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Category: Taxation

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  • SRB makes mandatory for banks to provide quarterly statement of taxable services

    SRB makes mandatory for banks to provide quarterly statement of taxable services

    KARACHI: Sindh Revenue Board (SRB) has made mandatory for banking companies to provide quarterly reconciled statement of taxable services provided during the period.

    The SRB issued notification No. SRB-3-4/17/2020 effective from July 01, 2020 to make it mandatory for banking and non-banking financing companies to submit quarterly reconciliation of sales taxable services provided or rendered during the period.

    The financial institutions are required to provide particulars of services or services related fee, commission, brokerage or charges.

    These services are included:

    1. Branch baking customer free and commission
    2. Consumer finance related fee and commission
    3. Card related fee and commission (debit and credit cards)
    4. Credit related fee and commission
    5. Investment banking fee and commission
    6. Commission and fee on foreign trade
    7. Bill discounting commission and fee
    8. Commission and brokerage on foreign exchange dealing
    9. Commission and fee on guarantees, including bank guarantees
    10. Commission and fee on cash management
    11. Commission and fee on remittances, including home remittances
    12. Commission and fee on bancassurance
    13. Commission on commodity operations
    14. Commission on handing of federal government or provincial or local government businesses
    15. Fee or rent of safe deposit lockers and safe vaults
    16. Services in respect of Hajj and Umrah
    17. Services in respect of Musharika and Modarba
    18. Services in respect of utility bills collection
    19. Services provided as a banker to an issue
    20. Services provided as a consultant to an issue
    21. Financial leasing
    22. Commodity or equipment leasing
    23. Other leasing
    24. Services in respect of Ijarah
    25. Funds management services
    26. Asset management services
    27. Advisory services
    28. Consultancy services
    29. Other services

    The reconciliation should include sales tax withheld by the banking/non-banking financial company as a withholding agent.

    Sales tax of the banking/non-banking financial companies services withheld, if any, by others as withholding agents.

  • FBR imposes up to seven percent additional customs duty

    FBR imposes up to seven percent additional customs duty

    ISLAMABAD: Federal Board of Revenue (FBR) has started preparation for achieving revenue collection target for fiscal year 2020/2021 as it massively increased additional customs duty up to 7 percent from July 01, 2020.

    The FBR issued SRO 572(I)/2020 on Tuesday for levying additional customs duty at different rates of two percent, four percent and seven percent.

    The FBR provisionally collected Rs3.957 trillion for fiscal year 2019/2020. As per budget documents the FBR has been assigned to collect Rs4,963 billion during the fiscal year 2020/2021, which is around 25 percent higher than collection of fiscal year 2019/2020..

    The government while presenting the budget 2020/2021 had claimed that the budget was tax free and it had not levied any duty and tax in order to provide relief to the masses amid outbreak of coronavirus.

    However, as per the notification additional customs duty at two percent has been imposed on goods imported under tariff slabs of zero percent, three percent and 11 percent.

    Another rate of four percent additional customs duty has been levied on goods imported under tariff slab of 16 percent.

    While the rate additional customs duty at seven percent has been applied on goods imported under tariff slab of 20 percent and above.

    However, import of edible crude oil which are subject to import at higher tariff slab, the additional customs duty shall be charged at the rate of two percent, the FBR said.

    The FBR further said that additional customs duty would not be applicable on the goods imported under concessionary regime for exporters.

    Further, the additional customs duty shall also not be applicable on the contractors and services companies for offshore projects.

  • FBR surpasses fiscal year 2019/2020 collection target

    FBR surpasses fiscal year 2019/2020 collection target

    ISLAMABAD: Federal Board of Revenue (FBR) has surpassed revenue collection target of Rs3,907 billion for fiscal year 2019/2020, which was significantly lower due to coronavirus adverse impact on the economy.

    FBR official spokesman on Tuesday said that the tax authorities had surpassed the downward revised target of Rs3,907 billion and collected Rs3,957 billion be Tuesday evening.

    The spokesman said that the gross collection of the FBR also recorded above Rs4,000 billion for the first time in the history. The collection is considerably high considering the adverse impact of coronavirus.

    The collection in the month of June 2020 also recorded at Rs411 billion by 3:00PM on June 30, 2020 as against the June target of Rs398 billion.

    It is important to note that the FBR had lost around 30 officials due to the pandemic, which also included a grade 22 officer Muhammad Zahid Khokhar.

    The FBR praised its officials for their dedication toward revenue collection despite threat of COVID.

  • FBR grants Rs30 billion as tax concession to new business entities

    FBR grants Rs30 billion as tax concession to new business entities

    ISLAMABAD: Federal Board of Revenue (FBR) has granted Rs30 billion as initial allowance to new business entities during fiscal year 2019/2020.

    The concession of allowance has been granted under Section 23 of Income Tax Ordinance, 2001.

    As per Section 23 the allowance has been granted as:

    Section 23. Initial allowance.—

    Sub-Section (1): A person who places an eligible depreciable asset into service in Pakistan for the first time in a tax year shall be allowed a deduction (hereinafter referred to as an “initial allowance”) computed in accordance with sub-section (2), provided the asset is used by the person for the purposes of his business for the first time or the tax year in which commercial production is commenced, whichever is later.

    Sub-Section (2): The amount of the initial allowance of a person shall be computed by applying the rate specified in Part II of the Third Schedule against the cost of the asset.

    [The rate of initial allowance under section 23 shall be 25 percent for plant and machinery.]

    Sub-Section (3): The rules in section 76 shall apply in determining the cost of an eligible depreciable asset for the purposes of this section.

    Sub-Section (4): A deduction allowed under this section to a leasing company or an investment bank or a modaraba or a scheduled bank or a development finance institution in respect of assets owned by the leasing company or the investment bank or the modaraba or the scheduled bank or the development finance institution and leased to another person shall be deducted only against the leased rental income derived in respect of such assets.

    (5) In this section, “eligible depreciable asset” means a depreciable asset other than —

    (a) any road transport vehicle unless the vehicle is plying for hire;

    (b) any furniture, including fittings;

    (c) any plant or machinery that has been used previously in Pakistan; or

    (d) any plant or machinery in relation to which a deduction has been allowed under another section of this Ordinance for the entire cost of the asset in the tax year in which the asset is acquired.

    The FBR granted a sum of Rs36.43 billion as allowances including the initial allowance during fiscal year 2019/2020.

    Under Section 23A an amount of Rs335 million has been granted as first year allowance under the head of industrial undertaking set up in specified rural and under developed areas or engaged in the manufacturing of cellular mobile phones.

    An amount of Rs477 million has been granted concessions under Section 60 of the Income Tax Ordinance, 2001 for persons paying Zakat.

    The FBR granted concession of Rs2.45 billion under Section 60A for persons paying Workers’ Welfare Fund. Another amount of Rs2.72 billion has been granted as allowance under Section 62B for persons paying workers’ participation fund.

    An amount of Rs285 million has been granted as allowance under Section 60C for individuals paying profit or share in rent and share in appreciation for value of house on loan by banks etc.

    The FBR granted Rs154 million as deductible allowance for education expenses under Section 60D.

  • FBR issues rules for processing duty drawback claims

    FBR issues rules for processing duty drawback claims

    ISLAMABAD: Federal Board of Revenue (FBR) on Monday issued draft rules for processing duty drawback claims in order to speedy repayment of exporters.

    The FBR issued SRO 561(I)/2020 to amend Customs Rules, 2001 for processing and sanctioning of duty drawback claims.

    The FBR said that the claims of duty drawback shall be sanctioned by the Customs if the same are complete in all respect and on first in first out (FIFO) basis.

    However, comprehensive audit of duty drawback would be carried out by the Directorate General of Post Clearance Audit (PCA) of the FBR.

    Any recovery detected by the PCA may be deducted from the next duty drawback claim of the exporter besides initiating recovery proceedings under the recovery rules.

    The duty drawback payment of such claims that are complete in all respects shall be made on FIFO basis taking into account the date of filing of claim.

    A consolidated discrepancy report shall be sent by the collectorate to State Bank of Pakistan (SBP) on monthly basis. The SBP shall also send a scroll of all the duty drawback payments made to the exporters.

    For calculating amount of customs duties paid at the time of import, past six months import data may be used taking the average quantity or value of each class or description of the materials, including packing materials, from which a particular class or description of goods is ordinarily produced or manufactured. Average exchange rates of the same period may be taken into consideration.

    The average amount of customs duties paid on imported materials used in the manufacturing of components, intermediate or semi-finished products which are exported as such or further used for manufacture of goods shall be taken into account for the purpose of calculation of the duty drawback.

    The average amount of customs duties paid at the effective rate on the imported input materials shall be calculated for the last six months import data.

    The average FOB (freight on board) value of each class or description of the goods exported during the last six months may be taken into consideration for the class or description of goods for which export drawback rates are being determined.

    On requisition by the relevant association, director general may furnish trade statistics pertaining to each class or description of imported or exported goods for the past six months on the basis of which export drawback rates need to be determined.

    At the time of submitting an application, the association shall specify the complete calculation in accordance with the method of calculation as the FBR may notify and shall also furnish therewith the worksheets.

    The Director General may initiate exercise for determination of duty drawback rates on its own motion where it is found that: duty drawback rates have not been determined; where already determination rates have changed due to amendments in tariffs.

  • SRB issues procedure for sales tax collection on renting tangible goods

    SRB issues procedure for sales tax collection on renting tangible goods

    KARACHI: Sindh Revenue Board (SRB) on Monday issued procedure for collection of sales tax on services on renting of machinery, equipment, appliances and other tangible goods.

    The SRB issued the rules for the levy, collection and payment of tax on the renting of machinery, equipment, appliances, and other tangible goods.

    (1) This rule shall apply to the persons providing or rendering and also to the persons procuring or receiving the services of renting of machinery, equipment, appliances and other tangible goods as described against tariff heading 9806.6000 of the Second Schedule to the Act:

    Provided that this rule shall not apply in the cases of the services of commodity or equipment leasing, hire purchase leasing and rent a car and automobile rental service as described against tariff headings 9813.3020, 9813.3030 and 9819.3000, respectively, of the Second Schedule to the Act.

    (2) The rate of tax shall be 5 percent as prescribed against tariff heading 9806.6000 in the Table of notification No. SRB-3-4/8/2013 dated the 1 st July, 2013, subject to the conditions and restrictions prescribed therein.

    (3) The liability to deposit the sales tax shall be:-

    (a) on the person providing or rendering the services in the case the services are provided or rendered by a person in Sindh or from the place of business in Sindh; and

    (b) on the person procuring or receiving the service in the case the where the services is procured or received from a person not resident in Pakistan.

    (4) The amount of the sales tax involved shall be deposited in Sindh Government’s head of account “B-02384” by the 15th day of a month following the tax period to which it relates.

    The tax return, in the prescribed form, shall be e-filed within 3 days from the due date of payment.

    (5) The service providers shall maintain the records as are prescribed under the Act and the sub-rule (2) of rule 29.

    In addition, the service provider shall also maintain an account of the stock of machinery, equipment, appliances and other tangible goods possessed by him for provision of the service. In addition, the service recipients procuring or receiving the services from the service providers not resident in Pakistan shall also maintain the record prescribed under the Act or rule 29(2).

    (6) The services providers shall issue tax invoices in accordance with the provisions of rule 29(1).

  • FBR grants Rs45 billion customs duty exemption under free trade agreements

    FBR grants Rs45 billion customs duty exemption under free trade agreements

    In a significant move to bolster trade and economic relationships, the Federal Board of Revenue (FBR) has granted Rs45 billion in customs duty exemptions and concessions on imports under various Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs) for the fiscal year 2019/2020.

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  • Illegal trading of currency, gold to be liable for imprisonment up to 14 years

    Illegal trading of currency, gold to be liable for imprisonment up to 14 years

    KARACHI: Passengers or crew members found involved in illegal trading of currency, gold or precious stones to be convicted with up to 14 years imprisonment along with huge amount of fine and penalty.

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  • Minimum tax to apply on non-resident PE companies

    Minimum tax to apply on non-resident PE companies

    KARACHI: The minimum tax on turnover has been proposed to impose on non-resident companies having permanent establishment (PE) in Pakistan.

    The amendment in Section 113 of the Income Tax Ordinance, 2001 has been proposed through Finance Bill, 2020.

    According to EY Ford Rhodes Chartered Accountants the Section 113 of the Ordinance levies minimum tax on a person based on his turnover where such person is not liable to pay tax due to various reasons listed therein.

    However, the levy of minimum tax in case of corporate taxpayers, is only applicable on resident companies.

    This means that foreign companies having a permanent establishment in Pakistan (including a branch) are not subject to minimum tax.

    The Finance Bill 2020 has now proposed to include non-resident companies having a permanent establishment in Pakistan under the domain of minimum tax on turnover.

    Consequently, such companies would be required to compute minimum tax under Section 113 of the Ordinance for determination of their ultimate tax liability.

    It may be noted that in the matter of levy of tax on non-resident persons, as per Section 107 of the Ordinance, the provisions of the Avoidance of Double Tax Agreement between Pakistan and the respective country would prevail over the provisions of the Ordinance.

    It needs to be appreciated that in most of the agreements Pakistan has signed with other countries, a permanent establishment of a non-resident in Pakistan would be taxable only on net income basis.

    “Therefore, the applicability of minimum tax in case of a non-resident person having a permanent establishment in Pakistan may be put to a question where a avoidance of double taxation treaty prevails,” they said.

  • FBR to get information of all persons entering, leaving Pakistan for broadening of tax base

    FBR to get information of all persons entering, leaving Pakistan for broadening of tax base

    KARACHI: Federal Board of Revenue (FBR) will get access to information of all persons entering or leaving Pakistan from federal investigation agency and bureau of emigration for the purpose of broadening of tax base.

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