Pkrevenue.com

Category: Budget

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

  • Pakistan enhances income tax rates for banks

    Pakistan enhances income tax rates for banks

    ISLAMABAD: Pakistan has enhanced tax rates for banks through amendments introduced through Finance Act, 2022.

    In this regard the apex tax agency of the country, i.e. Federal Board of Revenue (FBR) on Thursday issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments made to Income Tax Ordinance, 2001 through Finance Act, 2022.

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

    The FBR said that tax rates for banking companies are enhanced as explained hereunder:

    The taxable income arising from additional income of banking companies earned from additional investment in Federal Government securities for tax year 2020 and 2021 was taxable at the rate of 37.5 per cent instead of rates provided in Division II of Part I of First Schedule of the Income Tax Ordinance, 2001.

    READ MORE: Pakistan reintroduces capital value tax on motor vehicles

    This provision was further amended through Finance Act, 2021, whereby income attributable to investment in the Federal Government securities of banking companies was made taxable on the basis of advances to deposit ratios at graduated tax rates of 40 per cent, 37.5 per cent and 35 per cent, if ratio was up to 40 per cent, 40-50 per cent and above 50 per cent respectively.

    The Finance Act, 2022 has introduced enhanced rates of tax on taxable income of banks attributable to investment in Federal Government securities.

    READ MORE: Customs duty exemption, concession granted

    The enhanced rates for tax year 2022 are 55 per cent, 49 per cent and 35 per cent if gross advances to deposit ratio was upto 40 per cent, 40-50 per cent or above 50 per cent respectively.

    For tax year 2023, and onwards tax rates will be 55 per cent, 49 per cent and 39 per cent if gross advances to deposit ratio is up to 40 per cent, 40 -50 per cent or above 50 per cent respectively.

    The changes have been incorporated by substituting sub-rule (6A) of rule 6C of Seventh Schedule to the Ordinance.

    READ MORE: Commodities’ illegal movement to be treated as smuggling

    The tax rate on income of banking companies has been enhanced to 39 per cent for tax year 2023 from current 35 per cent through amendment in Division II of Part I of First Schedule of the Ordinance.

    Additionally, the application of section 4B has been restricted up to tax year 2022 in case of banking companies.

  • Declaring beneficial owner made mandatory for companies, AOPs

    Declaring beneficial owner made mandatory for companies, AOPs

    ISLAMABAD: The Federal Board of Revenue (FBR) on Thursday said that declaration of beneficial owner has been made mandatory for companies and Association of Persons (AOPs) under income tax laws.

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

    READ MORE: Pakistan reintroduces capital value tax on motor vehicles

    The FBR said that previously companies and AOPs were not required to disclose the natural individuals who are ultimate beneficial owners.

    Thus beneficial ownership could be hidden through intervening companies and trusts.

    READ MORE: Customs duty exemption, concession granted

    To bring transparency and to remove this obscurity, as per best international practices, companies and AOPs are now required to disclose details of their beneficial owners who are natural persons.

    Definition of term ‘beneficial owner’ has been provided by inserting new clause (7A) in section 2 of the Income Tax Ordinance 2001.

    READ MORE: Commodities’ illegal movement to be treated as smuggling

    Corresponding new section 181E has been inserted in the Ordinance whereby every company and association of persons will furnish electronically, particulars of its beneficial owners and will be required to update these particulars as and when there is a change in particulars of beneficial owners.

    Penalty of Rs. 1,000,000 has also been prescribed by incorporating entry No. 30 in the Table, in sub-section (1) of section 182 for each default of company or association of persons who contravenes the provisions of section 181E of the Ordinance.

    READ MORE: Special tax regime for pharma sector introduced

  • Pakistan reintroduces capital value tax on motor vehicles

    Pakistan reintroduces capital value tax on motor vehicles

    KARACHI: The federal government of Pakistan has reinstated the Capital Value Tax (CVT) at a rate of one percent on the value of both locally manufactured and imported motor vehicles. This move marks the revival of a tax that was previously withdrawn in phases and ultimately abolished in 2020.

    (more…)
  • Customs duty exemption, concession granted

    Customs duty exemption, concession granted

    KARACHI: The Finance Act, 2022 has amended provisions of Customs Act, 1969 to grant exemption and concessions from customs duty.

    Following are the exemptions and concessions of customs duty:

    Exemption of Customs Duty and Additional Customs Duty

    READ MORE: Commodities’ illegal movement to be treated as smuggling

    Customs Duty (CD) leviable on the import of following categories of items / sectors is exempted for incentivizing the respective sectors:

    – Machinery and capital goods for mechanization of farming including machinery pertaining to irrigation, drainage, harvesting, plant protection etc.

    – Specified raw materials used for manufacturing of LED lights, LED bulbs (including parts thereof) and brush ware.

    – 26 Active Pharmaceutical Ingredients for incentivizing Pharmaceutical manufacturers.

    – Raw materials for manufacture of first aid bandages.

    READ MORE: Special tax regime for pharma sector introduced

    – Membranes for filtering / purifying water.

    – The drug ‘Grafalon’ and gadget ‘Irisvision’.

    – Raw materials of Ivy leaves extract powders.

    – Motor spirit.

    – Cinematographic equipment imported during the period commencing on the 1st July, 2018 and ending on the 30th June, 2023.

    – Bullet proof vehicles and jammers imported by Federal Government, Provincial Government or such states and territories as are or may be included in Pakistan.

    READ MORE: Defacing sales tax invoice declared as offence

    – Smartphones including those in CKD/SKD condition (subject to certain conditions prescribed for import of CKD/SKD units).

    In addition to CD, Additional Customs Duty (ACD) is also exempted on import of the following goods:

    – Raw materials imported by paper sizing industry and chlorinated paraffin wax industry and manufacturers of aluminum conductor composite cores.

    – Stamping foils for manufacturing of optic fiber cables.

    – Aluminum paste and powder imported by the Coating industry.

    – Guts, bladders and stomachs of animals.

    Reduction in Customs Duty and Additional Customs Duty

    CD leviable on import of following goods is reduced:

    – Specified categories of other woven fabrics and artificial flowers / foliage of other materials imported by manufacturers of footwear.

    READ MORE: FBR to collect 3% further tax on supply to inactive taxpayer

    – High-density fiber (HDF) boards of wood or other ligneous materials

    – Specified fibers of polypropylene.

    – Through the Finance Bill, CD was proposed to be reduced on 10 categories of direct and reactive dyes. Such reduction in CD has now been restricted to 6 categories through the Act.

    In addition to CD, ACD, leviable on import of following goods is also reduced:

    – Direct and reactive dyes.

    – Glycerol crude and Glycerol for the coating industry.

    – Goods pertaining to Aluminum, polymers of ethylene, Biaxially Oriented Polypropylene (BOPP) used by the packing industry.

    – Adhesive, Epoxide resins, Filter media/ paper, Non-woven fabric media and Steel plates / sheets of prime quality imported by manufacturers of filters, other than automotive.

    – Organic composite solvents and thinners imported by manufacturers of Dibutyl Orthophthalates.

    – Plywood, veneered panels & similar laminated wood, poly (methyl methacrylate) and cyanoacrylate.

    – Flavoring powders for food preparation for snacks manufacturers.

  • Commodities’ illegal movement to be treated as smuggling

    Commodities’ illegal movement to be treated as smuggling

    In a move to tighten control over the illegal movement of essential commodities, the Finance Act, 2022, has expanded the definition of smuggling.

    (more…)
  • Special tax regime for pharma sector introduced

    Special tax regime for pharma sector introduced

    KARACHI: A special sales tax regime has been introduced for pharmaceutical sector through Finance Act, 2022 by making amendments in Sales Tax Act, 1990.

    As per the special tax regime manufacture or import of substances registered as drugs under the Drugs Act, 1976 shall be subject to 1 per cent sales tax with the condition that such tax shall be final discharge of tax in the supply chain and no input tax shall be allowed to the importer and manufacturer of such goods.

    READ MORE: Defacing sales tax invoice declared as offence

    According to explanation of Finance Act, 2022 released by PwC A. F. Ferguson & Co. prior to the amendments made through the Finance (Supplementary) Act, 2022, the entire pharma sector was exempt from levy of sales tax both at input as well as output stage, except for certain packing materials.

    The aforesaid exemption regime was converted into a zero-rating regime for import and local supplies for finished items of pharma sector, however, sales tax was imposed at standard rate of 17 per cent on purchase / import of Active Pharmaceutical Ingredients (API).

    READ MORE: FBR to collect 3% further tax on supply to inactive taxpayer

    As a result, the pharma sector was allowed to claim sales tax refund on all purchases including APIs and provincial sales tax on services. A faster – pharma system for expeditious processing of refund claims for pharma sector was introduced.

    These amendments were made with the aim to improve documentation of the pharma sector.

    READ MORE: FBR starts online monitoring sales of jewelers

    The special tax regime for Pharma Sector has now been introduced whereby manufacture or import of substances registered as drugs under the Drugs Act, 1976 shall be subject to 1 per cent sales tax with the condition that such tax shall be final discharge of tax in the supply chain and no input tax shall be allowed to the importer and manufacturer of such goods.

    Furthermore, APIs, excluding excipients, for manufacture of drugs registered under the Drugs Act, 1976 or raw materials for the basic manufacture of Active Pharmaceutical Ingredients shall also be subject to 1 per cent sales tax with no input tax adjustment and subject to certification by DRAP and certain procedural conditions.

    READ MORE: Tax concessions to pilots withdrawn

  • Defacing sales tax invoice declared as offence

    Defacing sales tax invoice declared as offence

    KARACHI: Defacing sales tax invoice has been declared as an offence under Sales Tax Act, 1990 as amendment has been made through Finance Act, 2022.

    The defacing of sales tax invoice will attract penalties as well as imprisonment.

    READ MORE: FBR to collect 3% further tax on supply to inactive taxpayer

    According to explanation of amendments made through Finance Act, 2022, issued by PwC A. F. Ferguson, defacing the prescribed invoice number or the barcode or QR code has been introduced as an offence subject to levy of penalty of higher of Rs 500,000 or 200 per cent of the amount of tax involved.

    Upon conviction by a Special Judge, a simple imprisonment for a term which may extend to two years, or with additional fine which may extend to two million rupees, or with both may also be imposed.

    READ MORE: FBR starts online monitoring sales of jewelers

    Any person who abets commissioning of such offence has also been made liable, upon conviction by a Special Judge, to simple imprisonment for a term which may extend to one year, or with additional fine which may extend to two hundred thousand rupees, or with both.

    Certain penalties were introduced through Tax Laws (Third Amendment) Ordinance, 2021 on failure of Tier-1 retailers to register and integrate business which have now been ratified in the Act.

    READ MORE: Tax concessions to pilots withdrawn

    The Finance Act, 2022 also amended laws related to powers of the FBR regarding initiating criminal proceedings.

    The powers of the FBR to prescribe rules for initiating criminal proceedings against any specified authority for willful or deliberate acts/omissions resulting in personal benefits and undue advantage to authority, person or taxpayer have been withdrawn. Earlier, the FBR was empowered to this effect through Finance Act, 2019.

    READ MORE: Pakistan grants tax exemption to charitable organizations

  • FBR to collect 3% further tax on supply to inactive taxpayer

    FBR to collect 3% further tax on supply to inactive taxpayer

    KARACHI: The Federal Board of Revenue (FBR) will collect three per cent further sales tax on supply made to a person not an active taxpayer.

    (more…)
  • FBR starts online monitoring sales of jewelers

    FBR starts online monitoring sales of jewelers

    KARACHI: The Federal Board of Revenue (FBR) has started online monitoring the sales of jewelers after amendment made through Finance Act, 2001.

    READ MORE: Tax concessions to pilots withdrawn

    According to tax experts at PwC A. F. Ferguson & Co. said that the scope of definition of the term ‘Tier-1 retailer’ has been enhanced to include a person engaged in supply of articles of jewelry or parts thereof, of precious metal excluding a person whose shop area measures 300 square feet in area or less.

    Consequently, such persons are now required to integrate their retail outlets with FBR’s computerized system for real-time reporting of sales to avoid disallowance of input tax by 60 per cent.

    READ MORE: Pakistan grants tax exemption to charitable organizations

    Further, supply of locally manufactured articles of jewelry, or parts thereof, of precious metal or of metal clad with precious metal by such person will be chargeable at 3 per cent subject to the condition that no input tax adjustment shall be allowed.

    READ MORE: New tax rates on car registration from July 01, 2022

    Consequently, failure to integrate with Board’s computerized system for real-time reporting of sales will not result in disallowance of input tax since the input tax adjustment is otherwise barred.

    However, a penalty up to Rs 1 million will be imposed if business is not integrated and if the non-integration continues after a period of two months, business premises may be sealed till such integration.

    READ MORE: Finance Act 2022 notifies tax rates on disposal of securities

  • Tax concessions to pilots withdrawn

    Tax concessions to pilots withdrawn

    KARACHI: Tax concessions on income in the shape of total allowances available to pilots of any Pakistani airlines have been withdrawn from July 01, 2022.

    The tax concessions have been withdrawn through Finance Act, 2022 by amending provisions of Income Tax Ordinance, 2001.

    READ MORE: Pakistan grants tax exemption to charitable organizations

    According to the amendment, tax concessions on total allowances available to pilots of any Pakistani airlines have been withdrawn. Previously, tax concession was available on allowance exceeding the basic pay chargeable to tax at the rate of 7.5 per cent.

    READ MORE: New tax rates on car registration from July 01, 2022

    Through the Finance Act, 2022 the tax concession has been abolished on flying allowance of persons included: flight engineers; navigators of Pakistan Armed Forces, Pakistani Airlines or Civil Aviation Authority; Junior Commissioned Officer; Other ranks of Pakistan Armed Forces. Previously tax concession was available on these persons on income taxable at 2.5 per cent as a separate block of income in case allowance does not exceed basic salary.

    READ MORE: Finance Act 2022 notifies tax rates on disposal of securities

    Tax concession on the income from profit on debt from investment in federal government securities has also be abolished in case of person other than a banking or insurance company. Previously, the income was subject to the final tax at 15 per cent.

    READ MORE: Finance Act 2022 revises tax rates for salaried persons