Pkrevenue.com

Author: Faisal Shahnawaz

  • PIA shows 46% revenue decline in half year

    PIA shows 46% revenue decline in half year

    KARACHI: Pakistan International Airlines Corporation Limited on Friday announced 46 per cent decline in net revenue for the half year ended June 30, 2021.

    The airline recorded net revenue of Rs27.64 billion for the half year (January – June) 2021 as compared with Rs51.47 billion in the same half of the last year.

    However, the losses of the company reduced sharply during the period. The net losses of the airline came down to Rs25 billion for the half year ended June 30, 2021 as compared with Rs36.536 billion in the corresponding half of the last year.

    The airline said the cost of services reduced to Rs36.84 billion for the half year under review as compared with Rs55.7 billion in the same half of the last year.

    Out of cost of services, the cost on aircraft fuel fell to Rs7.63 billion as compared with Rs14.65 billion.

    Meanwhile, other costs of services, including salaries, wages and allowances also came down to Rs29.21 billion in the first half of 2021 as compared with Rs41 billion in the same half of the last year.

    Administrative expenses fell to Rs2.59 billion when compared with Rs3.09 billion.

    The airline made an exchange gain of Rs1.32 billion as compared with loss of Rs9.76 billion in the same half of the last year.

  • Philip Morris declares 37% growth in half year net profit

    Philip Morris declares 37% growth in half year net profit

    KARACHI: Philip Morris (Pakistan) Limited on Friday declared over 37 per cent growth in net profit for the half year ended June 30, 2021.

    Philip Morris (Pakistan) Limited is one of the largest manufacturers of cigarettes in the country.

    The company posted a profit after tax at Rs1.72 billion for the six months period ended June 30, 2021 as compared with Rs1.25 billion in the same period of the last year.

    According to the half yearly report issued by the company, Pakistan’s economy has started gaining momentum and we appreciate the Government’s efforts in this regard especially towards ease of doing business, growth in large scale manufacturing, strengthening of governance, widening tax net etc.

    However, the spread of new variants (locally and globally) amidst the ongoing fourth wave of the pandemic might pose a risk to this growth trajectory. While dealing with the pandemic our priority remained the safety of our employees and stakeholders.

    In line with the Government directives, the company encouraged the employees for vaccination and the Company’s offices across the Country are operational with relevant SOPs in place with the close monitoring of the pandemic situation.

    No change in excise rates on cigarettes during federal budget 2020/2021 proved to be positive for Government Revenue and the Company’s contribution to the National Exchequer during fiscal year (July’20-Jun’21) in the form of excise duty, sales tax and other government levies, which stood at PKR 24,052 million (higher by 18.7 per cent compared to the previous fiscal year July’19-Jun’20). No change in excise rates during the fiscal year 2020/21 also led to consumer price stability of the legitimate cigarette brands.

    However, the issue of non-tax paid illicit cigarettes continues to have a detrimental effect with a market share of approximately 40% (which in 2013 was 23%) resulting in an annual loss of PKR 70-77 billion (estimated) to the national exchequer. The past decade has witnessed a growth of local cigarette manufacturers across Pakistan (including AJK) manufacturing over 100+ brands, selling at a lower price than the minimum price prescribed under tax laws for the purposes of levy and collection of federal excise duty i.e. PKR 63 per pack.

    Such products can be found in the market being sold between PKR 25 to PKR 38 per pack. In addition to violating the tax laws, these manufacturers continue to advertise and incentivize cigarette smokers to purchase their brands by offering cash prizes, gifts and travel opportunities, which is a violation under tobacco advertisement control guidelines issued by the Federal Ministry of National Health Services Regulations and Coordination.

    During the six months ended June 30, 2021, despite all the challenges above, the Company’s net turnover stood at PKR 9,224 million reflecting an increase of 4.7% versus the same period last year. During the six months, the Company’s contribution to the National Exchequer, in the form of excise duty, sales tax and other government levies, stood at PKR 14,435 million (higher by 15.5% compared to the same period last year) reflecting 60% of half-yearly Gross Turnover.

    The Company recorded Profit After Tax of PKR 1,720 million for the six months ended Jun 30, 2021 (compared to Profit After Tax of PKR 1,253 million for the same period last year) equivalent to 7.2% of half-yearly Gross Turnover.

    Distribution & Marketing expenses showed an increase over the prior year reflecting our continued commitment to allocating resources for initiatives behind building brands and route to market activities whilst remaining compliant with applicable laws that can earn the best returns coupled with lower expenses in Q2’20 driven by COVID 19 lockdown measures.

    Further, the company continues to find efficiencies in Administrative Expenses to ensure the increase remains under inflation.

    During the period, we continued our efforts to engage with the Government highlighting concerns towards the illicit sector and lack of a level playing field. The announcement of the Federal Budget 2021/22 in Jun’21 saw unaltered excise rates on cigarettes which can continue to support Government Revenues during the ongoing fiscal year and the stability of the consumer prices of legitimate cigarettes brands.

    Further, in the Finance bill 2021/22 a requirement to obtain brand registration certificates for specified sectors was also tabled and is now being formalized with the issuance of Sales Tax General Order (STGO) dated August 3, 2021 which requires manufacturers of specified goods including tobacco to obtain brand registration certificates.

    Furthermore, the Company is pleased to observe that the Government has made strides in creating checks and balances for goods coming in from the Azad Jammu & Kashmir (AJ&K) trade route to ensure proper taxation of goods arriving in Pakistan. We also continue to support the introduction of the Track and Trace system and strongly urge the Government for its sooner implementation as it will be an effective tool to supplement enforcement efforts against tax evasion.

  • Pakistan’s budget deficit shrinks to 7.1% in FY21

    Pakistan’s budget deficit shrinks to 7.1% in FY21

    KARACHI – Pakistan’s fiscal performance for the fiscal year 2020/2021 has shown encouraging signs as the budget deficit has reduced to 7.1 percent of the GDP compared to 8.1 percent in the preceding fiscal year.

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  • Rupee gains 19 paisas against dollar on inflows

    Rupee gains 19 paisas against dollar on inflows

    KARACHI: The Pak Rupee (PKR) gained 19 paisas against the dollar on Friday owing to inflows of export receipts and workers’ remittances.

    The PKR ended at Rs165.62 to the dollar as compared with the previous day’s closing of Rs165.82 in the interbank foreign exchange market.

    Currency experts said that the market witnessed sufficient supply of dollars from export receipts and workers’ remittances. The dollar inflows helped the rupee to make gains.

    They however said that demand for import payment remained high due to last trading of the day.

    Rupee makes 47 paisas recovery against dollar
  • SBP issues customers exchange rates on August 27

    SBP issues customers exchange rates on August 27

    KARACHI, August 27, 2021: The State Bank of Pakistan (SBP) has unveiled the latest exchange rates for customers on Friday, August 27, 2021.

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  • Taxation on permanent establishment in Pakistan

    Taxation on permanent establishment in Pakistan

    Section 105 of the Income Tax Ordinance, 2001 explains the taxation on non-resident persons established as permanent residents.

    The Federal Board of Revenue (FBR) issued the Income Tax Ordinance, 2001 updated up to June 30, 2021. The Ordinance incorporated amendments brought through Finance Act, 2021.

    Following is the text of Section 105 of the Income Tax Ordinance, 2001:

    105. Taxation of a permanent establishment in Pakistan of a non-resident person.— (1) The following principles shall apply in determining the income of a permanent establishment in Pakistan of a non-resident person chargeable to tax under the head “Income from Business”, namely: —

    (a) The profit of the permanent establishment shall be computed on the basis that it is a distinct and separate person engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the non-resident person of which it is a permanent establishment;

    (b) subject to this Ordinance, there shall be allowed as deductions any expenses incurred for the purposes of the business activities of the permanent establishment including executive and administrative expenses so incurred, whether in Pakistan or elsewhere;

    (c) no deduction shall be allowed for amounts paid or payable by the permanent establishment to its head office or to another permanent establishment of the non-resident person (other than towards reimbursement of actual expenses incurred by the non-resident person to third parties) by way of:

    (i) royalties, fees or other similar payments for the use of any tangible or intangible asset by the permanent establishment;

    (ii) compensation for any services including management services performed for the permanent establishment; or

    (iii) profit on debt on moneys lent to the permanent establishment, except in connection with a banking business; and

    (d) no account shall be taken in the determination of the income of a permanent establishment of amounts charged by the permanent establishment to the head office or to another permanent establishment of the non-resident person (other than towards reimbursement of actual expenses incurred by the permanent establishment to third parties) by way of:

    (i) royalties, fees or other similar payments for the use of any tangible or intangible asset;

    (ii) compensation for any services including management services performed by the permanent establishment; or

    (iii) profit on debt on moneys lent by the permanent establishment, except in connection with a banking business.

    (2) No deduction shall be allowed in computing the income of a permanent establishment in Pakistan of a non-resident person chargeable to tax under the head “Income from Business” for a tax year for head office expenditure in excess of the amount as bears to the turnover of the permanent establishment in Pakistan the same proportion as the non-resident’s total head office expenditure bears to its worldwide turnover.

    (3) In this section, “head office expenditure” means any executive or general administration expenditure incurred by the non-resident person outside Pakistan for the purposes of the business of the Pakistan permanent establishment of the person, including —

    (a) any rent, local rates and taxes excluding any foreign income tax, current repairs, or insurance against risks of damage or destruction outside Pakistan;

    (b) any salary paid to an employee employed by the head office outside Pakistan;

    (c) any travelling expenditures of such employee; and

    (d) any other expenditures which may be prescribed.

    (4) No deduction shall be allowed in computing the income of a permanent establishment in Pakistan of a non-resident person chargeable under the head “Income from Business” for —

    (a) any profit paid or payable by the non-resident person on debt to finance the operations of the permanent establishment; or

    (b) any insurance premium paid or payable by the non-resident person in respect of such debt. (Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)

  • Taxability of expenses incurred on foreign income

    Taxability of expenses incurred on foreign income

    Section 104 of the Income Tax Ordinance, 2001 explains the taxability of expenses incurred on foreign income.

    The Federal Board of Revenue (FBR) issued the Income Tax Ordinance, 2001 updated up to June 30, 2021. The Ordinance incorporated amendments brought through Finance Act, 2021.

    Following is the text of Section 104 of the Income Tax Ordinance, 2001:

    104. Foreign losses.— (1) Deductible expenditures incurred by a person in deriving foreign-source income chargeable to tax under a head of income shall be deductible only against that income.

    (2) If the total deductible expenditures referred to in sub-section (1) exceed the total foreign source income for a tax year chargeable to tax under a head of income (hereinafter referred to as a “foreign loss”), the foreign loss shall be carried forward to the following tax year and set off against the foreign source income chargeable to tax under that head in that year, and so on, but no foreign loss shall be carried forward to more than six tax years immediately succeeding the tax year for which the loss was computed.

    (3) Where a taxpayer has a foreign loss carried forward for more than one tax year, the loss for the earliest year shall be set off first.

    (4) Section 67 shall apply for the purposes of this section on the basis that —

    (a) income from carrying on a speculation business is a separate head of income; and

    (b) foreign source income chargeable under a head of income (including the head specified in clause (a)) shall be a separate head of income.

    (Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)

    Tax credit on residents’ foreign income
  • Tax credit on residents’ foreign income

    Tax credit on residents’ foreign income

    Section 103 of the Income Tax Ordinance, 2001 explains the tax credit on residents’ foreign income. The Federal Board of Revenue (FBR) issued the updated Income Tax Ordinance, 2001.

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  • Tax exemption on foreign source of income

    Tax exemption on foreign source of income

    Section 102, outlines the tax exemption on foreign-source income for resident individuals, underlining the importance of foreign income tax payments in the exemption process.

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  • Taxation of geographical source of income

    Taxation of geographical source of income

    Section 101 of the Income Tax Ordinance, 2001 explains about the taxation of the geographical source of income.

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