Author: Faisal Shahnawaz

Finance Bill 2019: Advance tax increased by 900 percent on renewal of license by arhatis

ISLAMABAD: The government has increased the advance tax by 900 percent (nine times) at the time of renewal of license by middleman of a commodity markets in agriculture sector.

The tax rates have been increased through Finance Bill, 2019 and may be applicable from July 01, 2019.

The Federal Board of Revenue (FBR) said that presently every market committee is required to collect advance tax from dealers, commission agents and arhatis at the time of issuance or renewal of licenses.

Now the tax rates are being increase for:

Class A from Rs10,000 to Rs100,000/-,

Class B from Rs7,500 to Rs75,000/-,

Class C from Rs5,000/- to Rs50,000; and

for any other category from Rs5,000/- to Rs50,000/-.

The tax has been collected under Section 236J of Income Tax Ordinance, 2001.

According to the section:

“236J. Advance tax on dealers, commission agents and arhatis etc.— (1) Every market committee shall collect advance tax from dealers, commission agents or arhatis, etc. at the rates specified in Division XVII of Part-IV of the First Schedule at the time of issuance or renewal of licences.

(2) The advance tax collected under sub-section (1) shall be adjustable.

(4) In this section “market committee” includes any committee or body formed under any provincial or local law made for the purposes of establishing, regulating or organizing agricultural, livestock and other commodity markets.”

June 13, 2019
Finance Bill 2019: Law proposed to initiate criminal proceedings against FBR officials

ISLAMABAD: The government has framed law to initiate criminal proceedings against officers and officials of Federal Board of Revenue (FBR) for committing corruption.

A new section 216A to Income Tax Ordinance, 2001 has been proposed through Finance Bill, 2019 as part of the budget 2019/2020 to initiate criminal proceedings against FBR officials.

The FBR said that in order to effectively check misuse of authority to gain financial benefit, a new enabling provision is being introduced to prescribe rules for initiating criminal proceedings against officers and officials of the Board who deliberately commit acts or fail to act for personal benefits.

Similar action would also be taken against persons who offer bribes or other financial benefits to the tax employees.

The proposed section is as follow:

“216A. Proceedings against persons.—(1) Subject to section 227, the Board shall prescribe rules for initiating proceedings including criminal proceedings against any authority mentioned in section 207 and officer of the Directorates General mentioned in Part II and Part III of Chapter XI including any person subordinate to the aforesaid authorities or officers of the Directorates General who willfully and deliberately commits or omits an act which results in personal benefits and undue advantage to the authority or the person or taxpayer or both.

(2) Where proceedings under sub-section (1) have been initiated against a person or authority, the Board shall simultaneously intimate the relevant Governmental agency to initiate criminal proceedings against the taxpayer.

(3) The proceedings under this section shall be without prejudice to any liability that the authority, person or taxpayer may incur under any other law for the time being in force.”

June 12, 2019
No provision for non-filers to purchase immovable property, motor vehicle: FBR

ISLAMABAD: Federal Board of Revenue (FBR) has said that no such provision was proposed through Finance Bill 2019 to allow non-filers to purchase immovable property or motor vehicles.

In a statement on Wednesday, the FBR strongly refuted the news appearing in some sections of press which states that the new Finance Bill has allowed the non-filers to purchase immovable property or cars.

The actual position is that the whole system of recognizing a non filer as a legal entity has been done away with in the new Finance Bill.

FBR has explained that under Income Tax Ordinance, every person earning taxable income ought to file his Income Tax Returns.

In case of failure of filing of Returns by persons involved in significant monetary transactions, a complete mechanism has been provided in the newly inserted 10th Schedule.

such persons will not only have to pay 100 percent more tax at Withholding stage but will also be automatically assessed to tax and his imputable income will be treated as concealed income liable to penalties and prosecution.

June 12, 2019
Rupee falls by 10 paisas on import demand

KARACHI: The Pak Rupee fell by 10 paisas against dollar on Wednesday owing to demand for import and corporate payments.

The rupee ended Rs151.57 to the dollar from previous day’s closing of Rs151.47 in interbank foreign exchange market.

The foreign exchange market was initiated in the range of Rs151.50 and Rs151.75. The market recorded day high of Rs152.00 and low of

Rs151.40 and closed at Rs151.57.

Currency experts said that the rupee would remain stable till the end of current fiscal year or June 30, 2019.

The exchange rate in open market also witnessed depreciation in rupee value.

The buying and selling of dollar was recorded at Rs151.30/Rs152.00 from previous day’s closing of Rs151.00/Rs152.00 in cash ready market.

June 12, 2019
Finance Bill 2019: tax rate enhanced up to 20pc on profit on debt

ISLAMABAD: The rate of tax has been increased up to 20 percent from 15 percent on profit on debt through Finance Bill, 2019.

The government has proposed increase in tax rates on profit on debt through Finance Bill 2019 as part of budget 2019/2020.

The tax rate has been increased to 15 percent from 10 percent where profit on debt does not exceed Rs5,000,000.

The tax rate has been increased to 17.5 percent from 12.5 percent where profit on debt exceeds Rs5,000,000 but does not exceed Rs25,000,000.

The tax rate has been increased to 20 percent from 15 percent where profit on debt exceeds Rs25,000,000 but does not exceed Rs36,000,000.

Presently the profit on debt is taxed separately and is not part of the income in normal tax regime.

According to the Federal Board of Revenue (FBR) the existing tax rates are 10 percent, 12.5 percent and 15 percent for slabs up to five million rupees, between five million to twenty five million rupees and above twenty five million rupees respectively.

The rates are being revised wherein tax rates for profit on debt not exceeding Rs 5 million shall be increased from 10 percent to 15 percent, between Rs 5 and 25 million tax rates shall be increased from 12.5 percent to 17.5 percent and from 25 to 36 million tax rates are being increased from 15 percent to 20 percent.

The rate of advance withholding tax on payment of profit on debt is also being enhanced from 10 percent to 15 percent.

Furthermore, the separate rates mentioned above would be applicable for profit on debt up to Rs.36 million and for amounts exceeding Rs. 36 million the profit on debt will be made part of the total income and taxed at normal rates.

June 12, 2019
Finance Bill 2019: turnover tax enhanced to 1.5 percent

ISLAMABAD: The rate of minimum turnover tax has been increased to 1.5 percent from 1.25 percent in the budget 2019/2020 presented a day earlier.

The Finance Bill, 2019 proposed to enhance the rate of minimum turnover tax

The Federal Board of Revenue (FBR) explained that presently minimum tax on turnover is charged at the rate of 1.25 percent of the turnover if taxable income is less than 1.25 percent of turnover.

Certain sectors have reduced rate of minimum tax at 0.2 percent, 0.25 percent and 0.5 percent of turnover.

The aforesaid rates of minimum tax are being enhanced from 1.25 percent to 1.5 percent, from 0.20 percent to 0.25 percent, from 0.25 percent to 0.3 percent and from 0.5 percent to 0.75 percent, respectively.

The following changes have been made in the minimum turnover tax for different sectors:

Minimum tax rate increased from 0.2 percent to 0.25 percent for:

(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; and

(d) Flour mills.

Minimum tax rate increased from 0.25 percent to 0.3 percent for motorcycle dealers registered under the Sales Tax Act, 1990.

Minimum tax rate increased from 0.5 percent to 0.75 percent for:

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

(b) Pakistani Airlines; and

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

(d) Dealers or distributors of fertilizer; and

(e) person running an online marketplace as defined in clause (38B) of section 2.

Minimum tax rate increased from 1.25 percent to 1.5 percent in all other cases.

June 12, 2019
Finance Bill 2019: late filer salary persons allowed ATL entry

ISLAMABAD: The government has allowed late filers to include Active Taxpayers List (ATL) after payment of penalty. Presently, as per law the late filers are not allowed to ATL entry till next tax year.

The government has proposed this relaxation through Finance Bill, 2019 as part of budget 2019/2020. The payment of penalty has been fixed Rs20,000 for companies, Rs10,000 for Association of Persons (AOPs), Rs3,000 for non-salaried persons and Rs1,000 for salaried persons.

The Federal Board of Revenue (FBR) while explaining the Finance Bill, 2019, said presently law prohibits placing a person’s name on the ATL for the year if the return is not filed within the due date.

Hence, a person who files a return of income after the due date would be subjected to higher tax rates meant for persons not appearing on ATL, for the ensuing year, creating a disincentive towards return filing.

“The condition of not placing name on ATL for the whole year is being abolished.”

Instead, such a person would be penalized by withholding any refund due to a late-filer in the tax year in which the return was filed late without incurring any liability of compensation for delayed refund.

Further, a nominal tax for placement on ATL after the due date of filing of return has been imposed as under:-

1. Company Rs. 20,000

2. Association of persons Rs. 10,000

3. Non-salaried individuals Rs. 3,000

4. Salaried individuals Rs. 1,000

June 12, 2019
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