Pkrevenue.com

Category: Budget

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

  • Proposal of final tax regime for commercial importers rejected

    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    However, the national assembly rejected the proposal of final tax regime for commercial importers is withdrawn.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

  • Mechanism revamped for tax dispute resolution

    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.

  • Simplified tax regime for shopkeepers implemented

    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.

  • Pakistan withdraws tax amnesties for industrial promotion

    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

  • Pakistan expands tax exemptions under foreign treaties

    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

  • Capital gains tax revamped on disposal of immovable properties

    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

  • Tax on deemed income arising from capital assets in Pakistan

    Tax on deemed income arising from capital assets in Pakistan

    KARACHI: A resident person, who owns capital assets in Pakistan, will be taxed on deemed income arising from capital assets for tax year 2022.

    An important amendment has been made part of the Income Tax Ordinance, 2001 through Finance Act, 2022.

    Experts at PwC A. F. Ferguson & Co. explained this provision of the ordinance made part through Finance Act, 2022, as a resident person owning capital assets in Pakistan will be taxed on deemed income arising from capital assets for tax year 2022 and onwards.

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

    For this purpose, such deemed income shall be computed as 5 per cent of the Fair Market Value (as determined by the FBR under section 68 of Income Tax Ordinance, 2001 of capital assets.

    The rate of tax on such income is prescribed as 20 per cent.

    This translates into an effective tax at 1 per cent of Fair Market Value of capital assets.

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

    The experts said that an exclusionary definition of ‘capital asset’ has been provided, which effectively means that such tax is leviable only in respect of ‘immovable property’ situated in Pakistan owned by resident persons.

    For the purposes of such tax; however, while following immovable properties shall stand excluded, the Federal Government has been empowered to notify any exclusion or inclusion of any person and/ or property from the scope of such tax:

    (a) one immovable property owned by the resident person;

    (b) self-owned business premises from where the business is carried out by the persons appearing on the active taxpayers’ list at any time during the year;

    (c) self-owned agriculture land where agriculture activity is carried out by person excluding farmhouse (defined in a specified manner) and land annexed thereto;

    (d) immovable property allotted to:

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

    (i) a shaheed or dependents of a shaheed belonging to Pakistan Armed Forces;

    (ii) a person or dependents of the person who dies while in the service of Pakistan armed forces or Federal or provincial government;

    (iii) a war wounded person while in service of Pakistan armed forces or Federal or provincial government; or

    (iv) an ex-serviceman and serving personnel of armed forces or ex-employees or serving personnel of Federal and provincial governments, being original allottees of the capital asset duly certified by the allotment authority;

    (e) any property from which income is chargeable to tax under the Ordinance and tax leviable is paid thereon;

    (f) immovable property in the first tax year of acquisition where tax under section 236K of the Income Tax Ordinance, 2001 has been paid;

    (g) where the fair market value of the capital assets in aggregate excluding the capital assets mentioned in clauses (a) through (f) above does not exceed Rs 25 million;

    READ MORE: Non-ATL retailers to pay double amount of fixed tax

    (h) immovable property owned by a provincial government or a local government; or

    (i) immovable property owned by a 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 Business and Professions.

    The constitutional validity of this tax in relation to entry 50 of the Fourth Schedule to the Constitution of Pakistan and the scope of any amount which can be deemed as income will have to be tested, they added.

  • Pakistan imposes tax at 10% on money transfers to non-residents

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

    Pakistan has introduced a 10 percent tax on money transfers to non-residents lacking a permanent establishment within the country who derive income from various financial services.

    (more…)
  • Significant changes to sales tax laws through Finance Act 2022

    Significant changes to sales tax laws through Finance Act 2022

    KARACHI: Significant changes have been made to sales tax laws through Finance Act, 2022 and that are applicable from July 01, 2022.

    PwC A.F. Ferguson & Co interpreted the changes made to Sales Tax Act, 1990 through the Finance Act, 2022, which are as follow:

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

    1. The requirement of CNIC / NTN for the purposes of invoices issued to unregistered persons and restriction of input tax attributed to such supplies retained to the extent of supplies to unregistered distributors.

    2. Sales tax regime of pharma sector revamped with 1 per cent final sales tax on manufacturers and importers without any input adjustment.

    3. The rate of fixed tax on other than Tier-1 retailers shall be increased by 100 per cent if the said retailers are not appearing on the Active Taxpayer List.

    4. Fertilizers exempted from sales tax.

    READ MORE: Non-ATL retailers to pay double amount of fixed tax

    5. Value of supply not to include the amount of subsidy provided by the Federal Government or Provincial Government to the electricity consumer.

    6. Through the Bill, ‘locally produced coal’ was proposed to be taxed at 17 per cent which has not been approved in the Act. It has now been subject to sales tax at higher of 17 per cent ad valorem or Rs 700 per metric tonne.

    7. The proposed increase in sales tax rate from 5 per cent to 10 per cent for following has not been approved in the Act.

    READ MORE: Tampering PSW data to attract 4-year jail sentence

    — natural gas

    — Phosphoric acid

    8. Electric vehicle in CBU condition of 50 kwh battery or below is now subject to sales tax at 12.5 per cent.

    9. Electric vehicle transport buses of 25 seats or more in CBU condition are now subject to sales tax at 1 per cent.

    10. Changes proposed in the rate of sales tax on different categories of mobile / satellite phones have not been approved in the Act.

    11. Online marketplace is now required to withhold sales tax at 1 per cent (instead of 2 per cent).

    READ MORE: NA approves levy on petroleum products up to Rs50/liter

  • Key changes to income tax laws through Finance Act 2022

    Key changes to income tax laws through Finance Act 2022

    KARACHI: The Finance Act, 2022 has made significant changes to Income Tax Ordinance, 2001, which are applicable from July 01, 2022.

    Following are the significant changes in Income Tax Ordinance, 2001 through Finance Act, 2022 as explained by PwC A.F. Ferguson & Co.:

    READ MORE: Non-ATL retailers to pay double amount of fixed tax

    1. Slab rates for super tax introduced for taxpayers having income in excess of Rs 150 million. The Bill earlier proposed such threshold at Rs 300 million at a standard rate of 2 per cent.

    2. Super tax rate is enhanced to 10 per cent for certain specified sectors for tax year 2022 whereas for banking companies such enhanced rate of super tax will be applicable for tax year 2023.

    READ MORE: Tampering PSW data to attract 4-year jail sentence

    3. The proposal of final tax regime for commercial importers is withdrawn. Consequently, commercial importers will remain under minimum tax regime.

    4. The proposal to restrict income tax holiday of certain IPPs withdrawn.

    5. The standard rate of tax for banking companies revised at 39 per cent.

    READ MORE: NA approves levy on petroleum products up to Rs50/liter

    6. The revised slab rates for salaried individuals introduced by setting below taxable limit at Rs 600,000 as against the original proposal of Rs 1,200,000. Further, the reduction in tax rates proposed in Finance Bill has not only been reversed but the tax incidence has also been enhanced (as compared to position prior to Finance Bill).

    7. The right to carry forward minimum tax retained, however, the period is reduced from five to three years.

    8. The tax credit on contributions to Voluntary Pension Scheme retained.

    9. The resident individual will now also include a citizen of Pakistan who was not in any one foreign country for more than 182 days.

    10. The credit for income covered by final tax in respect of assets declared in wealth statement or books of account in excess of imputable income is inter alia subject to submission of audited financial statements.

    READ MORE: All tax proposals of IT sector accepted: FBR

    11. Advance tax on sale of immovable properties to be collected irrespective of holding period.

    12. The rate of advance tax on imports mentioned in Part II of the Twelfth Schedule enhanced from 2 per cent to 3.5 per cent.

    13. Reduced rate of Capital Gains Tax on listed securities based on holding period to apply on securities purchased on or after July 01, 2022.