Pkrevenue.com

Author: Mrs. Anjum Shahnawaz

  • What is permanent establishment under income tax law?

    What is permanent establishment under income tax law?

    Income Tax Ordinance, 2001 has defined the meaning of permanent establishment of a foreign entity operating in Pakistan.

    The Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue 9FBR), defined as “permanent establishment” in relation to a person, means a fixed place of business through which the business of the person is wholly or partly carried on, and includes –

    (a) a place of management, branch, office, factory or workshop, premises for soliciting orders, warehouse, permanent sales exhibition or sales outlet, other than a liaison office except where the office engages in the negotiation of contracts (other than contracts of purchase);

    (b) a mine, oil or gas well, quarry or any other place of extraction of natural resources;

    (ba) an agricultural, pastoral or forestry property;

    (c) a building site, a construction, assembly or installation project or supervisory activities connected with such site or project but only where such site, project and its connected supervisory activities continue for a period or periods aggregating more than ninety days within any twelve-months period;

    (d) the furnishing of services, including consultancy services, by any person through employees or other personnel engaged by the person for such purpose;

    (e) a person acting in Pakistan on behalf of the person (hereinafter referred to as the “agent”), other than an agent of independent status acting in the ordinary course of business as such, if the agent –

    “(i) has and habitually exercises an authority to conclude contracts on behalf of the other person or habitually concludes contracts or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the person and these contracts are─

    (a) in the name of the person; or

    (b) for the transfer of the ownership of or for the granting of the right to use property owned by that enterprise or that the enterprise has the right to use; or

    (c) for the provision of services by that person; or”

    (ii) has no such authority, but habitually maintains a stock-in-trade or other merchandise from which the agent regularly delivers goods or merchandise on behalf of the other person; or

    Explanation.—For removal of doubt, it is clarified that an agent of independent status acting in the ordinary course of business does not include a person acting exclusively or almost exclusively on behalf of the person to which it is an associate; or ”;

    (f) any substantial equipment installed, or other asset or property capable of activity giving rise to income;

    (g) a fixed place of business that is used or maintained by a person if the person or an associate of a person carries on business at that place or at another place in Pakistan and─

    (i) that place or other place constitutes a permanent establishment of the person or an associate of the person under this sub-clause; or

    (ii) business carried on by the person or an associate of the person at the same place or at more than one place

    constitute complementary functions that are part of a cohesive business operation.

    Explanation.—For the removal of doubt, it is clarified that─

    (A) the term ”cohesive business operation” includes an overall arrangement for the supply of goods, installation, construction, assembly, commission, guarantees or supervisory activities and all or principal activities are undertaken or performed either by the person or the associates of the person; and

    (B) supply of goods include the goods imported in the name of the associate or any other person, whether or not the title to the goods passes outside Pakistan.

  • Income tax ordinance defines non-profit organization

    Income tax ordinance defines non-profit organization

    Income Tax Ordinance, 2001 has defined the meaning of Non-Profit Organization for the purpose of tax treatment on the activity of NPOs.

    The Income Tax Ordinance, 2001 up dated up to June 30, 2020 issued by the Federal Board of Revenue (FBR), explained as:

    “Non-profit organization” means any person other than an individual, which is —

    (a) established for religious, educational, charitable, welfare purposes for general public, or for the promotion of an amateur sport;

    (b) formed and registered by or under any law as a non-profit organization;

    (c) approved by the Commissioner for specified period, on an application made by such person in the prescribed form and manner, accompanied by the prescribed documents and, on requisition, such other documents as may be required by the Commissioner;  and none of the assets of such person confers, or may confer, a private benefit to any other person.

  • Promotion committees formed for Customs officials

    Promotion committees formed for Customs officials

    ISLAMABAD: Federal Board of Revenue (FBR) on Monday constituted department promotion and selection committees for making recommendation for promotions and selections of Customs officials.

    A notification issued by the FBR stated that in pursuance of Establishment Division’s concurrence conveyed vide OM No. 13/16/2015-R.IV dated February 12, 2021, the following departmental promotion/selection committees in respect of posts in BS-17 to BS-18, BS-16 to BS-17 and BS-11 to BS-16 for Pakistan Customs Service / Customs field formation have been constituted for making recommendations to the appointing authority for promotions and selection:

    For post in BS-16 to BS-17 and BS-17 to BS-18:

    01. Member (Admn/HRM)(BS-21), Chairman

    02. Chief HRMC BS-20, Member

    03. Chief F&C BS-20, Member

    04. Secretary HRMC Concerned BS-18/19: Member

    05. Secretary Litigation concerned: Co-opted Member

    For post in BS-11 to BS-16

    01. Chief (HRMC) BS-20: Chairman

    02. Secretary (HRMC-1) BS-19: Member

    03. Secretary (HRMC concerned) BS-19: Member

    04. Secretary Litigation concerned: Co-opted member

    The FBR said that the instant notification would supersede all previous office orders/notification for promotions / selections in respect of BS-11 to BS-18 of Pakistan Customs Service /Customs field formations.

  • Stock market falls by 338 points on FATF concerns

    Stock market falls by 338 points on FATF concerns

    KARACHI: The stock market witnessed a decline of 338 points on Monday owing start of plenary session of Financial Action Task Force (FATF), which will decide about status of Pakistan.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 45,890 points from last Friday’s closing of 46,228 points, showing a decline of 338 points.

    Analysts at Arif Habib Limited said that the market came down on the first day of the roll-over week, contributed mostly by banking sector stocks, where the disappointment reigns due to poor dividend distribution and anticipation of similar subdued result from UBL, scheduled to be announced on Wednesday.

    FATF plenary session starts today with the anticipation of status quo, which has also caused a bit of concern among investors holding on to the positions in hope of positive conclusion.

    Cement, Banks, O&GMCs and Fertilizer sectors saw selling pressure, whereas Tech stocks performed well. Among scrips, HUMNL topped the volumes with 114.3 million shares, followed by BYCO (109.1 million) and TRG (46.4 million).

    Sectors contributing to the performance include Banks (-218 points), E&P (-81 points), Cement (-44 points), Fertilizer (-23 points) and Power (-21 points).

    Volumes increased from 694.8 million shares to 722.1 million shares (+4 percent DoD). Average traded value also increased by 4 percent to reach US$ 162.1 million as against US$ 156.4 million.

    Stocks that contributed significantly to the volumes include HUMNL, BYCO, TRG, MDTL and DCL, which formed 45 percent of total volumes.

    Stocks that contributed positively to the index include TRG (+105 points), GATM (+12 points), BYCO (+8 points), GHGL (+6 points) and FML (+5 points). Stocks that contributed negatively include HBL (-74 points), UBL (-59 points), OGDC (-34 points), PPL (-24 points) and BAHL (-22 points).

  • No paper-based foreign exchange operation after June: SBP

    No paper-based foreign exchange operation after June: SBP

    KARACHI: All the banks will discontinue paper-based foreign exchange operation after June 2021, Managing Director of State Bank of Pakistan’s Banking Services Corporation Muhammad Ashraf Khan said on Monday.

    He said that digitalization of foreign exchange, which started in March 2020, has been expanded from 8 to 13 banks and majority of the banks will be processing 88 percent of foreign exchange digitally by the end of February 2021 and 98 percent by April whereas the banks will completely discontinue paper-based submissions after June 2021.

    MD SBP-BSC, while speaking at a meeting during his visit to the Karachi Chamber of Commerce & Industry (KCCI) on Monday, added that the initiative to digitalize foreign exchange operation was taken to create ease for the business community by completely eradicating the paperwork and expediting the overall process which has successfully been implemented by many banks.

    Head of Foreign Exchange Operations Department SBP Shakeel Muhammad Paracha, Director Exchange Policy Department SBP Arshad Mehmood Bhatti, Vice President KCCI Shamsul Islam Khan, Chairman of KCCI’s Banking & Insurance Subcommittee Qazi Zahid Hussain, Advisor Banking & Insurance Subcommittee Ateeq ur Rehman and others attended the meeting.

    MD SBP-BSC further stated that everything has been transferred from manual to digital processing and the customers have the freedom to get online anytime either from their home or office to apply for delivery of remittances without any paperwork while the customers will receive updates and objections (If any) about his transaction on his/ her registered email address.

    While assuring full support and cooperation, he stressed that the business and industrial community must come forward to adopt the digital mode for foreign exchange in which the customers can get registered themselves and track progress of case while relevant bank staff is also intimated about the progress and history of all the transactions is also maintained in a paperless environment.

    Vice President KCCI Shamsul Islam Khan, in his remarks, pointed that the State Bank, in any economy, plays the role of a heart in the economic development of the country by ensuring smooth circulation of funds and it was heartening to see that the State Bank has also been responsibly playing its role in an efficient manner which can be gauged from improved economic indicators particularly exports and remittances which have witnessed substantial growth.

    “However, the growth in remittances being witnessed nowadays may not last long hence, the State Bank needs to come up with some kind of the effective policy or incentive package which encourages Non-Resident Pakistanis (NRPs) to invest in numerous sectors of the economy.

    Encouraging such investments by NRPs would prove would not only help in dealing with economic crises but would also promote industrialization and create abundant employment opportunities on long term”, he added.

    He also stressed the need to take concrete measures for effectively dealing with the menace of smuggling which terribly hinders the legal trade and causes losses to the national exchequer.

    In this regard, he particularly suggested to establish Common Industrial Zone or Common Industrial Park near Pak-Iran border where all Custom Duties/ taxes should be kept at minimum level while this zone should be fully equipped with required infrastructure and the gas and electricity supplies should be provided by Iran which would surely bring down the cost of doing business due to cheaper electricity and gas tariffs that would attract a large number of industrialists to set up their units and warehouses in this particular zone.

  • Tax help desk at FPCCI to be set up after consultation: Javed Ghani

    Tax help desk at FPCCI to be set up after consultation: Javed Ghani

    KARACHI: Muhammad Javed Ghani, Chairman, Federal Board of Revenue (FBR) on Monday said that a help desk to resolve tax problems of business community will be established at the apex trade body after consultation with FBR wings.

    He was replying to various issues highlighted by members of Federation of Pakistan Chambers of Commerce and Industry (FPCCI) during his visit at the Federation House.

    Muhammad Javed Ghani said that he has noted the matters at large given by the members of the trade bodies and said the FBR Help Desk will be established in FPCCI. “However, it requires consultation with various wings of FBR in order to open the desk for productive outcome.”

    He further informed that the reduced human interactions is our policy towards which we are working and even we have improved the recent refunds in less period than it was earlier, which nearly is 70 to 80 percent more than the preceding period.

    He also said that frequent and purposeful interaction with FPCCI is being recognized to be a good move in the objective development of the economy of the country.

    Mian Nasser Hyatt Magoo, President, FPCCI said that it is high time to have paradigm shift in the tax structure to induce investment, promote production and grow economy instead of present revenucracy which remains the focus of FBR.

    He said that constitutional and lawful position given to FPCCI through Act of parliament to represent the private sector of trade, industry and services which has been diluted by FBR through marginalized interaction with apex body.

    He added that hardly any response is given by FBR against matters of members of trade bodies referred to FBR.

    He further stated that the revenue generating agents are being ignored by FBR, which is against the obligation which it owns.

    President FPCCI said that instead of negotiating with institutional representatives of FPCCI, FBR is attending Para shooters who have no locus standii to represent private sector stakeholders.

    He said that FBR should not accord market practicing tax lawyers and tax consultants to represent FPCCI in the FBR various committees.

    Mian Nasser Hyatt Maggo, President FPCCI said that FBR must come back to its past position since decade to negotiate trade, industry and business matters with/through apex body.

    The FPCCI collects fiscal improvement proposals from all the members’ bodies of trade and industry and CCIs to consider the paradigm changes in the present taxation for promoting economy with incremental tax revenue on sustainable basis.

    The apex body and its working on financial and other issues, if are taken up seriously with higher percentage of acceptance with higher level of seriousness of FBR would be a possible solution to make the budget which conduct business in harmony instead of amongst present conflicts and contradiction.

    The attention of the FBR was invited towards present leverage to groups other than FPCCI, which is against the lawful representation which FPCCI enjoys.

    It was said that the SMEs being said to be backbone of economy is being practically ignored and the persons of powerful and in-person connected groups have replaced the representation in decision making at FBR level.

    The members from different trade bodies invited attention of FBR towards CNIC condition on sale which is counterproductive to required sales tax collection as well as impede the industrial production and markets sales.

    Nowhere in the world CNIC or identity is asked from buyers, Pakistan is the only example set by FBR causing problems in business, in specific promoting the agitations on street by the agents of sales of produce, the conducting of small business be settled in peace by removing by removing CNIC condition for buyers.

    The participants invited the attention of Chairman FBR that still the entry of raw materials in part II of 12th schedule of Section 148 of ITO has not been facilitated, which is in the exclusive domain of FBR to resolve.

    The attention was also invited towards glaring example of not  entering raw materials and sub-component imported by vendors under SRO 655 but on the contrary all the component imported by assemblers have been assigned part II of the 12th Schedule of Section 148.

    This high handedness that weaker and SMEs segment not being well connected in the FBR committees are not being accommodated for otherwise on high reasonable ground.

    Other manufacturers also claimed continued ignorance of their requests pending with FBR with zero response.

    Tax structure on import of tea requiring rationalization was also put to the notice of Chairman FBR. Notices have become multiplied after the split of IRS commissionrates from earlier single unit to changed multiple units has eroded the concept of facilitation through One-Window.

    The same showcase notice is now originating from various windows opened in IRS.  The attention of Chairman FBR was also invited by the FPCCI towards the requirement of independence of tax judicial system, which presently negates the constitution and is pending since long for implementation in order to be constitutional compliant.

  • FBR chairman assures customs agents of expeditious consignment clearance

    FBR chairman assures customs agents of expeditious consignment clearance

    KARACHI: Mohammad Javed Ghani, Chairman, Federal Board of Revenue (FBR) on Monday assured the customs clearing agents of expeditious consignment clearance by deputing additional staff at the customs station.

    Karachi Customs Agents Association (KCAA) in a statement said that in order to resolve certain issues relating to exports and imports the delegation of the association  led by its President Wasiq Hussain Khan, General Secretary Mehmood ul Hasan Awan, Former President and Chief Coordinator Export Mohammad Amin Essani and Former General Secretary Arshad Khurshid held a meeting with the FBR Chairman Mohammad Javed Ghani at Large Taxpayers Office (LTO) Karachi.

    This meeting was also attended by the honorable Chief Collector South (Appraisement & Facilitation) Madam Surriya Ahmed Butt and Chief Collector South (Enforcement & Compliance) Dr. Saifuddin Junejo, wherein the agenda points submitted by the KCAA was discussed in details. 

    The FBR Chairman gave a very patient hearing to the problems being faced by the Customs Agents. The delegation of Karachi Customs Agents Association is very much appreciated of the sympathetic attitude of the Chairman FBR.

    He issued instructions with regards to the agenda points as highlighted by KCAA, which are as under: 

     Shortage of Staff. It was assured that sufficient number of staff will be deputed by the FBR at all Collectorate in order to avoid delay in the clearance of import and export consignments. 

    In order to avoid long delay in the process of contravention with regard to the export shipments. The Chairman FBR instructed to expedite the process of contravention meanwhile the adjudication of exports shipment would be finalized within the Export Collectorate instead of forwarding to Adjudication Collectorate. 

    Formation of Joint Committees: Upon request of KCAA, the Honorable Chairman approved that under the supervision of Chief Collectors joint committees should be formed comprising of Customs Officials including two representatives of Karachi Customs Agents Association respectively in each committee, in order to address issues being faced by the trade.

     It was also decided that once a month meeting of the said joint committees will be arranged by the collectorate. 

    Regarding blocking of Customs Agents Licenses, the worthy Chairman directed to the concerned quarter that matter should be reviewed in the meeting of joint committee on merit, in order to avoid unnecessary blocking of customs agent’s license until and unless the customs agents proved guilty after final decision by the concerned authorities.  

    KCAA grateful for the positive attitude and certainly appreciate for the prompt decisions taken by the worthy Chairman FBR for the betterment of our beloved country’s economy.

  • Rupee gains three paisas in interbank forex market

    Rupee gains three paisas in interbank forex market

    KARACHI: The Pak Rupee gained three paisas against the dollar on Monday owing to improved inflows of workers’ remittances and export payments, dealers said.

    The rupee ended Rs159.07 to the dollar from last Friday’s closing of Rs159.10  in the interbank foreign exchange market.

    Currency dealers said that the market witnessed higher demand of the foreign currency due to market was opened after two weekly holidays.

    However, inflows of workers’ remittances and export payments helped the rupee to make gains.

    They said that due to fall in coronavirus cases the market was remained optimistic and dollar demand for import payment was gradually rising.

    They, however, optimistic that the inflows of export receipts and workers’ remittances would help the local unit to gain values in coming days.

  • Foreign direct investment plunges by 27 percent in seven months

    Foreign direct investment plunges by 27 percent in seven months

    KARACHI: The foreign direct investment FDI) has declined by $432 million or 27 percent during first seven months of the current fiscal year as compared with same months of the last fiscal year, State Bank of Pakistan (SBP) said on Monday.

    The net inflows of FDI fell to $1.145 billion during July – January 2020/2021 as compared with $1.577 billion in the corresponding months of the last fiscal year.

    The inflows of FDI were at $1.792 billion during the period under review as compared with $2.04 billion in the corresponding period of the last fiscal year. Similarly, the outflows increased by 39.5 percent to $647 million during July – January 2020/2021 as compared with $464 million in the same period of the last fiscal year.

    The portfolio investment in the capital market witnessed massive outflow during the period under review. The outflows from the capital market recorded $237 million during first seven months of the current fiscal year as compared with inflow of $21.5 million in the corresponding months of the last fiscal year.

    The overall investment, including foreign public investment, fell by 78 percent to $755 million during first seven months of the current fiscal year as compared with $3.438 billion in the corresponding period of the last fiscal year.