In a move aimed at streamlining taxation in the digital era, proposed amendments to the Sales Tax Act, 1990 are set to require individuals operating online marketplaces to collect sales tax on goods sold through their platforms, regardless of ownership.
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Tax Rates for Individuals and Association of Persons
ISLAMABAD: The government has decided to retain the tax rates for individuals and Association of Persons (AOPs) for the year 2021-2022, sources in Federal Board of Revenue (FBR) said.
Since there is no change proposed through the Finance Bill, 2021 the rates applicable in Tax Year 2021 shall remain applicable in Tax Year 2022.
Rates of Tax for Individuals and Association of Persons
(1) Subject to clause (2), the rates of tax imposed on income of every individual and association of persons except a salaried individual shall be as set out in the following Table, namely:—
TABLE
S. No. Taxable income Rate of tax (1) (2) (3) 1. Where taxable income does not exceed Rs. 400,000 0% 2. Where the taxable income exceeds Rs. 400,000 but does not exceed Rs. 600,000 5% of the amount exceeding Rs. 400,000 3. Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000 Rs. 10,000 plus 10% of the amount exceeding Rs. 600,000 4. Where taxable income exceeds Rs.1,200,000 but does not exceed Rs. 2,400,000 Rs. 70,000 plus 15% of the amount exceeding Rs. 1,200,000 5. Where taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,000,000 Rs. 250,000 plus 20% of the amount exceeding Rs. 2,400,000 6. Where taxable income exceeds Rs. 3,000,000 but does not exceed Rs. 4,000,000 Rs. 370,000 plus 25% of the amount exceeding Rs. 3,000,000 7. Where taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 6,000,000 Rs. 620,000 plus 30% of the amount exceeding Rs. 4,000,000 8. Where taxable income exceeds Rs. 6,000,000 Rs. 1,220,000 plus 35% of the amount exceeding Rs. 6,000,000 -
Super tax permanently imposed on banking companies
ISLAMABAD: The levy of super tax has been permanently imposed on banking companies as it was expiring in the tax year 2021.
Sources in the Federal Board of Revenue (FBR) said that the super tax was only imposed on banking companies while the other taxpayers were exempted from tax year 2020.
The sources said that the Finance Bill 2021 had proposed to continue the levy of super tax at 4 percent on banking companies beyond Tax Year 2021 and onwards.
The government imposed the super tax through Finance Act, 2015 for one year, which was later extended for subsequent years, by inserting Section 4B to the Income Tax Ordinance, 2001.
According to Section 4B:
Super tax for rehabilitation of temporarily displaced persons.― (1) A super tax shall be imposed for rehabilitation of temporarily displaced persons, for tax years 2015 and onwards, at the rates specified in Division IIA of Part I of the First Schedule, on income of every person specified in the said Division.
(2) For the purposes of this section, “income” shall be the sum of the following:—
(i) profit on debt, dividend, capital gains, brokerage and commission;
(ii) taxable income (other than brought forward depreciation and brought forward business losses) under section (9) of this Ordinance, if not included in clause (i);
(iii) imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i); and
(iv) income computed, other than brought forward depreciation, brought forward amortization and brought forward business lossess under Fourth, Fifth, Seventh and Eighth Schedules.
(3) The super tax payable under sub-section (1) shall be paid, collected and deposited on the date and in the manner as specified in sub-section (1) of section 137 and all provisions of Chapter X of the Ordinance shall apply.
(4) Where the super tax is not paid by a person liable to pay it, the Commissioner shall by an order in writing, determine the super tax payable, and shall serve upon the person, a notice of demand specifying the super tax payable and within the time specified under section 137 of the Ordinance.
(5) Where the super tax is not paid by a person liable to pay it, the Commissioner shall recover the super tax payable under subsection (1) and the provisions of Part IV,X, XI and XII of Chapter X and Part I of Chapter XI of the Ordinance shall, so far as may be, apply to the collection of super tax as these apply to the collection of tax under the Ordinance.
(6) The Board may, by notification in the official Gazette, make rules for carrying out the purposes of this section.
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Salary Tax Rates for year 2021-2022
ISLAMABAD: The Finance Bill 2021 has not proposed changes to tax rates and slabs for salaried persons for tax year 2022, sources in the Federal Board of Revenue (FBR) said.
Therefore tax rate and slabs will remain unchanged for tax year starting from July 01, 2021.
Following is the table for tax rates on taxable income of salaried persons prevailed during tax year 2021:
Where the income of an individual chargeable under the head “salary” exceeds seventy-five per cent of his taxable income, the rates of tax to be applied shall be as set out in the following table, namely:—
01. Where taxable income does not exceed Rs. 600,000: the tax is zero per cent
02. Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000: the tax rate is 5% of the amount exceeding Rs. 600,000
03. Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000: the tax rate is Rs. 30,000 plus 10% of the amount exceeding Rs. 1,200,000
04. Where taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000: the tax rate is Rs. 90,000 plus 15% of the amount exceeding Rs. 1,800,000
05. Where taxable income exceeds Rs.2,500,000 but does not exceed Rs. 3,500,000: the tax rate is Rs. 195,000 plus 17.5% of the amount exceeding Rs. 2,500,000
06. Where taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000: the tax rate is Rs. 370,000 plus 20% of the amount exceeding Rs. 3,500,000
07. Where taxable income exceeds Rs. 5,000,000 but does not exceeds Rs. 8,000,000: the tax rate is Rs. 670,000 plus 22.5% of the amount exceeding Rs. 5,000,000
08. Where taxable income exceeds Rs. 8,000,000 but does not exceeds Rs. 12,000,000: the tax rate is Rs. 1,345,000 plus 25% of the amount exceeding Rs. 8,000,000
09. Where taxable income exceeds Rs. 12,000,000 but does not exceeds Rs. 30,000,000: the tax rate is Rs. 2,345,000 plus 27.5% of the amount exceeding Rs. 12,000,000
10. Where taxable income exceeds Rs. 30,000,000 but does not exceeds Rs. 50,000,000: the tax rate is Rs. 7,295,000 plus 30% of the amount exceeding Rs. 30,000,000
11. Where taxable income exceeds Rs. 50,000,000 but does not exceeds Rs. 75,000,000: the tax rate is Rs. 13,295,000 plus 32.5% of the amount exceeding Rs. 50,000,000
12. Where taxable income exceeds Rs. 75,000,000: the tax rate is Rs. 21,420,000 plus 35% of the amount exceeding Rs. 75,000,000
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FBR to confiscate goods without brand licensing
In a bid to enhance regulatory oversight and combat counterfeiting, the proposal to make brand licensing mandatory for manufacturers of specified goods has been put forward. In the event of non-compliance, the Federal Board of Revenue (FBR) is poised to be empowered with the authority to confiscate such items.
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Filing income tax return on July 01 impossible due to various reasons: KTBA
KARACHI: As the Federal Board of Revenue (FBR) has decided to open IRIS portal for income tax return filing for tax year 2021 but on the other hand a tax bar objected that making compliance of return filing on first day of July was impossible due to various reasons.
The Karachi Tax Bar Association (KTBA) on Friday responded to draft income tax return form issued by the FBR, which was issued through SRO 730(I)/2021 dated June 11, 2021.
The tax bar said that practically it was impossible for any taxpayer, be it individual, Association of Person (AOP) or a company to file return of income particularly on the first day of July or immediately thereafter owing to following factors:
Finally, we may add that practically it is impossible for any taxpayer, be it Individual, AOP or Company to file return of income particularly on the first day of July or immediately thereafter owing to following factors:
- Certificates for the purpose of Sec. 149 are issued by the employers broadly by the end of July so is the case of other Withholding Certificates by the Withholding Agents.
- Closing of books and completion of financial statements on thirtieth June is effectively impossible as Sales Tax Return for June is filed by the mid of July.
- Mainly the taxpayer starts compiling necessary information & documents to prepare and file the returns in the first week of July and normally it takes at least a month for this purpose. As such the pace of filing of return in July is almost nil and very slow.
The tax bar suggested that for the purpose of Section 118 of the Income Tax Ordinance, 2001, the FBR should fix the deadline to file return keeping in view the above as well.
The KTBA however appreciated the FBR for issuing draft Income Tax Return Forms in respect of Tax Year 2021 for this Year are relatively available earlier albeit the timelines are not in consistent with Rule 34A of Income Tax Rules 2002 nor approved Change Request Form (CRF) is evenly shared in order to let us track and trace the changes incorporated in the draft returns.
Secondly please appreciate that returns are not available in excel format to test the computations thus requirement of User Acceptance Test (UAT) of an amended return for testing environment is also not followed as required in Rule 34A(2)(e) read with sub-rule (3) ibid.
The tax bar said that any timeline for the purpose of Sec.237 of the Income Tax Ordinance, 2001, shall not take effect unless due diligence prescribed in sub-rule (3) and (4) ibid, is followed in letter and spirit.
It hoped the FBR will soon upload the amended return of income on IRIS portal for the purpose of UAT and time prescribed for suggestions/ objections in rules will be allowed accordingly.
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FBR forms committees to remove anomalies in Finance Bill
ISLAMABAD: The Federal Board of Revenue (FBR) on Friday formed committees to identify and remove technical and legal anomalies in the Finance Bill, 2021.
The FBR formed following committees:
Sultan Ali Allana, Chairman, HBL has been appointed as chairman of the business anomaly committee. Ch. Muhammad Tarique, Member (IR- Policy), FBR is co-chairman of the committee. The other members of the committee are included:
01. Ehsan A Malik, CEO, Pakistan Business Council
02. M. Shariq Vohra, President, Karachi Chamber of Commerce and Industry
03. Irfan Siddiqui, President, Overseas Investors Chamber of Commerce and Industry
04. Sherbaz Ilyas Ghazanfar Bilour, President, Sarhad Chamber
05. Abdul Samad, President, Quetta Chamber
06. Mian Naseer Hayat Maggo, President, Federation of Pakistan Chambers of Commerce and Industry
07. Mian Tariq Misbah, President, Lahore Chamber of Commerce and Industry
08. Adil Bashir, Chairman, All Pakistan Textile Mills Association
09. Asif Peer, President, American Business Council
10. Asad Shah, Director (External Affairs), PTC
11. Amir Waheed, ex-President of Islamabad Chamber
Naeem Akhtar Sheikh, UHY Hassan Naeem & Co. has been appointed as chairman of the anomaly technical committee constituted by the FBR. The co-chairman of the committee are: Ch. Muhammad Tarique, Member (IR-Policy), FBR; and Syed Hamid Ali, Member (Customs –Policy), FBR,
The other members of the committee are:
01. Ashfaq Tola, FCA, FCMA
02. Abdul Qadir Memon, Patron Pakistan Tax Bar, Karachi
03. Syed Yawar Ali, Chairman, Pakistan Business Council, Karachi
04. Shahzad Hussain, Ex- Partner, A F Ferguson & Co.
05. Khurram Mukhtar, Patron-in-Chief, PTEA
06. Ms. Sadia Nazeer, FCA, Partner KPMGA
07. Hafiz Muhammad Idrees, Advocate, Supreme Court, Ex-President, Tax Bar
08. Habib Fakhruddin, CA
09. Abdul Wahab Kodvai
The committees have been given tasks to review the anomalies identified and to advise FBR on removal of anomalies.
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Tax amendments made for income of salaried persons, individuals
KARACHI: The Finance Bill, 2021 has proposed certain amendments in Income Tax Ordinance, 2001 related to income of salaried persons and business individuals.
According to a presentation made at post budget 2021/2022 webinar of Karachi Tax Bar Association (KTBA) the major changes proposed through the Finance Bill 2021, are:
— Interest income above Rs5 million taxable at normal rates (previously Rs. 36 million); withholding @15 percent (previously 10 percent) for interest income below Rs. 500,000.
— Exemption for medical allowance / reimbursement withdrawn, which needs to be reconsidered.
— Interest income distributed by Provident Fund above Rs. 500,000 taxed @ 10 percent – conflict with 6th Schedule needs to be addressed.
— Rental income taxable at normal rate.
— No tax on transfer of assets via gift / inheritance etc. to non-resident relatives.
— Giftee allowed to claim FMV of gifted assets, after a holding period of 2 years.
— Individuals have been made a withholding agent for payment of commission (having turnover of Rs. 100 million).
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Final tax regime allowed for export of services
KARACHI: The Finance Bill 2021 has proposed a final tax regime for export of IT and IT enabled services.
According to commentary on budget 2021/2022 released by KPMG Taseer Hadi & Co. currently, tax deduction on foreign proceeds from export of goods are taxed at 1 percent which is considered as final tax.
The Finance Bill proposes similar taxation regime for following specified services:
—Export of IT and IT enabled services where tax credit under section 65F is not available;
—Services or technical services rendered outside Pakistan or exported from Pakistan;
—royalty, commission or fees derived by a resident company from a foreign enterprise in consideration for the use outside Pakistan of any patent, invention, model, design, secret process or formula or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided to such enterprise;
—construction contracts executed outside Pakistan; and
—other services rendered outside Pakistan as notified by the Board from time to time.
The tax deductible will be final tax subject to following conditions:
(i) Income tax return has been filed;
(ii) withholding tax statements for the relevant tax year have been filed;
(iii) sales tax returns under Federal or Provincial laws have been filed, if required under the law; and
(iv) no credit for foreign taxes paid shall be allowed.
The Bill also proposes an option for taxation under Normal Tax Regime which is to be exercised every year at the time of filing of income tax return.
The Bill proposes while explaining the nature and source of any amount, investment, money, valuable article, expenditure, referred to in section 111, a taxpayer takes into account any source of income under this section, he shall not be entitled to take credit of a sum that can be reasonably attributed to the business activity under this section.
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Finance Bill proposes blanket powers to tax machinery: KTBA
KARACHI: The federal government through Finance Bill, 2021 proposed certain amendments in tax law, which will give blanket powers to tax machinery, said Zeeshan Merchant, President, Karachi Tax Bar Association (KTBA).
Merchant was addressing at the post budget 2021/2022 seminar held on Thursday.
“We at KTBA feel that the FBR is actively pursuing the policy to create a friendly relationship between the taxpayers and the tax collectors,” he said, adding that we feel certain amendments proposed in the law have given blanket powers to the tax machinery.
Merchant said that the government had presented the budget, which had ingredients of both a sense of direction though based on certain assumption and some measures to increase the tax base.
KTBA president said that the bar was grateful to the government for timely action taken after the issues highlighted by the KTBA and now it is heard that certain proposed amendments would have now be drafted.
While discussing the budget, he said that senior citizens had not been taken care of and they were treated at par with normal taxpayers.
He said that the bill had proposed to omit section 114A of the Income Tax Ordinance, 2001. But it should be clarified by the tax authorities that nothing requires to be done in this regard.
He said that the discretionary power had been give to assistant commissioner to arrest a person for concealment of assets.
Zeeshan Merchant said that nothing has been done to bring retailers into the tax net like an effort has been made in SMEs sector.
He highlighted that the budget had some positive measures, included: increase in minimum tax threshold from Rs10 million to Rs100 million; reduction in minimum tax rate from 1.5 percent to 1.25 percent; minimum tax not to levy in case of losses; distributors brought in the fold of minimum tax; exemptions allowed for those availing tax credit; separate tax regime for SMEs.