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Category: Budget 2022-2023

  • Pakistan grants 5-year tax exemption to promote film industry

    Pakistan grants 5-year tax exemption to promote film industry

    ISLAMABAD: Pakistan has granted five-year tax exemption on income derived from cinema operations in order to promote local film industry.

    The tax exemption has been granted under Income Tax Ordinance, 2001 by amendment made through Finance Act, 2022.

    READ MORE: Advance tax on immovable property enhanced by 100%

    The Federal Board of Revenue (FBR), the apex tax collecting agency of Pakistan, issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments introduced through the Finance Act, 2022 to the Income Tax Ordinance, 2001.

    The FBR said that in order to promote local film industry, following new measures have been introduced:

    (i) Five years tax exemption has been granted by inserting clause (151) in Part I of Second Schedule to the Income Tax Ordinance 2001 to a person who derives any income from cinema operations, starting from the commencement of cinema operations.

    READ MORE: FBR explains changes in advance tax on motor vehicles

    (ii) Through insertion of clause (153) in Part I of Second Schedule to the Ordinance, exemption has been granted to profit and gains derived by a resident producer or a resident production house from production of feature films during the period from July 01, 2022 to June 30, 2027.

    READ MORE: Pakistan introduces automated system for withholding tax payments

    (iii) Similarly, exclusion from provisions of section 148 of the Income Tax Ordinance, 2001 has been provided through insertion of Clause (12P) in Part IV of Second Schedule on import of machinery and equipment as listed in serial no. 32 of Part-I of Fifth Schedule to the Customs Act, 1969 subject to the conditions and limitations specified therein.

    (iv) Moreover, through insertion of clause (43H) in Part IV of Second Schedule, exclusion from the provisions of clause (b) of sub-section (1) of section 153 has been provided to an exhibitor or a distributor of a feature film, as payer, on payment made to a distributor, producer or importer of feature film.

    READ MORE: Tax imposed on foreign payments made by exchange companies

  • Advance tax on immovable property enhanced by 100%

    Advance tax on immovable property enhanced by 100%

    ISLAMABAD: The rate of advance tax on sale and purchase of immovable property has been enhanced by 100 per cent.

    The tax rate has been enhanced on property transaction through Finance Act, 2022.

    READ MORE: FBR explains changes in advance tax on motor vehicles

    The FBR issued Income Tax Circular No. 15 of 2022/2023 to explain major amendments brought through Finance Act, 2022 to Income Tax Ordinance, 2001.

    The FBR said that the rate of advance tax on sale or transfer and on purchase or transfer of immovable property has been enhanced from 1 per cent to 2 per cent.

    READ MORE: Pakistan introduces automated system for withholding tax payments

    Moreover, sub-section (3) of section 236C of the Income Tax Ordinance, 2001 has been omitted.

    “Now advance tax on sale or transfer of immovable property will be collected under this section irrespective of holding period,” the FBR added.

    READ MORE: Tax imposed on foreign payments made by exchange companies

    Meanwhile, in case of purchaser of immovable property who is not appearing on the active taxpayers list, rate of tax to be collected under section 236K of the Income Tax Ordinance, 2001 will increase by two hundred and fifty (250) per cent of the rate specified in Division XVIII of Part IV of First Schedule.

    Necessary change has been incorporated in rule 1 of Tenth Schedule to the Income Tax Ordinance 2001, the FBR added.

    READ MORE: Minimum tax for commercial importers enhanced: FBR

  • FBR explains changes in advance tax on motor vehicles

    FBR explains changes in advance tax on motor vehicles

    ISLAMABAD: The Federal Board of Revenue (FBR) has explained changes made to advance tax on motor vehicles through Finance Act, 2022.

    The FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments brought through Finance Act, 2022 to the Income Tax Ordinance, 2001.

    The FBR said that provision of section 231B of Income Tax Ordinance, 2001 was limited to private motor vehicles. The scope of withholding tax has now been enhanced though omission of the word ‘private’ from the heading and elsewhere in the section.

    READ MORE: Pakistan introduces automated system for withholding tax payments

    Further, an inclusive definition of motor vehicle has been provided in the substituted sub-section (7) of section 231B with following exclusions:

    (i) a motor vehicle used for public transportation, carriage of goods and agriculture machinery;

    (ii) a rickshaw or a motorcycle rickshaw and

    (iii) any other motor vehicle having engine capacity up to 200cc.

    READ MORE: Tax imposed on foreign payments made by exchange companies

    Except motor vehicles mentioned at i, ii and iii above, provision of section 231B will apply on motor vehicles of all makes and models irrespective of its private or commercial use by the end users.

    The FBR further said that the withholding tax amount required to be collected at the time of purchase or registration of motor vehicle has been enhanced with engine capacity of 1601cc and above.

    In cases of electric vehicles where engine capacity of a vehicle is not available and value of vehicle is rupees five million or more, the amount of tax collected will be 3 per cent of import value as increased by customs duty, sales tax and federal excise duty in case of imported vehicles or invoice value in case of locally manufactured or assembled vehicles.

    READ MORE: Minimum tax for commercial importers enhanced: FBR

    Rates of tax required to be collected at the time of transfer of registration or ownership of a motor vehicles have been provided in clause (2) in the Table in Division VII of Part IV of First Schedule of the Ordinance.

    A new proviso has been inserted whereby a vehicle in which engine capacity is not applicable (electric vehicles) and the value of said vehicle is rupees five million or more, then tax amount of rupees twenty thousand will be collected at the time of transfer of registration or ownership of such vehicle.

    READ MORE: Tax through electricity connections on retailers, service providers

    In case of a person not appearing in active taxpayer list, tax collectible under this section will increase by two hundred percent. Necessary change has been incorporated in rule 1 of Tenth Schedule of the Ordinance, the FBR added.

  • Pakistan introduces automated system for withholding tax payments

    Pakistan introduces automated system for withholding tax payments

    ISLAMABAD: Pakistan has introduced an automated system for real-time payment for withholding tax. The system has been introduced through the Finance Act, 2022 by making amendment to the Income Tax Ordinance, 2001.

    The Federal Board of Revenue (FBR), the apex tax collecting agency of Pakistan, issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments introduced through the Finance Act, 2022 to the Income Tax Ordinance, 2001.

    READ MORE: Tax imposed on foreign payments made by exchange companies

    The FBR said that currently, withholding agents are required to collect and deduct tax at the time of making payment and deposit the same in government treasury within the prescribed time period.

    Similarly, withholding agents are required to file quarterly and annual withholding statements which consumes time and resources of taxpayers leading to increased compliance cost.

    Moreover, certain large withholding tax agents like banks, DISCOs, TELCOs, Government institutions etc. are still depositing tax through a single payment receipt for multiple taxpayers.

    READ MORE: Minimum tax for commercial importers enhanced: FBR

    “In order to streamline withholding tax collection and deduction mechanism, enabling provision for the placement of a fully automated system by the name Synchronized Withholding Administration and Payment System (SWAPS) has been introduced under section 164A of the Ordinance,” the FBR said.

    A withholding agent notified under section 164A will be called a SWAPS agent.

    The notified SWAPS agent will be integrated with Board and withholding tax will be deposited in government treasury on real time basis simultaneously at the time of making third party payment processed through SWAPS by the SWAPS agent.

    READ MORE: Tax through electricity connections on retailers, service providers

    It will also result in auto populated withholding statements thereby saving time and reducing cost of compliance for the business.

    SWAPS Payment Receipt (SPR) will be generated upon deposit of tax in this manner which will be a valid document for the purpose of claiming credit against tax payable under the provisions of this Ordinance.

    In case if a notified SWAPS agent fails to integrate with the Board in the manner prescribed, the said agent will not be eligible for credit under Part X of Chapter III of the Ordinance and exemption under any of the provisions of the Ordinance.

    READ MORE: FBR explains income tax on export of services

    All other provisions of the Ordinance not specifically dealt with in newly inserted section 164A will mutatis mutandis apply on a notified SWAPS agent.

    Corresponding changes have been made in section 164 of the Ordinance.

  • Tax imposed on foreign payments made by exchange companies

    Tax imposed on foreign payments made by exchange companies

    ISLAMABAD: The Federal Board of Revenue (FBR) has said that tax has been imposed on foreign payments made by exchange companies.

    The FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments brought through Finance Act, 2022 to the Income Tax Ordinance, 2001.

    READ MORE: Minimum tax for commercial importers enhanced: FBR

    The FBR said that two new sub-sections (1DC) and (1DD) have been inserted in section 152 of the Income Tax Ordinance 2001.

    Under sub-section (DC), service charges/commission/fee, by whatever name called, paid by an exchange company licensed by the State Bank of Pakistan (SBP) to a non-resident person has been brought under the tax net.

    READ MORE: Tax through electricity connections on retailers, service providers

    Now these exchange companies have been made liable to deduct tax at the time of making payment of service charges or commission or fee to the global money transfer operators, international money transfer operators or such other persons engaged in international money transfers or cross-border remittances for facilitating outward remittances.

    READ MORE: FBR explains income tax on export of services

    Similarly, under sub-section (1DD), every banking company has been made liable to deduct tax at the time of making payment to card network company or payment gateway or any other person, on any transaction fee or licensing fee or service charges or commission or fee by whatever name called or interbank financial telecommunication services.

    This final tax on the income of non-resident person and rates have been provided in Division IV of Part I of First Schedule. Corresponding changes in this regard have been made in sections 6 and 8 of the Ordinance.

    READ MORE: FBR restores 100% depreciation deduction

  • Minimum tax for commercial importers enhanced: FBR

    Minimum tax for commercial importers enhanced: FBR

    ISLAMABAD: The Federal Board of Revenue (FBR) said that withholding tax for commercial importers has been enhanced to 3.5 per cent from 2 per cent.

    The FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments introduced through Finance Act, 2022 to the Income Tax Ordinance, 2001.

    READ MORE: Tax through electricity connections on retailers, service providers

    The FBR said that the rate of withholding tax on import of goods falling in Part II of Twelfth Schedule of the Ordinance has been enhanced from 2 per cent to 3.5 per cent for commercial importers, which shall be minimum tax.

    Following changes have been incorporated with regard to withholding tax on import under section 148 of the Income Tax Ordinance 2001.

    READ MORE: FBR explains income tax on export of services

    Withholding tax on imports collected at 1 per cent and 2 per cent on goods falling under Part I and II of Twelfth Schedule to the Ordinance respectively is adjustable for an industrial undertaking if goods have been imported for own use. In numerous circumstance, goods imported by an industrial undertaking for own use may fall under Part III of Twelfth Schedule to the Ordinance on which tax at 5.5 per cent is collectible at import stage. This resulted in a situation whereby tax collected at 5.5 per cent on import of goods by an industrial undertaking for its own use became minimum tax. For the purpose of streamlining, tax collectible from an industrial undertaking on import of all goods for own use has been made adjustable.

    READ MORE: FBR restores 100% depreciation deduction

    Tax collectible under section 148 on import of edible oil, packaging material, paper and paper board, and plastics has been made minimum tax whether imported by an industrial undertaking for own use or by a commercial importer.

    Certain goods have been shifted from Part II to Part I of the Twelfth Schedule. The goods included in Part I are subject to tax at 1 per cent irrespective of import by industrial undertaking or commercial importers.

    READ MORE: FBR notifies graduated tax rates on disposal of securities

  • Tax through electricity connections on retailers, service providers

    Tax through electricity connections on retailers, service providers

    ISLAMABAD: The Federal Boar of Revenue (FBR) has issued explanation to tax collection through electricity connections from retailers and service providers.

    In this regard the FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments introduced through the Finance Act, 2022 to the Income Tax Ordinance, 2001.

    The FBR said that in order to collect income tax from certain retailers and specified service providers a special fixed tax regime has been introduced though insertion of section 99A of the Income Tax Ordinance, 2001.

    READ MORE: FBR explains income tax on export of services

    Now retailers, other than Tier-I retailers as defined in Sales Tax Act, 1990, and specified service providers will pay fixed income tax through their commercial electricity bills which has been provided in clause (3) of Division IV of Part IV of First Schedule to the Ordinance in the following manner:

    Where the gross amount of monthly bill does not exceed Rs30,000: the tax rate shall be Rs3,000

    Where the gross amount of monthly bill exceeds Rs30,000 but does not exceed Rs50,000: the tax rate shall be Rs 5,000.

    READ MORE: FBR restores 100% depreciation deduction

    Where the gross amount of monthly bill exceeds Rs50,000 but does not exceed Rs100,000: the tax rate shall Rs.10,000.

    Retailers and service providers as notified by the Board in the income tax general order: the tax shall be up to Rs.200,000.

    The FBR said that this is final tax on the income of persons covered in this section in respect of business being carried out from the premises for which tax is collected under this section.

    READ MORE: FBR notifies graduated tax rates on disposal of securities

    Retailers from whom tax has been collected in terms of sub-section (9) of section 3 of Sales Tax Act, 1990 shall not be required to pay tax under section 99A of the Ordinance and the tax collected under the Sales Tax Act, 1990 is also a final discharge of income tax liability under section 99A of the Ordinance.

    The Board with the approval of Minister in-charge is empowered to determine the scope, mode, manner, record keeping, mechanism of collection and deduction etc and to include or exempt any person or class of person, any income or class of income though issuance of income tax general order for the purpose of this section.

    READ MORE: FBR applies separates CGT rates on immovable properties

    Furthermore, enabling provision has been provided by inserting sub-section (1A) in section 235 of the Ordinance to collect tax through electricity bills from retailers other than Tier-I retailers as defined in Sales Tax Act, 1990 and specified service providers for the purpose of this section.

    The FBR issued another Circular No. 09 of 2022/2023 (Sales Tax, Federal Excise and ICT tax on service). According to this circular, the fixed tax regime for the retailers has been rationalized and now instead of percentage of the amount of monthly electricity bill, tax shall be charged on their monthly electricity bills as; Rs. 3000 for monthly bill upto Rs30,000, Rs5,000 if the monthly bill exceeds Rs30,000 but does not exceed Rs50,000 and Rs10,000 for monthly bill over Rs50,000.

    This shall constitute full and final discharge of tax liability of such persons under both Income Tax Ordinance, 2001, and Sales Tax Act, 1990.

    However, these tax amounts shall be doubled if the name of the retailer is not appearing on the Active Taxpayers List (ATL) issued by the Board under section 181A of the Income Tax Ordinance, 2001 on the date of issuance of monthly electricity bill, the FBR added.

    In addition to the above, the Board has been empowered to notify through a Sales Tax General Order (STGO) persons or class of persons required to discharge their sales tax liability through payment of a fixed amount along with their monthly electricity bills.

  • FBR explains income tax on export of services

    FBR explains income tax on export of services

    ISLAMABAD: The Federal Board of Revenue (FBR) has explained income tax treatment on export of services as amended through Finance Act, 2022.

    The FBR issued Income Tax Circular No. 15 of 2022/2023 to explain the important amendments brought through the Finance Act, 2022 to the Income Tax Ordinance, 2001.

    The revenue body said that a special regime u/s 154A of the Income Tax Ordinance, 2001 for export of IT and IT enabled services was introduced though Finance Act, 2021 whereby 1 per cent final tax was collected on realization of export proceeds of these services.

    READ MORE: FBR restores 100% depreciation deduction

    Moreover, hundred percent tax credit was available against this final tax to the exporters of IT and IT enabled services u/s 65F upon fulfilling few conditions mentioned therein.

    In order to simplify the tax regime for exporters of IT and IT enabled services, the 100 per cent tax credit regime under section 65F of the Ordinance has been withdrawn and a reduced rate of final tax of 0.25 per cent has been provided for exporters of IT and IT enabled services who are registered with the Pakistan Software Export Board (PSEB).

    READ MORE: FBR notifies graduated tax rates on disposal of securities

    Corresponding changes in section 65F have been made accordingly. Furthermore, scope of definitions of IT services and IT enabled services contained in clause (30AD) and clause (30AE) of section 2 of the Ordinance has been clarified and widened through the Finance Act, 2022.

    READ MORE: FBR applies separates CGT rates on immovable properties

    The FBR said previously, the amount of foreign commission due to an indenting commission agent was charged to tax, at the rate of 5 per cent, under sub-section (2) of section 154 of the Ordinance. Now, this rate has been reduced to 1 per cent by incorporating clause (da) in sub-section (1) of section 154A of the Ordinance. Corresponding changes have been made in section 154 accordingly.

    READ MORE: FBR explains tax on deemed income from immovable property

    Moreover, provisions of Tenth Schedule will not apply on tax collectible under section 154A of the Ordinance. Necessary change has been incorporated in rule 10 of Tenth Schedule in this regard, the FBR added.

  • FBR restores 100% depreciation deduction

    FBR restores 100% depreciation deduction

    The Federal Board of Revenue (FBR) has announced the restoration of the 100 percent depreciation deduction for depreciable assets used in a business for the first time.

    (more…)
  • FBR notifies graduated tax rates on disposal of securities

    FBR notifies graduated tax rates on disposal of securities

    ISLAMABAD: The Federal Board of Revenue (FBR) has notified rate of capital gain tax as introduced through Finance Act, 2022 and effective from July 01, 2022.

    The FBR issued Income Tax Circular No. 15 of 2022-2023 to explain important amendment made through the Finance Act, 2022 to the Income Tax Ordinance, 2001.

    The FBR said that a separate block of taxation of capital gains on disposal of securities is available under the Ordinance.

    READ MORE: FBR applies separates CGT rates on immovable properties

    Earlier, flat tax rate of 12.5 per cent was applicable on gain on disposal of securities irrespective of holding period.

    Now graduated tax rates have been provided with respect to securities acquired after July 01, 2022, by substituting the Table in Division VII of Part I of First Schedule as under:

    01. For holding period less than 1 year: the tax rate shall be 15 per cent.

    READ MORE: FBR explains tax on deemed income from immovable property

    02. For holding period from 1 year to 2 years: the tax rate shall be 12.5 per cent.

    03. For holding period from 2 years to 3 years: the tax rate shall be 10 per cent.

    04. For holding period from 3 years to 4 years: the tax rate shall be 7.5 per cent.

    READ MORE: Super tax to apply for Tax Year 2022 and onwards: FBR

    05. For holding period from 4 years to 5 years: the tax rate shall be 5 per cent.

    06. For holding period from 5 years to 6 years: the tax rate shall be 2.5 per cent.

    07. For holding period more than 6 years: the tax rate shall be zero per cent.

    08. Future commodity contracts entered into by members of Pakistan Mercantile Exchange: the tax rate shall be five per cent.

    READ MORE: Pakistan enhances income tax rates for banks

    However, gain on disposal of securities acquired on or before 30th day of June, 2022 will continue to be charged to tax at the earlier flat rate of 12.5 per cent irrespective of the holding period, the FBR added.