Author: Faisal Shahnawaz

Finance Bill 2019: FTR abolished on stock brokers’ commission

ISLAMABAD: The government has withdrawn Final Tax Regime (FTR) for stock brokers for the purpose of taxation on commission earned by them. The proposal has been presented through Finance Bill, 2019 before the Parliament.

In the budget 2019/2020 the government has taken several measures to plug loopholes of those avenues which were promoting black economy.

The elimination of FTR for stock brokers was also part of it. Now the tax brokerage commission would become under minimum tax regime.

The present government through Finance Supplementary (Second Amendment) Act, 2019 allowed the FTR on brokerage commission on the demand of stock brokers.

However, the ongoing review of Financial Action Task Force (FATF) regarding money laundering and black money the government had no choice but to withdraw FTR and presumptive tax regime.

With the proposed elimination of the FTR the brokers will liable to provide details of investors from whom they drive brokerage income.

Besides, stock brokers would also require to file complete income tax returns providing all details of their business transactions.

June 12, 2019
Finance Bill 2019: Amnesty on immovable property purchase withdrawn

ISLAMABAD: The government has withdrawn a permanent amnesty for not explaining the source of investment in purchasing immovable properties.

The government has proposed to withdraw this provision through Finance Bill, 2019 as part of budget 2019/2020, presented on Tuesday.

The Federal Board of Revenue (FBR) in its income tax salient features said that 3 percent tax for not explaining the source of investment is being withdrawn.

Section 236W was introduced to Income Tax Ordinance, 2001 through Income Tax (Fourth Amendment) Act, 2016 dated December 02, 2016. This section was granted immunity from declaring source of investment for the purchase of immovable properties.

The FBR said that in Pakistan the Real Estate sector is one of the biggest sources of money laundering and is used as a parking lot for untaxed as well as ill-gotten money.

In view of this a wide range of steps have been taken to restructure the taxation of this sector.

The various steps being taken are as under:-

(i) At present, the Board has issued valuation tables of immovable properties in 21 major cities wherein such properties are valued at a value higher than the DC rates. The purchasers are also required to pay 3 percent tax on the difference between the DC value and FBR value of property to explain the source of investment to the extent of differential between FBR value and DC value. The rates notified by the Board are still considerably lower than actual market value. It is therefore intended that FBR rates of immovable properties would be taken closer to or about 85 percent of actual market value.

(ii) As the increase in FBR values of immovable property is going to increase the incidence of tax on genuine buyers and sellers, the rate of withholding tax on purchase of immovable property is being reduced from 2 percent to 1 percent.

(iii) At present, withholding tax on purchase of property is attracted only if the value of property is more than four million rupees. The threshold of four million rupees is being abolished and withholding tax on purchase is to be collected irrespective of the value of property.

(iv) At present, there is no withholding tax on sale of property if the property is held for a period of more than three years. Since capital gain is to be taxed under normal tax regime even beyond the period of three years, withholding tax on sale of property would be collected where the holding period is up to five years.

(v) Presently the law imposes restriction on registration or transfer of property having fair market value exceeding rupees five million in the name of a non-filer. The aforesaid restriction placed on purchase of immovable property is being withdrawn.

June 12, 2019
Finance Bill 2019: Final Tax Regime withdrawn

ISLAMABAD: The government has decided to withdraw Final Tax Regime (FTR) and bring various sectors into the documented economy.

The FTR has been proposed to be abolished through Finance Bill, 2019 as part of budget 2019/2020, which was presented on Tuesday.

The Federal Board of Income tax by its inherent nature is tax charged and levied on income.

However presently persons involved in certain transactions are not required to pay tax on their actual profit.

Instead, the tax collected or deducted on these transactions is treated as final tax liability.

This regime is available persons to such as commercial importers, commercial suppliers of goods, contractors, persons deriving brokerage or commission income and persons earning income from CNG stations.

“The tax collected or deducted from the aforesaid persons shall now be treated as minimum tax liability except for exporters, persons winning prizes and sellers of petroleum products.”

This measure is designed as a first step for gradual phasing out of the final tax regime and transition to income based taxation for all persons.

June 12, 2019

Finance Bill 2019: Tax card for business individuals, salary income less than 75pc for tax year 2020

ISLAMABAD: The government has proposed new tax slabs for business individuals in tax year 2020 through Finance Bill 2019.

The tax card will also be applicable in case of salary persons where total salary income is less than 75 percent of the total income.

The Finance Bill 2019 was presented on Tuesday as part of federal budget 2019/2020.

Following are the tax card for business individuals and salaried persons having salary income less than 75 percent:

S. No	Taxable Income	Rate of Tax
01	Where taxable income does not exceed Rs400,000	0%
02	Where taxable income exceeds Rs400,000 but does not exceed Rs600,000	5% of the amount exceeding Rs. 600,000
03	Where taxable income exceeds Rs600,000 but does not exceed Rs1,200,000	Rs10,000 plus 10% of the amount exceeding Rs600,000
04	Where taxable income exceeds Rs1,200,000 but does not exceed Rs2,400,000	Rs70,000 plus 15% of the amount exceeding Rs1,200,000
05	Where taxable income exceeds Rs2,400,000 but does not exceed Rs3,000,000	Rs. 250,000 plus 20% of amount exceeding Rs2,400,000
06	Where taxable income exceeds Rs3,000,000 but does not exceed Rs4,000,000	Rs370,000 plus 25% of the amount exceeding Rs3,000,000
07	Where taxable income exceeds Rs4,000,000 but does not exceed Rs6,000,000	Rs620,000 plus 30% of the amount exceeding Rs4,000,000
08	Where taxable income exceeds Rs6,000,000	Rs1,220,000 plus 35% of the amount exceeding Rs6,000,000

June 12, 2019

Budget 2019/2020: sales tax zero-rating abolished

ISLAMABAD: The government has abolished sales tax zero-rated by rescinding SRO 1125(I)/2011 for export sectors. However, new mechanism of refund has been introduced which would be paid at the time of realization of exports.

SRO 1125(I)/2011 provides for zero-rate of sales tax on inputs and products of five export-oriented sectors i.e. textile, leather, carpets, sports goods and surgical goods.

The objective was to resolve delay in refund payments. However, zero7 rating has created loophole and the benefit is being availed by unintended beneficiaries / non-exporters. Reduced rates for finished goods is also harming revenues.

Huge misuse of SRO on import of fabric and processed fabrics has been reported. To streamline and prevent revenue leakage SRO 1125 is being rescinded.

SRO 1125 be rescinded, thus restoring standard rate of 17 percent on items covered under SRO.

The rate of sales tax on local supplies of finished articles of textile and leather and finished fabric may be raised from current 6 percent for integrated businesses, and 9 percent for others, to 15 percent and 17 percent, respectively.

Zero-rating of utilities (gas, electricity and fuels) allowed to these export oriented sectors through various sales tax general orders be withdrawn.

Refund of sales tax to these sectors be automated, thus ensuring that the sales tax paid on inputs is immediately refunded. Refund Payment Orders (RPOs) shall be immediately sent to SBP for payment as soon as these are generated.

Ginned cotton which is presently exempt is proposed to be subjected to reduced rate of 10 percent

In addition to above, it is also proposed to rescind notification No. SRO. 769 (I)/2009, dated 4th September, 2009, which grants zero-rating on import and supply of polyethylene and polypropylene for manufacture of mono filament yarn and net cloth, being similar in nature to SRO 1125, and that granting zero-rating to local supplies is to be discouraged.

June 11, 2019
Budget 2019/2020: salary, pension increased up to 10 percent

ISLAMABAD: The government has announced increase up to 10 percent in salary and pension in the federal budget 2019/2020.

Hammad Azhar, State Minister for Revenue presented Budget 2019/2020 on Tuesday and announced following relief measures for government employees and pensioners.

Ad-hoc Relief Allowance at 10 percent on running Basic Pay of BPS 2017 to civil government employees in BPS grade 1 to 16, and employees of Armed Forces Civil employees BPS 17 – 20 will be given ad-hoc Relief Allowance at 5 percent.

Civil employees in BPS 21 and 22 will receive no increase in pay as they have decided to sacrifice for the sake of improvement in economic situation of the country.

Increase in net pension at 10 percent will be given to all civil and armed forces pensioners of federal government.

Special conveyance allowance for disabled employees will be enhanced from Rs.1,000 per month to Rs.2,000 per month.

Special pay admissible to SPS/PS/APS to Ministers, Ministers of State, Parliamentary Secretaries, Additional Secretaries, and Joint Secretaries will be enhanced by 25 percent.

In addition to the above, minimum wage is being increased to Rs.17,500 per month.

June 11, 2019
Budget 2019/2020 at glance

ISLAMABAD: Following is the glance of budget 2019/2020.

June 11, 2019
Budget 2019/2020 with massive tax burden presented

ISLAMABAD: The present government on Tuesday presented its first budget with total outlay of Rs 7,022 billion for the fiscal year 2019-2020, registering growth of 30 percent against the revised budget of Rs 5.385 trillion for current fiscal year (2018-2019).

State Minister for Revenues Hammad Azhar presented the budget in the National Assembly, amid protest by the Opposition parties.

The minister said that total federal revenues have been estimated at Rs 6,717 billion which is 19 percent higher than the previous year’s revenues of Rs 5,661 billion.

The collection of revenues by Federal Board of Revenue (FBR), he said are estimated to be recorded at Rs 5,555 billion which are 12.6 percent of Gross Domestic Product (GDP). In order to achieve the revenue collection target the government introduced massive budgetary measures across the board.

The minister of state said out of total revenue collections, an amount of Rs 3.255 trillion would be distributed among the provinces under 7th National Finance Commission (NFC) Award which is 32 percent higher than the current year’s share of Rs 2.465 trillion.

He said Net Federal Revenues for the upcoming fiscal year have been estimated at Rs 3.46 trillion against the revenues of Rs 3.07 trillion during current fiscal year which is 13 percent higher.

Similarly, he said the federal budget deficit would be Rs 3.56 trillion whereas the provincial budget surplus is estimated to be at Rs 423 billion for the year 2019-2020.

June 11, 2019
Rupee weakens by Rs1.36 against dollar

KARACHI: The Pak Rupee weakened by Rs1.36 against the US dollar on Tuesday as demand persists for import payment.

The rupee closed at Rs151.47 to the dollar from previous day’s close of Rs150.11 in interbank foreign exchange market.

Currency experts said that the rupee declined due to weak economic conditions.

They said that the economic survey launched yesterday presented bleak picture of Pakistan’s economy.

The exchange rate also witnessed depreciation in rupee value.

The buying and selling of dollar was recorded at Rs151.00/Rs152.00 from previous day’s closing of Rs150.10/Rs150.40 in cash ready market.

June 11, 2019
Government borrows Rs3.2 trillion from SBP in 10 months: Economic Survey

ISLAMABAD: The government has borrowed Rs3.2 trillion from State Bank of Pakistan (SBP) for budget financing during first ten months of current fiscal year, Economic Survey of Pakistan revealed.

The survey released a day earlier stated that during July 01, 2018-April 26, 2019 government borrowed Rs 1,073.0 billion for budgetary support compared to Rs 850 billion in the same period last year, of which, government has borrowed from SBP Rs 3,204.7 billion as compared to Rs 1,316.1 billion last year.

On the other hand, government retired Rs 2,131.7 billion to scheduled banks against retirement of Rs 466.1 billion in last year. Net government sector borrowing thus remained at Rs 908.0 billion during the period under review compared with Rs 813.6 billion last year.

During the period 01 Jul-26 Apr, FY2019 money supply (M2) increased by Rs 625.3 billion (growth of 3.9 percent) compared with Rs 601.8 billion (4.1 percent) in comparable period of last year.

Net Domestic Assets (NDA) is the main contributor to M2 growth.

Net Foreign Assets (NFA) point contribution is negative and stood at (-5.5 percent) during the period under review compared with (-3.3 percent) in the same period last year.

NDA point contribution has increased to 9.4 percent compared with 7.4 percent last year. NDA point contribution growth partially offset by NFA negative growth, thus overall money supply grew by 3.9 percent during the period under review.

On the other hand, reserve money posted an expansion of Rs 488.0 billion (growth of 8.9 percent) during 01 Jul-26 Apr, FY2019 against Rs 260.5 billion (5.4 percent) last year.

SBP’s NDA posted a growth of 22.5 percent compared with 18.18 percent during the same period last year, whereas, SBP’s NFA decreased by Rs 743.8 billion compared with contraction of Rs 473.7 billion in the comparable period last year.

Therefore, reserve money growth stemmed from NDA of the SBP whereas NFA outstanding stock remained negative during the period under review.

Within Broad Money, NFA of the banking sector further contracted to Rs 882.4 billion during 01 Jul-26 Apr, FY2019. During same period last year, it was contracted by Rs 475.4 billion.

Therefore, SBA and scheduled bank’s NFA remained negative during the period under review.

During the period 01 Jul-26 Apr, FY2019 NDA of the banking sector registered an expansion of Rs 1,507.7 billion (growth of 9.3 percent) compared with Rs 1,077.2 billion (7.7 percent) during the comparable period last year.

NDA of SBP increased by Rs 1,132.5 billion as compared with Rs 661.5 billion during same period last year.

The NDA of scheduled banks witnessed an expansion of Rs 375.1 billion compared to expansion of Rs 415.7 billion in the same period of last year.

Government sector borrowing and private sector credit mutually impacted NDA growth of the banking system, which was more than offset the contraction in NFA of the banking system.

Consequently, broad money growth increased to 3.9 percent during 01 Jul-26 Apr, FY2019 as compared to 4.1 percent during the comparable period last year.

Credit to Public Sector Enterprises (PSEs) increased by Rs 312.1 billion during the period 01 Jul-26 Apr, FY2019 against Rs 153.2 billion during the same period of last year.

June 11, 2019