Category: Taxation

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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.

July 8, 2022
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…)

July 8, 2022
MCC Gwadar to auction motor vehicles on July 18, 2022

ISLAMABAD: Model Customs Collectorate (MCC) Gwadar has announced auction of motor vehicles on July 18, 2022 which will be held at Custom House Gwadar.

Following is the list of motor vehicles to be presented for the auction:

01. Zamyad Pickup, Chassis No. NAZDL104TD-0068010

02. Zamyad Pickup, Chassis No. NAZPL140TB-N272445

READ MORE: Customs Sukkur to auction huge lot of motor vehicles

03. Toyota Pickup S/cabin, Model 1984, Chassis No. YN55-0017594

04. Toyota Pickup S/cabin Model 1984 Chassis No. YN55-0018440

05. Toyota Hilux Surf Model 1999 Chassis No. RZN185-9030039

06. Toyota Hilux Surf Model 1998 Chassis No. RZN185-0031909

07. Toyota Premio Model 2008 Chassis No. NZT260-3038101

08. Toyota Axio Model 2007 Chassis No. ZRE142-6008183

READ MORE: Customs to auction NDP vehicles on June 8, 2022

09. Toyota Vitz Model 2004 Chassis No. SCP13-0030163

10. Toyota Probox Model 2003 Chassis No. ZNE10-0101673

11. Toyota Land Cruiser Pickup Model 1988 Chassis No. FJ75-0043421

12. Toyota Land Cruiser Pickup Model 1988 Chassis No. FJ75-0074709

13. Toyota Land Cruiser Pickup Model 1988 Chassis No. FJ75-0075357

14. Toyota Land Cruiser VX 4×4 Model 1998 Chassis No. UZJ100-0015026

15. Toyota Hilux D/cabin Vigo Model 2005 Chassis No. MR0FZ29G701508652

READ MORE: Lahore Customs to auction vehicles on May 26, 2022

16. Toyota Land Cruiser Pickup Model 1986 Chassis No. FJ75-0040747

17. Toyota Hilux Surf Model 2003 Chassis No. RZN215-0008039

18. Toyota Land Cruiser Pickup Model 1986 Chassis No. FJ75-0043119

19. Toyota Premio Model 2003 Chassis No. ZZT245-0018897

20. Toyota Land Cruiser Prado Model 1995 Chassis No. KZJ71-0004062

21. Toyota Hilux Pickup S/Cabin Model 1983 Chassis No. RN40-156765

22. Toyota Hilux Pickup S/Cabin Model 1983 Chassis No. RN40-0155452

23. Toyota Hilux Pickup S/Cabin Model 1983 Chassis No. RN40-0168695

24. Toyota Surf Model 1998 Chassis No. UZN185-0078719

READ MORE: Gwadar Collectorate auctions motor cars on May 23

25. Hino Bus Model 2006 Chassis No. AK1JMKA-10688

26. Hino Bus Model Chassis No. AK1JRKA-177243

27. Hino Truck Model 1999 Chassis No. FG1JPC-10097

28. Hino Truck Model 2013 Chassis No. FM1JNPD-19364

29. Hino Truck Model 2015 FM8JNKD-44766

30. Hino Truck Model 2005 FD8JLF-11877

31. Hino Bus Model 2004 AK1J-11063

32. Toyota Hilux Surf SSR-X (05 door) Model 1993 KZN130-9048371

33. Hino Oil Tanker Model 1997 FG1JKB-10162

34. Hino Oil Tanker 1997 FG1JPB-10349

July 8, 2022

Pakistan makes amendments to baggage rules

ISLAMABAD: The apex revenue collecting agency of Pakistan on Wednesday issued a draft to amend baggage rules.

The Federal Board of Revenue (FBR) issued SRO 985(I)/2022 to propose amendments to the Baggage Rules, 2006.

The draft proposed to substitute Rule 3 of the Baggage Rules, 2006. According to the substituted rule:

3. Allowance for Pakistani nationals not availing transfer or residence: The following shall be various allowances for the Pakistani nationals not availing transfer of residence, namely:

A. Items of personal use allowed duty-free on any visit:

(i) personal wearing apparel and clothing accessories;

(ii) one laptop computer; and

(iii) any other item except mobile phone, following allowances shall be admissible:

S. No.	Stay Abroad	Value of Duty Free allowance
(1)	(2)	(3)
(i)	Upto thirty days	Upto four hundred US Dollars (USD 400)
(ii)	Between thirty to sixty days	Upto eight hundred US Dollars (USD 800)
(iii)	More than sixty days	Upto twelve hundred US Dollars (USD 1200)

B. Purchases from a Duty Free Shop:

Duty free allowance of the aggregate value upto one hundred US dollars in case the goods are purchased from one of the duty free shops in Pakistan within sixty days of the arrival, and provided that the stay abroad of the passenger is more than sixty days.

The draft also recommended to substitute Rule 4 of the Baggage Rules, 2006, which is:

4. Allowance for Pakistani nationals availing transfer of residence:

A. Duty Free Allowance:

(i) personal household goods generally used by a family.

(ii) second hand or used professional equipment in use of a registered Pakistani practitioner during stay abroad, having proof of registration in the country abroad and duly recognized by the concerned regulatory authority or association:

Provided that an inspection certificate from an internationally recognized inspection agency in the exporting countries to the effect that such equipment is free from bacteria and other material injurious to human health, is furnished at the time of import of the equipment.

(iii) any other item (excluding mobile phones) of the value not exceeding fifteen hundred US dollars; and

(iv) weapon of non-prohibited bore for the personnel of armed forces, customs, police or any other law enforcement agency.

B. Purchases from a duty free shop:

Duty free allowances of the aggregate value upto fifteen hundred US dollars in case the goods are purchased from one of the duty free shops in Pakistan within sixty days of the arrival.

The draft rules amended table in Rule 5 of the Baggage Rules, 2006.

5. Special allowances for Foreign Exchange Remittance Card holders.— In addition to the allowances hereinbefore provided, the duty credit as specified in the Table below shall be admissible to a Pakistani national holding Foreign Exchange Remittance Card (FERC) once in a calendar year. The duty credit can also be utilized for the unaccompanied baggage or any purchase from one of the duty free shops. The duty credit under this scheme shall not be utilizable on import of vehicles.

The proposed amended table is as follow:

(1)	(2)	(3)	(4)
S.NO.	TYPE OF FERC	AMOUNT REMITTED THROUGH NORMAL BANKING CHANNEL (in US $ or equivalent foreign currency)	DUTY CREDIT IN PAKISTANI RUPEES
1.	Silver	2500 or more	20,000
2.	Silver Plus	5000 or more	40,000
3.	Golden	10,000 or more	60,000
4.	Golden Plus	25,000 or more	100,000
5.	Platinum	50,000 or more	200,000

The draft also recommended to substitute Rule 6 of the Baggage Rules, 2006, which is:

6. Allowance for foreign nationals and tourists: The following allowance shall be admissible to foreign national and tourist, namely:

(i) personal wearing apparel and clothing accessories; and

(ii) any other item (excluding mobile phones) of the value not exceeding eight hundred US dollars.

July 7, 2022

101 retailers given July 10 as deadline for integration

ISLAMABAD: The Federal Board of Revenue (FBR) has issued a list of 101 retailers and directed them to integrate by July 10, 2022 otherwise action will be taken as per law.

The FBR issued Sales Tax General Order (STGO) No. 1 of 2023 related to Tier-1 retailers for integration with FBR’s Point of Sale (POS) system.

READ MORE: FBR issues list of 113 retailers for mandatory integration

The Finance Act, 2019 added sub-section (6) to section 8B of the Sales Tax Act, 1990 whereby a Tier-1 Retailers who did not integrate its retail outlet in the manner prescribed under sub-section (9A) of section 3 of the Sales Tax Act, 1990 during a tax period, its adjustable tax for that period would be reduced by 15 per cent. The figure of 15 per cent has been raised to 60 per cent vide Finance Act, 2021.

In order to operationalize this important provision of law, a system-based approach has been adopted whereby all Tier-1 Retailers who are liable to integrate but have not yet integrated, with effect from July-2021 (Sales Tax Returns filed in August, 2021) are to be dealt with as per the procedure laid down in STGO No/ 1 of 2022 issued on August 3, 2021.

READ MORE: RTO-II Karachi seals electronics shop for integration failure

Vide the instant Sales Tax General Order, a list of 101 identified Tier-1 Retailers has been placed on FBR’s web portal allowing them to integrate with FBR’s system by July 10, 2022 an the procedure of exclusion from this list of 101 identified Tier-1 Retailers shall apply as laid down in STGO 17 of 2022 dated May 13, 2022.

Upon filing of Sales Tax Return for the month of June, 2022 for all hereby notified Tier-1 Retailers not having yet integrated, their input tax claim would be disallowed as above, without any further notice or proceedings, creating tax demand by the same amount.

READ MORE: RTO-II Karachi seals Baklava Palace for integration failure

July 6, 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

July 5, 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.

July 5, 2022

Non-ATL retailers to pay double amount of fixed tax

ISLAMABAD: Small retailers or a shopkeepers have to pay double the amount of fixed tax in case of not appearing on the Active Taxpayers List (ATL).

The federal government through the Finance Bill, 2022 introduced a scheme of fixed tax for small retailers.

However, the National Assembly approved the bill with certain changes in the fixed tax regime. The Finance Act, 2022 now has binding on the small retailer to register themselves with the tax department and appear on the Active Taxpayers list (ATL) in order to avail the fixed tax facility.

Otherwise, in case of not appearing on the ATL, the small retailer is required to pay one hundred per cent more on the amount of fixed tax.

In order to collect the tax under this regime, the government decided to recover the amount through electricity bill.

In this regard certain amendments have been made to Sales Tax Act, 1990 and Income Tax Ordinance, 2001.

In sub section 9, Section 3 of Sales Tax Act, 1990, a new proviso has been inserted through the Finance Act, 2022, which stated:

“Provided that the above rates of tax shall be increased by one hundred percent if the name of the person is not appearing in the Active Taxpayers List issued by the Board under section 181A of the Income Tax Ordinance, 2001 on the date of issuance of monthly electricity bill.”

Similarly, a new Section 99A has been inserted to the Income Tax Ordinance, 2001 and approved through the Finance Act, 2022, which is as follow:

“99A. Special provisions relating to payment of tax through electricity connections.

(1) Notwithstanding anything contained in the Ordinance, a tax shall be charged and collected from retailers other than Tier-I retailers as defined in Sales Tax Act, 1990 (VII of 1990) and specified service providers on commercial electricity connections at the rates provided in clause (2A) of Division IV, Part IV of the First Schedule.

(2) A retailer who has paid sales tax under sub-section (9) of section 3 of Sales Tax Act, 1990 (VII of 1990), shall not be required to pay tax under this section and the sales tax so paid shall constitute discharge of tax liability under this section.

(3) The tax collected or paid under this section shall be final tax on the income of persons covered under this section in respect of business being carried out from the premises where the electricity connection is installed.

(4) For the purposes of this section, Board with the approval of the Minister in-charge may issue an income tax general order to-

(a) provide the scope, time, payment, recovery, penalty, default surcharge, adjustment or refund of tax payable under this section in such manner and with such conditions as may be specified.

(b) provide record keeping, filing of return, statement and assessment in such manner and with such conditions as may be specified;

(d) include or exempt any person or classes of persons, any income or classes of income from the application of this section, in such manner and with such conditions as may be specified.”

The rate of tax leviable under section (99A), and collectable under sub section (1A) of Section 235 shall be as under:-

Gross amount of monthly bill	Tax
Where the amount does not exceed Rs. 30,000	Rs. 3000
Where the amount exceeds Rs. 30,000 but does not exceed Rs. 50,000	Rs. 5000
Where the amount exceeds Rs. 50,000 but doesnot exceed Rs. 100,000	Rs. 10,000
Specified retailers and service providers through Income Tax General Order	Rs.50,000

July 5, 2022

FBR notifies companies return forms for tax year 2022

The Federal Board of Revenue (FBR) in Pakistan has officially released the income tax return forms for companies for the tax year 2022, signaling the commencement of the annual tax filing season.
(more…)

July 4, 2022
FBR issues business individuals return forms for tax year 2022

The Federal Board of Revenue (FBR) has taken a significant step towards initiating the annual tax filing process by issuing income tax return forms for business individuals for the tax year 2022.
(more…)

July 4, 2022