Pkrevenue.com

Category: Taxation

Stay updated on taxation news, tax laws, FBR policies, compliance, audits, income tax, sales tax, and fiscal developments in Pakistan.

  • Domestic electricity consumers to pay tax on monthly bill above Rs25,000

    Domestic electricity consumers to pay tax on monthly bill above Rs25,000

    ISLAMABAD: The tax authorities have imposed tax on domestic electricity consumers – whose monthly bill is Rs25,000 and above.

    According to a commentary on budget 2021/2022 by KPMG Taseer Hadi & Co. currently, tax collection on domestic consumers of electricity is prescribed under section 235A of Income Tax Ordinance, 2001 whereby 7.5 per cent advance tax is required to be collected if the monthly electricity bill is of Rs. 75,000 or more.

    Such advance tax is adjustable against tax liability of such person. Whereas, tax collection on commercial and industrial consumer of electricity is prescribed under section 235 of the Income Tax Ordinance, 2001.

    The Finance Bill 2021 proposed to withdraw section 235A and also proposes to insert requirement of tax collection on domestic consumers of electricity in section 235 based on following criteria:

    —if the consumer’s name is not appearing in Active Taxpayers List (ATL);

    —monthly bill is Rs. 25,000 or more;

    —tax rate will be 7.5 per cent;

    —tax collection on annual bill amount up to Rs360,000 will be minimum tax;

    —tax collection on monthly bill over and above Rs. 30,000 will be adjustable against tax liability of a person.

    The Bill further proposed to exclude those persons whose entire income is subject to final tax or minimum tax regime under any provisions of the Income Tax Ordinance, 2001 from the application of the above section.

  • Investors allowed carry forward capital losses on disposal of securities

    Investors allowed carry forward capital losses on disposal of securities

    ISLAMABAD: Federal Board of Revenue (FBR) on Thursday allowed investors of Pakistan Stock Exchange (PSX) to carry forward capital losses for calculation of capital gain tax.

    In this regard the FBR issued SRO 801(I)/2021 to make amendment in the Income Tax Rules, 2002.

    The FBR previously issued draft rules through SRO 639(I)/2021 dated June 01, 2021 for seeking feedback from stakeholders.

    As per the SRO a substitution in sub-rule (3) of Rule 13D of the Income Tax Rules, 2002 has been made. According to the amendment:

    (3) Capital loss arising on disposal of listed securities in tax year 2019 and onwards that has not been set off against the gain of the person from disposal of listed securities chargeable to tax during the tax year shall be carried forward to the following tax year and set off only against the gain of the person from disposal of listed securities chargeable to tax but no such loss shall be carried forward to more than three tax years immediately succeeding the tax year for which the loss was first determined.

    In Rule 13N, the substitution in sub-rule (7), as:

    (7) Capital loss arising on disposal of listed securities in tax year 2019 and onwards that has not been set off against the gain of the person from disposal of listed securities chargeable to tax during the tax year shall be carried forward to the following tax year and set off only against the gain of the person from disposal of listed securities chargeable to tax but no such loss shall be carried forward to more than three tax years immediately succeeding the tax year for which the loss was first determined.

    A new sub-rule after the sub-rule 7 has been inserted, which is:

    (7A) Capital loss arising on disposal of listed securities in tax year 2019 and onward shall be carried forward to a subsequent tax year for setting off, in the manner prescribed as follow:

    (a) The setting off of eligible capital loss carried forward from previous tax year(s) shall be made by National Clearing Company of Pakistan Limited (NCCPL) under this rule, only in respect of a taxpayer whose name appear or appeared in the Active Taxpayers List (ATL) pertaining to the tax year to which such loss pertains as witnessed by the ATL available on FBR’s website after updation for the tax year to which such loss pertains;

    (b) adjustment of carried forward capital loss(es) shall be made on monthly basis by the NCCPL from the first month of updation of ATL for the tax year and on first-in first-out (FIFO) basis;

    (c) The NCCPL may requisition date wise position of ATL in respect of particular taxpayer from Information Technology (IT) Wing of the FBR as and when required;

    (d) At the end of relevant tax year, NCCPL shall maintain tax year-wise balance of unexpired carried forward capital losses separately identifiable for computation of limitation period for each ta year; and

     (e) The manner of adjustment of capital loss carried forward from previous tax years will be in accordance with illustration given in clause (zf) of Rule 13P.

  • General Sales Tax on wheat bran taken back: FBR

    General Sales Tax on wheat bran taken back: FBR

    ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday said that the proposal of 17 percent sales tax on wheat bran has been taken back.

    In a statement, the FBR said that in order to boost the present government’s drive to keep inflation under control and to give maximum relief to the business community, General Sales Tax (GST) on wheat bran proposed to be enhanced to 17 percent in the Finance Bill is also being taken back.

    The FBR further clarified that the table prescribing tax rates for minimum tax on turnover basis has been substituted in the Finance Bill-2021 to provide relief to retailers of Fast Moving Consumer Goods (FMCG) including flour mills and refineries.

    The words, “flour mills” could not be mentioned inadvertently in the table which was an error and had been noted and would be rectified in the amended bill.

    This would mean that the minimum tax applicable on flour Mills would remain at 0.25 per cent of the turnover instead of 1.25 per cent as being generally interpreted.

  • Rules for computation of profit and gains for SMEs

    Rules for computation of profit and gains for SMEs

    ISLAMABAD: Rules have been issued for computation of profit and gains of Small and Medium enterprises (SMEs). The SMEs shall be required to register with the Federal Board of Revenue (FBR) on its IRIS web portal.

    The SMEs are also given option to register with Small and Medium Enterprises Development Authority on its SME registration portal (SMERP).

    There shall be following two categories of small and medium enterprises and tax on their taxable income shall be computed at the tax rates given in the table below:

    Category – 1: Where annual business turnover does not exceed Rs100 million, the tax rate shall be 7.5 per cent of taxable income

    Category – 2: Where annual turnover exceeds Rs100 million but does not exceed Rs250 million, the tax rate shall be 15 per cent of taxable income

    The Finance Bill 2021 proposed definition of Small and Medium enterprises as:

    —a person who is engaged in manufacturing as defined in clause (iv) of sub-section (7) of section 153 of the Ordinance; and

    —his business turnover in a tax year does not exceed two hundred and fifty million rupees.

    Subject to a condition that if annual business turnover of a small and medium enterprise exceeds two hundred and fifty million rupees, it shall not qualify as small and medium enterprise in the tax year in which annual turnover exceeds that turnover or any subsequent tax year.

    The Bill proposes a new section read with Fourteenth Schedule which shall deal with the computation and payment of tax for small and medium enterprises (SMEs) for tax year 2021 and onward as per the procedure laid down.

    Option for final tax regime

    —The small and medium enterprises may opt for taxation under final tax regime at the rates given in the table below

    Category – 1: Where annual business turnover does not exceed Rs100 million, the rate of tax shall be 0.25 per cent of gross turnover

    Category – 2: Where annual business turnover exceeds Rs100 million but does not exceed Rs250 million

    —Option under this rule shall be exercised at the time of filing of return of income and option once exercised shall be irrevocable for three tax years. The provisions of section 177 and 214C shall not apply to SME who opts for taxation under Final Tax Regime.

    SMEs that opt for taxation under normal law may be selected for tax audit through risk based parametric computer ballot under section 214C of the Ordinance if its tax to turnover ratio is below tax rates specified in these rules.

    The cases selected under audit of this rule shall not exceed 5 per cent of the total population of SMEs whose tax to turnover ratio is below tax rates given in these rules.

  • Bill proposes date extension to amnesty for builders and developers

    Bill proposes date extension to amnesty for builders and developers

    ISLAMABAD: The Finance Bill, 2021 has proposed to extend key dates for an amnesty to builders and developers who opt to pay tax computed under special provisions.

    KPMG Taseer Hadi & Co. Chartered Accountants said that the Finance Bill 2021 proposed to extend key dates for builders and developer who opt to pay tax computed under special provision in accordance with the rules in the Eleventh Schedule of Income Tax Ordinance 2001 on a project by project basis.

    Key proposed amendments are as under:

    —A new project or an incomplete existing project that is completed by 30 September 2023.

    —Any income, profits and gains of a builder or developer of an incomplete existing project earned up to tax year 2019 or tax year 2020 as the case may be.

    —Provisions of section 111 of Income Tax Ordinance, 2001 shall not apply to capital investment made in a new project in form of money or land subject to following conditions:

    -If the investment is made by a builder and developer being an individual, such person shall open a new bank account and deposit such amount on or before 30 June 2021.

    -If the investment is made by a builder and developer through a company or association of person being a single object company or association of person on or before 30 June 2021.

    -A person making investment as mentioned above shall submit a prescribed form on Iris web portal by 30 June 2021.

    -The project grey structure shall be certified in case of builder by approving authority or NESPAK on or before 30 September 2023.

    -In case of developer the approving authority or NESPAK shall certify landscaping on or before 30 September 2023 and a firm of chartered accountants shall certify that at least 50 per cent of plots have been booked for sale and at least 40 per cent of sale proceeds have been received by 30 September 2023 and 50 per cent of the roads have been laid up as certified by the approving authority or NESPAK.

    —Provisions of section 111 of Income Tax Ordinance, 2001 shall not apply to first purchaser of building or a unit of the building purchased from the builder from a new project or from incomplete existing project and payment is made through cross banking channel between date of registration of the project and ending on 31 March 2023.

    —Provisions of section 111 of Income Tax Ordinance, 2001 shall not apply to the purchaser of plots who intends to construct building if purchase and payment is made through cross banking channel on or before 30 June 2021 and construction is started on or before 31 December 2021 and such construction is completed on or before 30 September 2022.

  • FBR makes huge seizure of smartphones, drives at Islamabad Airport

    FBR makes huge seizure of smartphones, drives at Islamabad Airport

    ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday made a huge seizure of smartphones and drives worth Rs50 million at Islamabad International Airport.

    A FBR spokesman said that in line with the vision of Prime Minister and due focused approach against the menace of smuggling, FBR has seized 10 cartons and 06 bags lying unclaimed on a conveyer belt at Islamabad International Airport.

    The bags contained 25 Apple Macbooks, 235 Apple iPhones, 09 LG Thinq V50 smartphones, 200 SanDisk drives, 94 Lexar SSD drives, 217 SSD drives of difference brands, 40 Lexar SD RAMs, 20 Apples watches (Series 6), 30 Apple Air pods, 04 Apples iPad Pro (5th Generation), 12 Apple iPad (8th Generation), 10 Apple power adapters, 05 Apple USB Power adapters, 03 Apple HD TV devices,05 Honey Well dome cameras, 07 used cameras and other miscellaneous goods having market value of Rs.50 million.

    FBR will continue its counter smuggling drive to support local industry and to play its role in economic growth of the country.

  • Tax Maloomat captures assets, bank account details of 53 million citizens

    Tax Maloomat captures assets, bank account details of 53 million citizens

    ISLAMABAD: The Tax Maloomat (information) – a program launched by the Federal Board of Revenue (FBR) has captured details of 53 million citizens who have made transactions and withholding tax was deducted.

    (more…)
  • Advance tax on stock exchange transactions abolished

    Advance tax on stock exchange transactions abolished

    KARACHI: The government through budget 2021/2022 has abolished advance tax on stock exchange transactions and in this regard required amendment has been proposed through Finance Bill, 2021.

    Tax experts at KPMG Taseer Hadi & Co. in its commentary on budget 2021/2022 said that the stock exchanges registered in Pakistan were required to collect advance tax from their members on purchases and sales of shares in lieu of tax on commission earned by them.

    The Finance Supplementary (Second Amendment) Act, 2019 abolished the collection of this advance tax effective 01 March 2019.

    Resultantly, applicability of section 233 of the Income Tax Ordinance, 2001 i.e. withholding of tax on commission income was triggered.

    However, there is a point of view that taxation of income earned by members of stock exchange registered in Pakistan still covered under this section.

    In view of above, the Bill proposes to withdraw section 233A of the Income Tax Ordinance, 2001, hence, after such amendment, the taxability of income earned by members of stock exchanges now compulsorily fall under section 233 of the Ordinance.

    The bill also proposed to abolish collection of tax by National Clearing Company of Pakistan Limited (NCCPL).

    NCCPL collects advance tax from the members of Stock Exchanges registered in Pakistan on margin financiers, trading financiers and lenders in respect of margin financing in share business. The Bill proposes to withdraw such collection of tax.

  • Retailers accepting debit, credit cards payment to be treated as Tier-I

    Retailers accepting debit, credit cards payment to be treated as Tier-I

    ISLAMABAD: The Federal Board of Revenue (FBR) will bring more retailers into sales tax ambit after the proposal made through Finance Bill, 2021 related to Tier-I retailers.

    Tier-I retailers are commonly known for having huge volume sales and operating in a mall, air conditioned environment etc.

    Sources in the FBR said that retailer receiving payment through debit card and debit card would also qualify for Tier-I retailers.

    KPMG Taseer Hadi & Co. Chartered Accountants in its commentary on Budget 2021/2022 stated that the Section 2(43A) of Sales Tax Act, 1990 provides threshold limit and qualification criteria for tier-1 retailers.

    The Finance Bill now proposes to enhance the qualification criteria of tier-1 retailers by following additions

    – Retailers of furniture whose shop measures two (2) thousand square feet or more.

    – Retailer operating an online market place supplying goods through e-commerce platform, whether the goods are owned by him or not.

    – A retailer who has acquired point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by State Bank of Pakistan.

    The Bill further proposes to do away with on incentive of the cash back, up to five percent of the tax involved, to customers of Tier-1 retailer who have integrated their retail outlets with the Board’s computerized system for real-time reporting of sales.

  • No withholding tax on cash withdrawal from July 01

    No withholding tax on cash withdrawal from July 01

    ISLAMABAD: Banks shall not collect/deduct withholding tax on cash withdrawal from July 01, 2021 subject to approval of the Finance Bill by the National Assembly.

    The Finance Bill 2021 proposed abolishing levy of withholding tax on cash withdrawals from banking system.

    The withholding tax on cash withdrawal was imposed through Finance Act, 2005 in order to bring persons having taxable income but out of tax net.

    Initially the withholding tax was imposed at withdrawal of Rs25,000 on all persons making such transaction at 0.5 percent. However, through Finance Act, 2012 this threshold was increased to Rs50,000.

    Later, the withholding tax rate was reduced for income tax return filer to 0.3 percent and for non-filer it was increased to 0.6 percent.

    Through Finance Supplementary (Second Amendment) Act, 2019 the withholding tax on return filer at the rate of 0.3 percent was abolished and non-filers were required to pay 0.6 percent on making cash withdrawal above Rs50,000 per day.

    Now through Finance Bill 2021 proposed to abolish the 0.6 percent withholding tax on persons not on the Active Taxpayers List (ATL) or non-filers.

    The changes proposed through Finance Bill 2021 will be applicable from July 01, 2021 subject to the approval from the National Assembly.