettes;

(b) petroleum agents and distributors who are registered under the Sales Tax Act, 1990;

(c) rice mills and dealers

(d) Tier-1 retailers of fast moving consumer goods who are integrated with board or its computerized system for real time reporting of sales and receipts;

(e) Person’s turnover from supplies through e-commerce including from running on online marketplace as defined in clause (38B) of Section 2.

(f) Persons engaged in the sale of purchase of used vehicles

(g) flour mills

4. in all other cases the minimum tax rates shall be 1.25 per cent

July 4, 2021
Overseas Pakistanis deposit $1.56 billion through Roshan Digital Account: SBP

KARACHI: State Bank of Pakistan (SBP) on Saturday said that overseas Pakistanis have deposited $1.56 billion through Roshan Digital Account during past 10 months.

The SBP said that since its launch by the Prime Minister of Pakistan on September 10, 2020, Roshan Digital Account has attracted significant interest from overseas Pakistanis.

“According to the new web page released today, 181,556 accounts have been opened from 171 countries across the world and $ 1.562 billion has been deposited in these accounts through end-June 2021.”

In line with SBP’s commitment to transparency in its key policy measures, SBP from today has begun releasing regular data on the progress of Roshan Digital Account (RDA).

This web page will be updated on a monthly basis. This periodic update was also requested by market participants.

Since its launch by the Prime Minister of Pakistan on 10th September 2020, Roshan Digital Account has attracted significant interest from overseas Pakistanis.

According to the new web page released today, 181,556 accounts have been opened from 171 countries across the world and $1.562 billion has been deposited in these accounts through end-June 2021.

The webpage shows monthly trends in the number of accounts opened, deposits, and investments in Naya Pakistan Certificates (NPCs) and the stock market.

The data shows an accelerating trend across all these dimensions over the last few months. June 2021 saw the highest monthly amount of deposits ($ 310 million) and NPC investments ($ 233 million) since the launch of Roshan Digital Account. As of end-June 2021, $ 1050 million has been invested in NPCs, with $621 million in conventional NPCs and $429 million in Islamic NPCs.

Roshan Digital Account is a landmark initiative of the State Bank which seamlessly connects the Pakistani diaspora to the Pakistani financial system and economy.

For the first time, it allows overseas Pakistanis to open a bank account in Pakistan in a completely digital manner, without needing to visit any bank branch or embassy.

The account enables overseas Pakistanis to undertake all kinds of banking transactions in Pakistan, including paying school and utility bills for their families, funds transfer, e-commerce, car financing through Roshan Apni Car and making charitable donations through Roshan Samaaji Khidmat.

At the same time, the account provides exclusive investment opportunities in Naya Pakistan certificates offering attractive returns in both conventional and Shariah-compliant forms, as well as the Pakistani stock market and real estate.

The tax treatment is simple, freeing overseas Pakistanis from the need to file a tax return in Pakistan on income derived from investments through the account. Importantly, the account is fully repatriable, giving overseas Pakistanis the comfort of being able to remit the money in their accounts back to where they live without any difficulty.

July 4, 2021