Category: Budget 2022-2023

Pakistan slaps 45% corporate tax on banks

ISLAMABAD: Pakistan has slapped corporate income tax at 45 per cent on banks, which is raised from 35 per cent.

The country presented its federal budget on June 10, 2022 and introduced tax measures for boosting revenue collection.

READ MORE: Tax rates for business individuals, AOPs during TY2023

Through Finance Bill, 2022 the tax rate for banking companies have been proposed to increase to 45 per cent from existing 35 per cent.

In this regard, the bill proposed amendment to Division II, Part I of First Schedule of the Income Tax Ordinance, 2001.

Proposed Rates of Tax for Companies

READ MORE: Pakistan reintroduces advance tax on foreign payments

The rate of tax imposed on the taxable income of a company shall be as set out in the following Table, namely:-

Type of Company Rate of Tax
Small company 20%
Banking company 45%
Any other company 29%

Following are the existing rates of tax for corporate entities for tax year 2022:

(i) The rate of tax imposed on the taxable income of a company for the tax year 2007 and onward shall be 35%:

Provided that the rate of tax imposed on the taxable income of a company other than a banking company, shall be 34% for the tax year 20145:

READ MORE: Exchange companies to withhold tax on payment to MTOs

Provided further that the rate of tax imposed on the taxable income of a company, other than a banking company, shall be 33% for the tax year 2015:

“Provided further that the rate of tax imposed on taxable income of a company, other than banking company shall be 32% for the tax year 2016, 31% for tax year 2017, 30% for tax year 2018 and 29% for tax year 2019 and onwards.

READ MORE: Salaried persons denied adjustments against deduction

(iii) where the taxpayer is a small company as defined in section 2, tax shall be payable at the rate of 25%:

Provided that for tax year 2019 and onwards tax rates shall be as set out in the following Table, namely:—

Tax year Rate of Tax
2019 24%
2020 23%
2021 22%
2022 21%
2023 and onwards 20%”

June 12, 2022

Tax rates for business individuals, AOPs during TY2023

ISLAMABAD: Finance Bill, 2022 has proposed to revise tax rates for business individuals and Association of Persons (AOPs) during Tax year 2023.

The government presented its federal budget 2022/2023 and introduced various changes to taxation laws to ensure documentation and plug revenue leakages.

Through Finance Bill, 2022 the basic exemption of tax on income of individuals and AOPs has been increased to Rs600,000 from Rs400,000.

Following is the proposed tax card for business individuals and AOPs.

Sr. No.	Taxable Income	Rate of Tax
1.	Where taxable income does not exceed Rs. 600,000/	0 per cent
2.	Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 800,000	5 per cent of the amount exceeding Rs. 600,000
3.	Where taxable income exceeds Rs. 800,000 but does not exceed Rs. 1,200,000	Rs. 10,000 + 12.5 per cent of the amount exceeding Rs. 800,000
4.	Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,400,000	Rs.60,000 + 17.5 per cent of the amount exceeding Rs. 1,200,000
5.	Where taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,000,000	Rs. 270,000 + 22.5 per cent of the amount exceeding Rs. 2,400,000
6.	Where taxable income exceeds Rs. 3,000,000 but does not exceed Rs. 4,000,000	Rs. 405,000 + 27.5 per cent of the amount exceeding Rs. 3,000,000
7.	Where taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 6,000,000	Rs. 680,000 + 32.5 per cent of the amount exceeding Rs. 4,000,000
8.	Where taxable income exceeds Rs. 6,000,000	Rs. 1,330,000 + 35 per cent of the amount exceeding Rs. 6,000,000.”

Following are the existing rates of tax for Individuals and Association of Persons for tax year 2022:

(1) Subject to clause (2), the rates of tax imposed on the income of every individual and association of persons except a salaried individual shall be as set out in the following Table, namely:—

1. Where taxable income does not exceed Rs. 400,000: the tax rate shall be zero per cent.

2. Where the taxable income exceeds Rs. 400,000 but does not exceed Rs. 600,000: the tax rate shall be 5 per cent of the amount exceeding Rs. 400,000.

3. Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000: the tax rate shall be Rs. 10,000 plus 10 per cent of the amount exceeding Rs. 600,000.

4. Where taxable income exceeds Rs.1,200,000 but does not exceed Rs. 2,400,000: the tax rate shall be Rs. 70,000 plus 15 per cent of the amount exceeding Rs. 1,200,000.

5. Where taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,000,000: the tax rate shall be Rs. 250,000 plus 20 per cent of the amount exceeding Rs. 2,400,000.

6. Where taxable income exceeds Rs. 3,000,000 but does not exceed Rs. 4,000,000: the tax rate shall be Rs. 370,000 plus 25 per cent of the amount exceeding Rs. 3,000,000.

7. Where taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 6,000,000: the tax rate shall be Rs. 620,000 plus 30 per cent of the amount exceeding Rs. 4,000,000.

8. Where taxable income exceeds Rs. 6,000,000: the tax rate shall be Rs. 1,220,000 plus 35 per cent of the amount exceeding Rs. 6,000,000.

June 12, 2022

Pakistan reintroduces advance tax on foreign payments

ISLAMABAD: Pakistan has reintroduced advance tax on foreign payments made through credit, debit or prepaid cards. The advance tax has been revived through Finance Bill, 2022.

The country presented its federal budget 2022/2023 on June 10, 2022 and made several amendments in tax laws to broaden tax base and plug revenue leakages.

READ MORE: Exchange companies to withhold tax on payment to MTOs

The Finance Bill, 2022 proposed to reintroduce Section 236Y of the Income Tax Ordinance, 2001. The section was omitted through Finance Act, 2021.

Following is the proposed amendment in the Income Tax Ordinance, 2001:

READ MORE: Salaried persons denied adjustments against deduction

“236Y. Advance tax on persons remitting amounts abroad through credit or debit or prepaid cards.—(1) Every banking company shall collect advance tax, at the time of transfer of any sum remitted outside Pakistan, on behalf of any person who has completed a credit card or debit card or prepaid card transaction with a person outside Pakistan at the rate specified in Division XXVII of Part IV of the First Schedule.

READ MORE: New ADR mechanism introduced to facilitate taxpayers

(2) The advance tax collected under this section shall be adjustable.”

The Finance Bill 2022 proposed advance tax rate on amount remitted abroad through credit, debit or prepaid cards under section 236Y shall be 1 per cent of the gross amount remitted abroad.

READ MORE: FBR to disable mobile SIMs on non-filing of tax returns

June 12, 2022
Exchange companies to withhold tax on payment to MTOs

ISLAMABAD: Exchange companies have been brought under the ambit of withholding tax and now they are required to deduct tax on payment to international money transfer operators (MTOs).

The change has been proposed through budget 2022/2023, which was presented on June 10, 2022.

Through Finance Bill, 2022 amendments suggested to Section 152 of the Income Tax Ordinance, 2001.

READ MORE: Salaried persons denied adjustments against deduction

According to amendments, new sub-sections have been proposed:

“(1DC) Every exchange company licensed by the State Bank of Pakistan shall deduct tax at the time of making payment of service charges or commission or fee, by whatever name called, 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, at the rates given in Division IV, Part I of the First Schedule:

READ MORE: New ADR mechanism introduced to facilitate taxpayers

Provided that where such person retains service charges or commission or fee, by whatever name called from the amount payable to the exchange company on any account, the exchange company shall be deemed to have paid the service charges or commission or fee, by whatever name called and the exchange company shall collect the tax accordingly.

(1DD) Every banking company while making payment to card network company or payment gateway or any other person, of any transaction fee or licensing fee or service charges or commission or fee by whatever name called or interbank financial telecommunication services, shall deduct tax at the rates given in Division IV, Part I of the First Schedule:

READ MORE: FBR to disable mobile SIMs on non-filing of tax returns

Provided that where card network company or payment gateway or any other person retains money in relation to aforementioned services from the amount payable to the banking company on any account, the banking company shall be deemed to have paid the amount and the banking company shall collect the tax accordingly.”;

According to Income Tax Ordinance, 2001 updated up to June 30, 2021, the rate of tax imposed under section 6 on payments to non-residents shall be 15 per cent of the gross amount of the royalty or fee for technical services and 5 per cent of the gross amount of the fee for offshore digital services.

READ MORE: Pakistan amends tax laws to legalize money transfers

June 12, 2022
Salaried persons denied adjustments against deduction

ISLAMABAD: Salaried persons have been denied adjustment of tax credits against the deduction at source. The amendment has been introduced through Finance Bill, 2022.

The government on June 10, 2022 presented federal budget 2022/2023 and announced various taxation measures.

The Finance Bill, 2022 proposed amendment to sub-section 1 of Section 149 of Income Tax Ordinance, 2001.

READ MORE: New ADR mechanism introduced to facilitate taxpayers

Under the present laws, employers are required to deduct / withholding tax at the time of payment to their employees. The employers are also authorized to adjust withholding tax paid by employees against other source of income.

However, through the proposed amendment employers would not be allowed to adjust deduction under Section 62, 63 and 64.

Finance Bill also recommended changes in Alternate Dispute Resolution (ADR).

Through the Finance Bill, 2022 amendment to Section 134A of Income Tax Ordinance, 2001 has been suggested.

READ MORE: FBR to disable mobile SIMs on non-filing of tax returns

The text of proposed amended Section 134A is as follow:

“134A. Alternative Dispute Resolution. — (1) Notwithstanding any other provision of the Ordinance, or the rules made thereunder, an aggrieved person in connection with any dispute pertaining to—

READ MORE: Pakistan amends tax laws to legalize money transfers

(a) the liability of tax of one hundred million and above against the aggrieved person or admissibility of refund, as the case may be;

(b) the extent of waiver of default surcharge and penalty; or

(c) any other specific relief required to resolve the dispute; may apply to the Board for the appointment of a committee for the resolution of any hardship or dispute mentioned in detail in the application, which is under litigation in any court of law or an Appellate Authority, except where criminal proceedings have been initiated.

READ MORE: Fixed tax rates for retailers, payable through electricity bills

June 12, 2022
Pakistan restores final tax regime for importers

ISLAMABAD: The present coalition government has accepted demand of business community and in the budget 2022/2023 brought importers back into final tax regime.

Through Finance Bill, 2022 important amendment has been suggested to Section 148 of the Income Tax Ordinance, 2001.

READ MORE: New ADR mechanism introduced to facilitate taxpayers

Previously, PTI government after consultation with manufacturers and other stakeholders brought the importers into minimum tax regime through Finance Act, 2019.

The importers were brought into the minimum tax regime after arguments that the importers were misusing the tax incentives as the final tax regime was not subject to audit and returns. The importers are required to file a statement only under the FTR.

READ MORE: FBR to disable mobile SIMs on non-filing of tax returns

The Finance Bill, 2022 proposed to make amendment in sub-section 7 of Section 148 of the Income Tax Ordinance, 2001 to substitute the word ‘minimum’ with the word ‘final’.

A new section 7A to Income Tax Ordinance has also been proposed, which is:

“(7A) Notwithstanding anything contained in sub-section (7), the tax required to be collected under this section shall be minimum tax on the income every person arising from imports of following goods –

READ MORE: Pakistan amends tax laws to legalize money transfers

(i) edible oil;

(ii) packaging material;

(iii) paper and paper board; or

(iv) plastics:

Provided that the Board with the approval of Minister in-charge may, by a notification in the official Gazette, add any entry thereto or omit any entry therefrom or amend any entry therein this sub-section.”

READ MORE: Fixed tax rates for retailers, payable through electricity bills

June 12, 2022
New ADR mechanism introduced to facilitate taxpayers

ISLAMABAD: A new mechanism of Alternate Dispute Resolution (ADR) has been introduced through Finance Bill, 2022 to facilitate taxpayers.

The government on June 10, 2022 presented the federal budget 2022/2023. Through the budget various taxation measures and facilitation steps have been taken.

Through the Finance Bill, 2022 amendment to Section 134A of Income Tax Ordinance, 2001 has been suggested.

The text of proposed amended Section 134A is as follow:

READ MORE: FBR to disable mobile SIMs on non-filing of tax returns

“134A. Alternative Dispute Resolution. — (1) Notwithstanding any other provision of the Ordinance, or the rules made thereunder, an aggrieved person in connection with any dispute pertaining to—

(a) the liability of tax of one hundred million and above against the aggrieved person or admissibility of refund, as the case may be;

(b) the extent of waiver of default surcharge and penalty; or

(c) any other specific relief required to resolve the dispute; may apply to the Board for the appointment of a committee for the resolution of any hardship or dispute mentioned in detail in the application, which is under litigation in any court of law or an Appellate Authority, except where criminal proceedings have been initiated.

READ MORE: Pakistan amends tax laws to legalize money transfers

(2) The application for dispute resolution shall be accompanied by an initial proposition for resolution of the dispute, including an offer of tax payment, from which, the applicant would not be entitled to retract.

(3) The Board may, after examination of the application of an aggrieved person, appoint a committee, within forty five days of receipt of such application in the Board, comprising,—

(i) Chief Commissioner Inland Revenue having jurisdiction over the case;

(ii) person to be nominated by the taxpayer from a panel notified by the Board comprising –

(a) chartered accountants, cost and management accountants and advocates having a minimum of ten years’ experience in the field of taxation;

READ MORE: Fixed tax rates for retailers, payable through electricity bills

(b) officers of the Inland Revenue Service who have retired in BS 21 or above; or

(c) reputable businessmen as nominated by Chambers of Commerce and Industry:

Provided that the taxpayer shall not nominate a Chartered Accountant or an advocate if the said Chartered Accountant or the advocate is or has been an auditor or an authorized representative of the taxpayer; and

(d) person to be nominated through consensus by the members appointed under (i) and (ii) above, from the panel as notified by the Board in (ii) above:

Provided that where the member under this clause cannot be appointed through consensus, the

Board may nominate a member proposed by the taxpayer eligible to be nominated as per clause (ii).

(4) The aggrieved person, or the Commissioner, or both, as the case may be, shall withdraw the appeal pending before any court of law or an Appellate Authority, after constitution of the committee by the Board under sub-section (3), in respect of dispute as mentioned in sub-section (1).

(5) The committee shall not commence the proceedings under sub-section (6) unless the order of withdrawal by the court of law or the Appellate Authority is communicated to the Board:

READ MORE: Pakistan amends laws to hunt tax evaders living abroad

Provided that if the order of withdrawal is not communicated within seventy five days of the appointment of the committee, the said committee shall be dissolved and provisions of this section shall not apply.

(6) The Committee appointed under sub-section (3) shall examine the issue and may, if it deems necessary, conduct inquiry, seek expert opinion, direct any officer of the Inland Revenue or any other person to conduct an audit and shall decide the dispute by majority, within one hundred and twenty days of its appointment:

Provided that in computing the aforesaid period of one hundred and twenty days, the period, if any, for communicating the order of withdrawal under sub-section (5) shall be excluded.

(7) The decision by the Committee under sub-section (6) shall not be cited or taken as a precedent in any other case or in the same case for a different tax year.

(8) The recovery of tax payable by a taxpayer in connection with any dispute for which a Committee has been appointed under sub-section (3) shall be deemed to have been stayed on withdrawal of appeal up to the date of decision by the Committee or the dissolution of the Committee whichever is earlier.

(9) The decision of the committee under sub-section (6) shall be binding on the Commissioner and the aggrieved person.

(10) If the Committee fails to decide within the period of one hundred and twenty days under sub-section (6), the Board shall dissolve the committee by an order in writing and the matter shall be decided by the court of law or the Appellate Authority which issued the order of withdrawal under sub-section (5) and the appeal shall be treated to be pending before such court of law or the Appellate Authority as if the appeal had never been withdrawn.

READ MORE: CGT up to 15% slapped on immovable properties

(11) The Board shall communicate the order of dissolution to the court of law or the Appellate Authority and the Commissioner.

(12) The aggrieved person, on receipt of the order of dissolution, shall communicate it to the court of law or the Appellate Authority, which shall decide the appeal within six months of the communication of said order.

(13) The aggrieved person may make the payment of income tax and other taxes as decided by the committee under sub-section (6) and all decisions, orders and judgments made or passed shall stand modified to that extent.

(14) The Board may prescribe the amount to be paid as remuneration for the services of the members of the Committee, other than the member appointed under clause (i) of sub-section (3).

(15) The Board may, by notification in the official Gazette, make rules for carrying out the purposes of this section.”

June 12, 2022
FBR to disable mobile SIMs on non-filing of tax returns

ISLAMABAD: Finance Bill 2022 has proposed to empower Federal Board of Revenue (FBR) to disable mobile phone SIMs of non-filers of annual tax return.

Besides, it is also proposed to empower the FBR to disconnect connections of electricity and gas of non-filers.

READ MORE: Pakistan amends tax laws to legalize money transfers

The amendment has been proposed though Budget 2022/2023, which was presented on June 10, 2022.

The Finance Bill, 2022 proposed insertion of Section 114B to the Income Tax Ordinance, 2001.

Following is the text of proposed amendment:

“114B. Powers to enforce filing of returns.— (1) Notwithstanding anything contained in any other law for the time being in force, the Board shall have the powers to issue income tax general order in respect of persons who are not appearing on active taxpayers’ list but are liable to file return under the provisions of the Ordinance.

READ MORE: Fixed tax rates for retailers, payable through electricity bills

(2) The income tax general order issued under sub-section (1) may entail any or all of the following consequences for the persons mentioned therein, namely:–

(a) disabling of mobile phones or mobile phone SIMS;

(b) discontinuance of electricity connection; or

(c) discontinuance of gas connection.

(3) The Board or the Commissioner having jurisdiction over the person mentioned in the income tax general order may order restoration of mobile phones, mobile phone SIMs and connections of electricity and gas, in cases where he is satisfied that —

READ MORE: Pakistan amends laws to hunt tax evaders living abroad

(a) the return has been filed; or

(b) person was not liable to file return under the provisions of the Ordinance.

(4) No person shall be included in the general order under sub-section (1) unless following conditions have been met with, namely:–

READ MORE: CGT up to 15% slapped on immovable properties

(a) notice under sub-section (4) of section 114 has been issued;

(b) date of compliance of the notice under sub-section (4) of section 114 has elapsed; and

(c) the person has not filed the return.

(5) The action under this section shall not preclude any other action provided under the provisions of the Ordinance.”

June 12, 2022
Pakistan amends tax laws to legalize money transfers

ISLAMABAD: Pakistan has amended tax laws to grant approval of legal banking channels to money transfer by money transfer operators and bureaus.

The country presented budget 2022/2023 on June 10, 2022 and amended tax laws to grant approval the money transfer made through operators, bureaus and exchange companies.

Through Finance Bill, 2022 amendment made to Section 111 of the Income Tax Ordinance, 2001. The Section 111 is related to undeclared money and assets.

An explanation has been proposed to sub-section 4 of Section 111 to the Income Tax Ordinance, 2001, which is as follow:

READ MORE: Fixed tax rates for retailers, payable through electricity bills

“Explanation.— For removal of doubt, it is clarified that the remittance through money service bureaus, exchange companies or money transfer operators shall be deemed to constitute foreign exchange remitted from outside Pakistan through normal banking channels as provided under this sub-section.”

Previously, the Federal Board of Revenue (FBR) on September 24, 2021 said that tax authorities will not ask source of foreign exchange not exceeding Rs5 million remitted through exchange companies (ECs) or money transfer operators.

READ MORE: Pakistan amends laws to hunt tax evaders living abroad

The FBR issued explanation to the Tax Laws (Third Amendment) Ordinance, 2021.

The revenue body said Section 111(4) of Income Tax Ordinance, 2001 provides exclusion from unexplained income or assets to any amount of foreign exchange remitted from outside Pakistan through normal banking channels not exceeding Rs5 million en-cashed into rupees by a scheduled bank.

The amendment through insertion of an explanation has now also treated remittances through Money Service Bureaus (MCBs), Exchange Companies (ECs) and Money Transfer Operators (MT0s) or other similar entities as foreign exchange remitted from outside Pakistan through normal Banking channels.

After a formal clarification from SBP, Circular No. 05 of 2022 was issued by the Board.

READ MORE: CGT up to 15% slapped on immovable properties

Through this amendment the FBR’s clarification has now been made part of legislation to facilitate foreign remittance and align the law with innovations that have taken place in the banking industry.

Through the Circular No. 05 of 2022, the FBR has withdrawn all the appeals pertaining to income tax exemption on inward foreign remittances.

“In order to win the trust of the taxpayers and spare the public resources for more productive use elsewhere, all departmental appeals filed on the strict sensu interpretation of the law, be withdrawn immediately, and no further appeals be filed if one all fours of this clarification,” according to the circular.

Further, all circulars and instructions issued on the matter previously issued stand rescinded, the FBR added.

June 12, 2022

Fixed tax rates for retailers, payable through electricity bills

ISLAMABAD: The government has announced a fixed tax regime for small retailers, which will be collected their monthly electricity bills.

The fixed tax regime has been proposed through budget 2022/2023, which was announced on June 10, 2022.

Through Finance Bill, 2022 amendment has been made to Income Tax Ordinance, 2001 to propose special provisions relating to payment of tax through electricity connections.

Finance Minister Miftah Ismail on the floor of the house while presenting the federal budget said a fixed tax regime for small retailers is being proposed wherein tax will be collected along with electricity bills along with simplified registration and reporting regime.

“The proposed tax will range from Rs.3000 to Rs.10,000 and this will be a final discharge of tax liability. I can reassure the business community that FBR will not probe further after payment of the fixed tax by a retailer,” the minister added.

Through the Finance Bill, 2022 a new Section 99A has been inserted to the Income Tax Ordinance, 2001, which is as follow:

“99A. Special provisions relating to payment of tax through electricity connections.

(1) Notwithstanding anything contained in the Ordinance, a tax shall be charged and collected from retailers other than Tier-I retailers as defined in Sales Tax Act, 1990 (VII of 1990) and specified service providers on commercial electricity connections at the rates provided in clause (2A) of Division IV, Part IV of the First Schedule.

(2) A retailer who has paid sales tax under sub-section (9) of section 3 of Sales Tax Act, 1990 (VII of 1990), shall not be required to pay tax under this section and the sales tax so paid shall constitute discharge of tax liability under this section.

(3) The tax collected or paid under this section shall be final tax on the income of persons covered under this section in respect of business being carried out from the premises where the electricity connection is installed.

(4) For the purposes of this section, Board with the approval of the Minister in-charge may issue an income tax general order to-

(a) provide the scope, time, payment, recovery, penalty, default surcharge, adjustment or refund of tax payable under this section in such manner and with such conditions as may be specified.

(b) provide record keeping, filing of return, statement and assessment in such manner and with such conditions as may be specified;

(d) include or exempt any person or classes of persons, any income or classes of income from the application of this section, in such manner and with such conditions as may be specified.”

The rate of tax leviable under section (99A), and collectable under sub section (1A) of Section 235 shall be as under:-

Gross amount of monthly bill	Tax
Where the amount does not exceed Rs. 30,000	Rs. 3000
Where the amount exceeds Rs. 30,000 but does not exceed Rs. 50,000	Rs. 5000
Where the amount exceeds Rs. 50,000 but doesnot exceed Rs. 100,000	Rs. 10,000
Specified retailers and service providers through Income Tax General Order	Rs.50,000

June 12, 2022

Type of Company	Rate of Tax
Small company	20%
Banking company	45%
Any other company	29%

Tax year	Rate of Tax
2019	24%
2020	23%
2021	22%
2022	21%
2023 and onwards	20%”