In a move to tighten control over the illegal movement of essential commodities, the Finance Act, 2022, has expanded the definition of smuggling.
(more…)Category: Budget
This is parent category of budgets presented by Pakistan government. Here you will find year-wise federal and provincial budgets.
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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.
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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
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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.
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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
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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
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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
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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.
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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
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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.