Category: Budget

This is parent category of budgets presented by Pakistan government. Here you will find year-wise federal and provincial budgets.

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.

July 24, 2022
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

July 24, 2022
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

July 24, 2022
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.

July 23, 2022
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.

July 23, 2022
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.
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July 23, 2022
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.

July 23, 2022
FBR applies separates CGT rates on immovable properties

ISLAMABAD: The Federal Board of Revenue (FBR) has implemented capital gain tax on disposal of immovable properties as amended through Finance Act, 2022.

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

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

The FBR said that earlier, the gain arising on the disposal of immovable property after the holding period of 4 years was exempt from tax.

Now the holding period concession will separately apply which for open plots is six years, for constructed property is four years and for flats is two years.

Further, whole amount of gain on disposal of immovable property will be taxable at graduated rates provided in Division VIII of Part I of First Schedule of the Ordinance given as under:

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

01. Where the holding period does not exceed one year: the tax rate for open plots shall be 15 per cent; for constructed property at 15 per cent; and for flats 15 per cent.

02. Where the holding period exceeds one year but does not exceed two years: the tax rate for open plots shall be 12.50 per cent; for constructed property at 10 per cent; and for flats at 7.5 per cent.

03. Where the holding period exceeds two years but does not exceed three years: the tax rate for open plots shall be 10 per cent; for constructed property at 7.5 per cent; and zero per cent for flats.

READ MORE: Pakistan enhances income tax rates for banks

04. Where the holding period exceeds three years but does not exceed four years: the tax rate for open plots shall be 7.5 per cent; for constructed property at 5 per cent; and zero per cent for flats.

05. Where the holding period exceeds four years but does not exceed five years: the tax rate for open plots shall be 5 per cent; zero per cent for constructed property; and zero per cent for flats.

06. Where the holding period exceeds five years but does not exceed six years: the tax rate for open plot shall be 2.5 per cent; zero per cent for constructed property; and zero per cent for flats.

07. Where the holding period exceeds six years: the tax rate shall be zero for open plots, constructed property and flats.

READ MORE: Declaring beneficial owner made mandatory for companies, AOPs

The concessional taxation regime for capital gains has been made applicable only to disposal of immovable properties situated in Pakistan.

The benefit of holding period and concessional rate of tax is not available in respect of capital gains arising on disposal of immoveable property situated outside Pakistan.

Furthermore, to streamline capital gains taxation regime, the concessions earlier available under sub-sections (3) and (3A) of section 37 in terms of reduction in capital gain by certain percentages on disposal of capital assets held for more than one year has been withdrawn.

READ MORE: Pakistan reintroduces capital value tax on motor vehicles

Sub-section (4A) of section 37 has been omitted.

Accordingly, non-recognition provision of section 79 will apply to determine the cost of acquisition on transfer of capital asset under the circumstances contained therein.

July 23, 2022
FBR explains tax on deemed income from immovable property

ISLAMABAD: The Federal Board of Revenue (FBR) has explained the new introduced tax on deemed income through Finance Act, 2022.

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

The FBR said that a new section 7E has been introduced through Finance Act, 2022 whereby for tax year 2022 and onwards, a resident person is treated to have derived income equal to five per cent of fair market value of the capital assets situated in Pakistan which will be chargeable to tax at the rate of 20 per cent under Division VIIIC of Part I of First Schedule of the Ordinance.

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

Following exclusions have been provided to which this section will not apply:

(i) One capital asset owned by the resident person;

(ii) Self-owned business premises from where the business is carried out by the persons appearing on the active taxpayer’s list at any time during the year;

READ MORE: Pakistan enhances income tax rates for banks

(iii) Self-owned agriculture land where agriculture activity is carried out by the person but excluding farmhouse and annexed land. Farmhouse has been defined in this section;

(iv) Capital asset allotted to —

(a) A Shaheed or dependents of a Shaheed belonging to Pakistan Armed Forces;

(b) A person or dependents of a person who dies while in the service of Pakistan armed forces or federal or provincial government;

READ MORE: Declaring beneficial owner made mandatory for companies, AOPs

(c) A war wounded person while in service of Pakistan armed forces or federal or provincial government;

(d) An ex-serviceman and serving personnel of armed forces or ex-employees or serving personnel of federal and provincial governments who are original allotees of the capital asset as duly certified by the allotment authority;

(v) Any property from which income is chargeable to tax under the Ordinance and tax leviable has been paid;

(vi) Capital asset in the first year of acquisition on which tax under section 236K has been paid;

READ MORE: Pakistan reintroduces capital value tax on motor vehicles

(vii) Where fair market value of the capital assets in aggregate excluding capital assets mentioned in serial nos. (i) to (vi) above does not exceed rupees twenty-five million;

(viii) Capital assets which are owned by a provincial government or local government;

(ix) Capital assets owned by local authority, a development authority, builders and developers for land development and construction subject to the condition that such persons are registered with Directorate General of Designated Non-Financial Businesses and Professions.

July 23, 2022

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

ISLAMABAD: The Federal Board of Revenue (FBR) on Thursday said that super tax will be applicable for tax year 2022 and onwards.

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

The FBR said that a new section 4C to Income Tax Ordinance, 2001 has been introduced through Finance Act, 2022 and this section will apply for tax year 2022 and onwards.

Except for the persons whose income as envisaged in this section is below Rs150 million, all other persons including those assessed under Fourth, Fifth and Seventh Schedules to the Ordinance are liable to pay super tax on graduated rates ranging from 1% to 4% based on graduated income slabs provided in Division JIB of Part I of First Schedule given as under:

S. No.	Income under Section 4C	Rate of Tax
1.	Where income does not exceed Rs150 million	0% of the income
2.	Where income exceeds Rs150 million 1% of the income but does not exceed Rs200 million	1% of the income
3.	Where income exceeds Rs200 million 2% of the income but does not exceed Rs250 million	2% of the income
4.	Where income exceeds Rs250 million but does not exceed Rs300 million	3% of the income
5.	Where income exceeds Rs300 million	4% of the income

However, for tax year 2022 the rate of super tax under this section will be 10% instead of 4%, where the income of the persons engaged, partly or wholly, in business of airlines, automobiles, beverages, cement, chemicals, cigarette & tobacco, fertilizer, iron & steel, LNG terminal, oil marketing, oil refining, petroleum & gas exploration and production, pharmaceuticals, sugar and textiles exceeds Rs.300 million. For tax year 2023, this super tax on income of banking companies will be 10% if the income for the year exceeds Rs. 300 million.

For the purposes of this section, the income will be the sum of the following:

(i) Profit on debt, dividend, capital gains, brokerage, and commission;

(ii) Taxable income (other than brought forward depreciation and brought forward business losses) under section 9 of the Ordinance, excluding amounts specified in (i) above;

(iii) Imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i) above; and

(iv) Income computed, other than brought forward depreciation, brought forward amortization and brought forward business losses under Fourth, Fifth and Seventh Schedule.

Super tax payable under this section will be paid on the date and manner as specified in under section 137(1) of the Ordinance.

In case of default by the person liable to pay super tax under this section, Commissioner through an order in writing will determine the liability of the person and proceed to recover the same under applicable provisions of the Ordinance, the FBR added.

July 21, 2022