Category: Budget

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

Pakistan grants tax exemption to charitable organizations

KARACHI: Pakistan has granted exemption from tax on income of various charitable organizations through Finance Act, 2022.

The tax exemption has been granted under Second Schedule of Income Tax Ordinance, 2001.

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

According to interpretation of Finance Act, 2022 by PwC A. F. Ferguson & Co. the income of following organizations has been exempted from income tax by way of inclusion in Table I of Clause (66):

(i) The Pakistan Global Sukuk Programme Company Limited;

(ii) Karandaaz Pakistan from tax year 2015 onwards;

(iii) Public Private Partnership Authority for tax year 2022 and subsequent four tax years; and

(iv) Hamdard Laboratories (Waqf) Pakistan.

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

It is apt to mention here that income derived by The Pakistan Global Sukuk Programme Company Limited was earlier exempted from income tax through Notification SRO 1457(I)/2021 dated November 11, 2021; however, through the Act, such tax exemption has been ratified by the Parliament.

Further, the following Organizations, earlier entitled to tax exemption subject to fulfillment of conditions specified in section 100C of the Ordinance, are now extended unconditional tax exemption as was earlier available to them prior to Finance Act, 2020:

(i) Pakistan Mortgage Refinance Company Limited;

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

(ii) Pakistan Sweet Homes Angels and Fairies Place; and

(iii) Dawat-e-Islami Trust.

Further, the following Organizations have been extended tax exemption subject to fulfillment of conditions specified in section 100C:

(i) Burhani Qarzan Hasnan Trust;

(ii) Saifee Hospital Karachi; and

(iii) Safiyah Girls Taalim Trust.

READ MORE: Proposal of final tax regime for commercial importers rejected

July 12, 2022
New tax rates on car registration from July 01, 2022

KARACHI: The new rates of advance tax on registration of motor cars have been notified through Finance Act, 2022.

According to PwC A. F. Ferguson & Co. the new rates of advance tax on registration of the motor vehicles are as follows:

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

Engine Capacity Up to 850cc: old rate Rs. 7,500: new rate Rs. 10,000

Engine Capacity 851cc to 1,000cc: old rate Rs. 15,000: new rate Rs. 20,000

Engine Capacity 1,001cc to 1,300cc: old rate Rs. 25,000: new rate Rs. 25,000

Engine Capacity 1,301cc to 1,600cc: old rate Rs. 50,000: new rate Rs.50,000

Engine Capacity 1,601cc to 1,800cc: old rate Rs. 75,000: new rate Rs. 150,000

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

Engine Capacity 1,801cc to 2,000cc: old rate Rs. 100,000: new rate Rs. 200,000

Engine Capacity 2,001cc to 2,500cc: old rate Rs. 150,000: new rate Rs. 300,000

Engine Capacity 2,501cc to 3,000cc: old rate Rs. 200,000: new rate Rs. 400,000

Engine Capacity Above 3,000cc: old rate Rs. 250,000: new rate Rs. 500,000

Where engine capacity is not applicable and value of vehicle is Rs. 5 million or more: old rate Nil: new rate 3 per cent of the import value (as increased by sales tax, customs duty and FED) or invoice value in case of locally manufactured vehicle.

READ MORE: Proposal of final tax regime for commercial importers rejected

The Finance Act, 2022 has also imposed advance tax of Rs. 20,000 on transfer of motor vehicles of unspecified engine capacity (e.g. electric vehicles) having value of Rs. 5 million or more. The said rate of Rs. 20,000 shall be reduced by 10 per cent each year from the date of first registration in Pakistan.

For the purposes of tax collection under section 231B, the definition of ‘motor vehicles’ has been amended and now defined to include car, caravan automobiles, jeep, limousine, pickup, sports utility vehicle, trucks, vans, wagon and any other automobile excluding:

READ MORE: Mechanism revamped for tax dispute resolution

(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 upto 200cc.

July 11, 2022
Finance Act 2022 notifies tax rates on disposal of securities

KARACHI: Through the Finance Act, 2022 the tax rates on disposal of securities have been notified for tax year 2023 and onwards.

According to interpretation of PwC A. F. Ferguson & Co. gain on disposal of listed securities (that was previously chargeable to tax at 12.5 per cent irrespective of the holding period) shall now be subject to revised tax rates based on holding period. The revised rates in terms of section 37A of Income Tax Ordinance, 2001 are as under:

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

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

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

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

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

READ MORE: Proposal of final tax regime for commercial importers rejected

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

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

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

For securities (other than future commodity contracts entered into by members of Pakistan Mercantile Exchange):

READ MORE: Mechanism revamped for tax dispute resolution

(i) the above-referred revised rates shall apply on disposal of securities acquired on or after July 1, 2022; and

(ii) rate of 12.5 per cent shall apply on disposal of those securities which were acquired on or before June 30, 2022 irrespective of holding period.

Previously, in respect of Mutual Fund or Collective Investment Scheme or a REIT scheme, no capital gains tax was deductible if the holding period of the security was more than 4 years.

Through Finance Act, 2022, such holding period has now been increased to 6 years.

READ MORE: Simplified tax regime for shopkeepers implemented

July 11, 2022
Finance Act 2022 revises tax rates for salaried persons

KARACHI: The federal government has withdrawn the proposal to give concessions to salaried persons and retained the minimum threshold for salary income at Rs600,000.

Through the Finance Act, 2022 the new tax rates on salary income have been implemented from July 01, 2022.

The new tax rates are as follow:

READ MORE: Proposal of final tax regime for commercial importers rejected

01. Where the taxable income does not exceed Rs 600,000: the tax rate shall be zero.

02. Where the taxable income exceeds Rs 600,000 but does not exceed Rs 1,200,000: the tax rate shall be 2.5 per cent of the amount exceeding Rs 600,000.

03. Where the taxable income exceeds Rs 1,200,000 but does not exceed Rs2,400,000: the tax amount shall be Rs 15,000 + 12.5 per cent of the amount exceeding Rs 1,200,000.

04. Where the taxable income exceeds Rs2,400,000 but does not exceed Rs 3,600,000: the tax amount shall be Rs 165,000 + 20 per cent of the amount exceeding Rs 2,400,000.

READ MORE: Mechanism revamped for tax dispute resolution

05. Where the taxable income exceeds Rs 3,600,000 but does not exceed Rs 6,000,000: the tax amount shall be Rs 405,000 + 25 per cent of the amount exceeding Rs 3,600,000.

06. Where the taxable income exceeds Rs 6,000,000 but does not exceed Rs 12,000,000: the tax amount shall be Rs 1,005,000 + 32.5 per cent of the amount exceeding Rs 6,000,000.

07. Where the taxable income exceeds Rs 12,000,000: the tax amount shall be Rs 2,955,000 + 35 per cent of the amount exceeding Rs 12,000,000.

Earlier, through Finance Bill, 2022 following rates of tax proposed for salaried person:

READ MORE: Simplified tax regime for shopkeepers implemented

01. Where taxable income does not exceed Rs. 600,000: the tax rate was zero.

02. Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000: the tax rate was Rs100

03. Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,400,000: the tax rate was 7 per cent of the amount exceeding Rs. 1,200,000.

04. Where taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,600,000: the tax amount was Rs. 84,000 + 12.5 per cent of the amount exceeding Rs. 2,400,000.

05. Where taxable income exceeds Rs. 3,600,000 but does not exceed Rs. 6,000,000: the tax amount was Rs. 234,000 + 17.5 per cent of the amount exceeding Rs. 3,600,000.

READ MORE: Pakistan withdraws tax amnesties for industrial promotion

06. Where taxable income exceeds Rs. 6,000,000 but does not exceed Rs. 12,000,000: the tax amount was Rs. 654,000 + 22.5 per cent of the amount exceeding Rs. 6,000,000.

07. Where taxable income exceeds Rs. 12,000,000: the tax amount was Rs. 2,004,000 + 32.5 per cent of the amount exceeding Rs. 12,000,000.

July 11, 2022
Proposal of final tax regime for commercial importers rejected

KARACHI: The National Assembly of Pakistan has rejected a proposal to grant final tax regime for commercial importers.

The proposal was made part of Finance Bill, 2022 under which the government proposed to bring commercial importers under the ambit of final tax regime.

READ MORE: Mechanism revamped for tax dispute resolution

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.

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’.

However, the national assembly rejected the proposal of final tax regime for commercial importers is withdrawn. Consequently, commercial importers will remain under minimum tax regime.

READ MORE: Simplified tax regime for shopkeepers implemented

Tax experts at PwC A. F. Ferguson & Co. said that previously, in case of goods imported by an industrial undertaking for own use, the advance tax on imports did not constitute minimum tax if the same were subjected to advance tax collection at 1 per cent or 2 per cent.

There were various items which were in the nature of raw material but were subjected to standard rate of 5.5 per cent.

READ MORE: Pakistan withdraws tax amnesties for industrial promotion

The tax authorities were misinterpreting these provisions to deny the adjustability of tax collected at 5.5 per cent.

This regime has been amended and now the advance tax on raw materials imported by an industrial undertaking for own use will not be minimum tax irrespective of the applicable rate.

However, advance tax on import of following items will be treated as minimum tax in respect of income arising from such imports:- a) Edible oil; b) Packaging material; c) Paper and paper board; or d) Plastics.

READ MORE: Pakistan expands tax exemptions under foreign treaties

July 10, 2022
Mechanism revamped for tax dispute resolution

KARACHI: The mechanism of alternative dispute resolution (ADR) has been revamped through Finance Act, 2022 and same has been implemented from July 01, 2022.

According to explanation to the Section 134A of the Income Tax Ordinance, 2001 amended through Finance Act, 2022, analysts at PwC A. F. Ferguson & Co. said that under the revamped procedure for ADR in all three fiscal laws, an aggrieved person may apply for resolution of a dispute pending before any court of law or appellate forum, through ADR mechanism in following cases:-

READ MORE: Simplified tax regime for shopkeepers implemented

a) Where the liability of tax is Rs 100 million or above or admissibility of refund;

b) The extent of waiver of default surcharge & penalty; or

c) Any other specific relief required to resolve the dispute.

However, any case where criminal proceedings have been initiated fall outside the purview of ADR mechanism.

Previously, in case of a dispute where a mixed question of law and fact was involved, the Federal Board of Revenue (FBR) was empowered to examine as to whether ADR Committee should be constituted or not. This hindrance has been removed.

Under the new mechanism, the taxpayer has a right to nominate a person from the panel notified by the FBR except where the relevant Chartered Accountant or an Advocate has been an authorized representative of the taxpayer.

READ MORE: Pakistan withdraws tax amnesties for industrial promotion

Furthermore, the taxpayer will have to withdraw his appeal for seeking relief under ADR.

Following is the text of Section 134A that is substituted through the Finance Act, 2022:

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 expands tax exemptions under foreign treaties

(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;

(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

READ MORE: Capital gains tax revamped on disposal of immovable properties

(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 clause (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:

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.

(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 subsection

(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.

July 10, 2022
Simplified tax regime for shopkeepers implemented

KARACHI: The Federal Board of Revenue (FBR) has implemented a simplified tax regime from shopkeepers and small retailers.

Through the Finance Act, 2022 important amendments have been made to Income Tax Ordinance, 2001.

READ MORE: Pakistan withdraws tax amnesties for industrial promotion

Tax experts at PwC A. F. Ferguson & Co. explained that for other than Tier – 1 retailers and specified service providers, a ‘final tax’ has been levied on the basis of gross amount billed for commercial electricity connections at the following rates:

Where the amount does not exceed Rs. 30,000: the tax shall be Rs3,000

READ MORE: Pakistan expands tax exemptions under foreign treaties

Where the amount exceeds Rs. 30,000 but does not exceed Rs. 50,000: the tax shall be Rs5,000

Where the amount exceeds Rs. 50,000 but does not exceed Rs. 100,000: The tax shall be Rs10,000

Specified retailers and service providers through Income Tax General Order: the tax shall be Rs200,000

READ MORE: Capital gains tax revamped on disposal of immovable properties

The aforesaid tax shall be collected by the electricity companies through monthly bills in addition to withholding tax under section 235 of the Income Tax Ordinance, 2001.

However, in case sales tax is collected from such retailers through electricity bills under section 3(9) of Sales Tax Act, 1990, the sales tax will constitute discharge of tax liability under this section and thus no tax will be charged/ collected along with electricity bills.

READ MORE: Tax on deemed income arising from capital assets in Pakistan

The Federal Government is empowered to issue income tax general order for implementing this scheme and to specify service providers eligible for this regime.

July 10, 2022
Pakistan withdraws tax amnesties for industrial promotion

KARACHI: Pakistan has withdrawn tax amnesties for industrial promotion through Finance Act, 2022 by making certain amendments to the Income Tax Ordinance, 2001,

READ MORE: Pakistan expands tax exemptions under foreign treaties

Analysts at PwC A. F. Ferguson & Co. explained amendments made through Finance Act, 2022 to Sections 59C, Section 65H and Section 100F of the Income Tax Ordinance, 2001.

READ MORE: Capital gains tax revamped on disposal of immovable properties

The analysts said that amnesties, introduced vide the Income Tax (Amendment) Ordinance, 2022, with respect to the following investments have been withdrawn with effect from March 2, 2022:-

a) New & existing industrial undertakings – Section 59C;

READ MORE: Tax on deemed income arising from capital assets in Pakistan

b) Industries owned by overseas Pakistanis and resident Pakistanis having declared foreign assets

– Section 65H; and

c) Revival of sick units – Section 100F.

READ MORE: Pakistan imposes tax at 10% on money transfers to non-residents

Through the Finance Act, 2022 certain tax credits for industrial promotion under Section 60C, Section 62 and Section 62A of Income Tax Ordinance, 2001 have also been withdrawn.

Tax credits and deductible allowances in respect of the following, have been withdrawn:-

a) Profit on debt incurred on house financing – Section 60C;

b) Investment in new shares of listed companies, mutual funds or life insurance policies, Sukuk, etc. – section 62; and

c) Purchase of Health insurance policies – section 62A.

READ MORE: Significant changes to sales tax laws through Finance Act 2022

July 9, 2022
Pakistan expands tax exemptions under foreign treaties

KARACHI: Pakistan has expanded scope of income tax exemption provided under international tax treaties.

The change has been brought into Section 44 of Income Tax Ordinance, 2001 through Finance Act, 2022.

READ MORE: Capital gains tax revamped on disposal of immovable properties

Experts at PwC A. F. Ferguson & Co. explained the amendment saying that presently, income received by any person (not being a citizen of Pakistan) engaged as a contractor, consultant, or expert on a project in Pakistan is exempt from tax to the extent provided for in a bilateral or multilateral technical assistance agreement between the Federal Government and a foreign government or public international organization, subject to certain conditions. Such exemption is limited to agreements where ‘technical assistance’ is being provided.

READ MORE: Tax on deemed income arising from capital assets in Pakistan

The Finance Act 2022, has enhanced the scope of above exemption by removing the term ‘technical assistance’ from the above provision, meaning thereby now all sorts of agreement between Federal Government and a foreign government or public international organization would be covered under the above exemption.

READ MORE: Pakistan imposes tax at 10% on money transfers to non-residents

Furthermore, the exemption would also be available to a citizen of Pakistan provided such person is either a non-resident person or a resident person solely by reason of the performance of services under the agreement.

The Act has also empowered the Federal Government to grant exemption on income of any person on a case-to-case basis through a notification in the Official Gazette in respect of an official development assistance financed loans and grant-in-aid, subject to such conditions and limitations as may be specified.

READ MORE: Significant changes to sales tax laws through Finance Act 2022

July 9, 2022
Capital gains tax revamped on disposal of immovable properties

KARACHI: The Finance Act, 2022 has revamped the taxation of capital gains on disposal of immovable properties.

Amendment has been incorporated in Section 37 of Income Tax Ordinance, 2001 through Finance Act, 2022.

READ MORE: Tax on deemed income arising from capital assets in Pakistan

Capital gains tax on disposal of immovable properties located in Pakistan shall be taxed at the following rates:

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.

READ MORE: Pakistan imposes tax at 10% on money transfers to non-residents

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.

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.

READ MORE: Significant changes to sales tax laws through Finance Act 2022

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.

Tax experts at PwC A. F. Ferguson & Co. said consequently, capital gains relating to disposal of immovable properties situated outside Pakistan will be taxed at applicable rates irrespective of holding period.

READ MORE: Key changes to income tax laws through Finance Act 2022

July 8, 2022