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Category: Taxation

Pakistan Revenue delivers the latest taxation news, covering income tax, sales tax, and customs duty. Stay updated with insights on tax policies, regulations, and financial developments in Pakistan.

  • Amnesty Scheme 2019 unveiled; 4pc tax for documenting hidden assets; applicable till June 30

    Amnesty Scheme 2019 unveiled; 4pc tax for documenting hidden assets; applicable till June 30

    ISLAMABAD: The federal government finally announced tax amnesty scheme 2019 for people having undisclosed assets to become part of documented economy. The scheme has been announced at four percent of tax to declared hidden assets other than immovable properties.

    The scheme is available for Pakistani citizens who have evaded taxes other than public office holders.

    The scheme will be applicable till June 30, 2019, Advisor to Prime Minister Finance, Dr Abdul Hafeez Shaikh said at a press conference while announcing the scheme after its formal approval by the federal cabinet on Tuesday.

    The advisor was accompanied by Special Assistant to the Prime Minister on Information and Broadcasting, Dr Firdous Ashiq Awan, State Minister for Revenues, Hammad Azhar and Federal Board of Revenue Chairman Syed Shabbar Zaidi.

    “Basic purpose of the scheme is not to generate revenue but to document economy and make the dead assets functional to promote economy,” Shaikh said.

    The advisor urged the business community to participate in this amnesty scheme to document their concealed assets.

    Inviting all such people who had their undeclared assets to take benefit from this scheme, the Advisor said this was the last chance as the government had already imposed the Benami Law under which all such benami properties would be confiscated by the government.

    He said efforts have been made to make the scheme easy in understanding as well as implementing.

    He said all assets were included in the scheme inside or outside Pakistan. All assets other than real estate, would have to pay four percent to get these legalized.

    In case of real estate, it would be evaluated at 1.5-time on existing FBR value, to bring it to market value he said.

    For Pakistanis living abroad, the advisor said that they can pay four percent to legalize their money subject to bringing cash or other kind into Pakistan.

    Otherwise they would have to pay 6 percent to legalize their assets, he added.

    Minister of State for Revenue Hammad Azhar said there was a lot of difference between the current and previous amnesty schemes as for the first time there was a condition for all asset declarer to become tax filer besides giving option to all such people to revise their balance sheet in their tax returns.

  • IR officers barred from suspending registration, raiding business premises of tax defaulters

    IR officers barred from suspending registration, raiding business premises of tax defaulters

    ISLAMABAD: The offices of Inland Revenue have been barred from taking harsh action against tax defaulters such as suspending registration and raiding business premises on suspicions of tax evasion.

    The newly appointed chairman of Federal Board of Revenue (FBR) Shabbar Zaidi issued more directives on Tuesday to restrict the IR officers for using discretionary powers.

    The federal government appointed the chairman from private sector for enhancing revenue collection through strengthening operation side. The policy side of taxation matters has already been with the ministry of finance.

    The chairman soon after assuming the charge issued directives to the field offices of the FBR that no bank account would be attached of a taxpayer without informing 24 hours prior taking any action. Further obtaining permission from FBR chairman has been made mandatory for freezing any bank account.

    The chairman on Tuesday issued more instructions to the field offices of Inland Revenue, which stated: “There will be no suspension from active taxpayers list unless there is personal interaction with CEO/owner of the business 24 hours before suspension, list of all cases of suspension after suspension will be sent to chairman FBR and Member IR operations with reasons of suspension and evidence of personal interaction as discussed above.”

    The chairman further directed: “There will no be no raid or any premises of any existing taxpayer without prior approval of Member IR Operations and Chairman. If there are evidences of economic transactions which are chargeable to tax and the organization/entity is not a tax registered person then officer of that jurisdiction will report it to the Member IR Operations and Chairman FBR who will provide necessary direction for future course of action.”

  • FBR advised making declaration of fund source mandatory for foreign remittances

    FBR advised making declaration of fund source mandatory for foreign remittances

    KARACHI: Federal Board of Revenue (FBR) has been advised to make it mandatory the declaration of source of funds for foreign remittances.

    Association of Chartered Certified Accountants (ACCA) in its tax proposals for budget 2019/2020 recommended changes to Section 111(4) of Income Tax Ordinance, 2001 regarding foreign exchange remitted from outside Pakistan.

    The association recommended amendment:

    “to any amount of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect … and a declaration along-with evidence of the source of funds.”

    It said that this will continue to promote the inflow of foreign exchange remittances towards the country while stopping the misuse of the provision to whiten/launder black monies and de-incentivizing genuine tax paying businesses.

    “This way, the ‘non enquiry’ clause which has been extensively abused, will be abolished sans the current monetary limit while still retaining the tax relief for foreign exchange remittance.

    The ACCA further said that the minimum tax on turnover is charged irrespective of the net profit or loss.

    This often gives rise to a situation where businesses end up paying double taxes on their revenues and profits as well as loss making businesses facing additional cash-flow pressures by paying this tax.

    The current rate of 1.25 percent applicable generally except for a few sectors, should be brought down to 0.4 percent.

    The now deleted exception in case of a gross loss needs to be reinstated in line with the principles of natural justice and equity.

    This will facilitate the business eco-system contributing to a growth in GPD which can lead to increased revenue collections for the treasury.

    The association further highlighted Section 138 and 140 of the Ordinance regarding recovery of tax through attachment of bank accounts and/or property or arrest.

    It said that currently, the allowance for the commissioner to attach the property of the taxpayer before expiry of notice period on “satisfaction” of the commissioner regarding possible removal, cancellation or disposal of attachable property is misused in many cases to harass the businesses.

    This change can bring an end to this, increase taxpayers’ trust in the tax apparatus and improve the ease of doing business in the country.

    “Any such attachment of any movable/immovable property before expiry of the notice period may only be authorized by the Commissioner in the presence of objective evidence, which should be shared with the taxpayer.”

  • SRB suspends sales tax registration of four freight forwarders

    SRB suspends sales tax registration of four freight forwarders

    KARACHI: Sindh Revenue Board (SRB) has suspended sales tax registration of four freight forwarders for defaulting payment and non-compliance of filing sales tax returns.

    The SRB issued suspension notices to the following freight forwarders:

    Muhammad Rafique (M/s. Rafique Brothers)

    M/s. Prime Ocean Cargo Management Company (Pvt) Limited

    M/s. Shahnoor Weavers

    Muhammad Tahir Imam (M/s. ST Logistics International)

    The SRB said that Muhammad Rafique (M/s. Rafique Brothers) had failed to make payment of Sindh Sales Tax on Services for the period from July 2011 till to date. Further the company also failed to file return electronically for the tax periods February 2017 to December 2018 and July 2011 to April 2013.

    The SRB asked the company that the notice would be revoked in case it takes remedial action by May 24 by making payment and filing true and correct returns for the said periods. Otherwise the case shall be proceeded for cancellation in case remedial action was not taken by May 25, 2019.

    In case of M/s. Prime Ocean Cargo Management Company (Pvt) Limited, the SRB said that the company had failed to file returns for the period July 2016, December 2015, March 2015, June 2013, March 2013, September 2012, August 2012, June 2012, May 2012, April 2012, March 2012, February 2012, January 2012, December 2011, October 2011, September 2011, August 2011, July 2011.

    The SRB directed the company to take remedial action by May 24, 2019. “In case of non-satisfactory response or failure to take remedial measures as suggested above on or before May 25, 2019 the case shall be further preceded for cancellation of registration wit the SRB.”

    In the case of M/s. Shahnoor Weaver, the SRB said that the company had failed to make payment since July 2011 till date. Further, the company had failed to e-filer sales tax returns for tax periods from July 2011 to June 2015 and from August 15 to December 2018.

    The SRB directed the company to take remedial action by May 26, 2019. “In case of non-satisfactory response or failure to take remedial measures as suggested on or before May 27, 2019, the case shall be further preceded for cancellation of registration with the SRB.”

    In the fourth case of Muahmmad Thair Imam (M/s. ST Logistics International), the SRB said that the company had failed to make payment of sales tax on services from July 2011 till date. Further, the company also failed to e-filer sales tax returns for the said period.

    The SRB has directed the company to take remedial action by May 23, 2019. “In case o non-satisfactory response or failure to take remedial measures as suggested on or before May 24, 2019 the case shall be further preceded for cancellation of registration wit SRB,” it added.

  • Pakistan Customs launches swift consignment clearance system to improve ease of doing business

    Pakistan Customs launches swift consignment clearance system to improve ease of doing business

    KARACHI: Pakistan Customs on Monday launched the swift consignment clearance software for improving ease of doing business and trading across the border indices of the country.

    The system namely ‘WeBOC Global’ was inaugurated by Member Customs Dr Jawwad Uwais Agha at Custom house, Karachi.

    He introduced the key features of the newly developed ICT system which was attended by a large number of the senior officers of Pakistan Custom and members of the WeBOC-Glo Project team.

    The new version of Customs clearance system was deployed at early in the morning May 13, 2019 which has immediately replaced the previous version of WeBOC clearance system.

    This will be a modern and technologically advanced version of WeBOC which is an end to end automated online goods clearance system home grown by Pakistan Customs in 2011.

    With the introduction of new WeBOC system, the Custom clearance system of Pakistan will enter into the club of modern, upgraded and technologically advanced Custom clearance system of the world, the Member said.

    The WeBOC-Glo in addition to new modules and functionalities will be plugging the deficiencies of earlier clearance system pointed out during the course of time in internal reviews and ICT Gap Analysis by the World Bank.

    Components of Release 1.0 of the WeBOC-Glo were introduced by Iftikhar Ahmad, Collector/Convener of the project which included 13 modules and functionalities.

    The major modules included:

    (1) the Development of Electronic Data Interchange (EDI) with Terminal Operators for Export LCL Cargo, which will reduce dwell time at ports

    (2) the Quota Management of Bulk Export Cargo, which will facilitate auto debiting of assigned quota,

    (3) the establishment of IT interface with Ministry of Foreign Affairs for automation of Exemption Certificates,

    (4) the availability of WeBOC Glo on Chrome and Edge to provide convenience to users,

    (5) the enhanced Security Features, to safeguard the User IDs and relevant data of importers /exporters,

    (6) the unified Screens for MIS Officers, to ensure speedy processing,

    (7) the search engine for TARIFF and relevant SROs to empower users in Tariff and import/export policy information for correct filling and assessment of GDs,

    (8) the update on Containers Status, to allow traders the facility to keep track of containers,

    (9) Improved User Interface, aimed at making the system more user friendly and less time consuming and

    (10) the Glo Insight which strengthens the statistical Scrutiny and monitoring of Customs transactions through business intelligence and data analysis tools for informed decisions making.

    In addition to above, the WeBOC-Glo will be instrumental in closure of old Customs clearance system by automating areas that had remained outside its scope so far.

    (1) the Export Processing Zone, whose import and export clearance along with the role and functions of EPZA have been automated for the first time,

    (2) the GD Filing Without NTN, which will facilitate individual importers, Small and Medium Enterprises (SME) promoting e-Commerce in Pakistan,

    (3) the Exceptional GD Filing, which caters to all scenarios where auto clearance were held up due to peculiar taxation regimes on items or specific orders of superior courts.

    The team has been further instructed by Dr Agha to plan launch of Release-2of WeBOC Glo by the first week of July, 2019.

    The Release-2 will include further important modules like DTRE, Bulk Exports and Exports through Courier.

    With the development of these modules all the processes related to export will be fully automated which will definitely facilitate export sectors.

    Release-2 will also include E-Auction Module, for auction of confiscated goods in line with modern concepts of Auction.

    Oil imports contribute the major share in Imports Bill. All the processes like Import, storage, transportation and transit of Oil will also be covered in Release-2 Similarly PCA Entity based Audit module will also be part of it, which will dramatically enhance money trial analysis and be handy in detection of money laundering.

    Initial work has already been done on these modules and they are under different stages of development.

    Some less important modules will be launched in Release-3 by Mid September which will complete automation of all the Customs processes under WeBOC-Glo.

    Earlier, Dr Jawwad Agha conceived the idea of up gradation and functionally advanced new Customs system and had put in place a two tier setup, the WeBOC-Glo Domain team and Oversight and Approval Team, in December, 2018.

    In view of highly technical nature of the task officers having vast professional experience and well grounded in automated work environment were grouped together.

    The team lead by Collector Dr. Iftikhar Ahmad (project team leader) included: Additional Collectors Shafqat Niazi, Sanaullah Abro, Ms Mona Mehfooz, Ali Zaman Gardezi and Deputy Collector Ms Nausheen Riaz Khan.

    The project team leader said that packed and strict timeline was given to undertake the Businesses Process Re-Engineering (BPR), development of new modules and functionalities of the WeBOC Glo.

    He added that the project team had to put in long hours on weekend, over and above their regular work assignments, to meet the deadlines, while Agha continuously monitored the progress and provided his full support to project team. Within short time of four months, WeBOC-Glo project team under guidance of oversight and Approval team, consisting of senior officers of Customs succeeded in accomplishing the task of development of 13 different modules and functionalities of new version.

    User Acceptance Tests (UATs) with relevant stakeholders have been completed too. The PRAL’s Business Analysis and software Development Units provided able resource support and remained instrumental in the achievement.

    With the launch of the WeBOC-Glo, the Customs department moves further ahead as the leading public sector organization mag use of modern technology for hassle free public service delivery.

    The system ensures transparency, efficiency, professionalism and further reduces the interaction with taxpayer besides providing tech ability for future integration with artificial intelligence for RMS analysis.

  • KTBA suggests full fledged VAT, reduction in sales tax rate to 10pc

    KTBA suggests full fledged VAT, reduction in sales tax rate to 10pc

    KARACHI: Karachi Tax Bar Association (KTBA) has suggested the tax authorities for introduction of full fledged value-added tax (VAT) and reduction of sale tax rate up to 10 percent in order to discourage under invoicing, corruption and smuggling.

    The KTBA recently organized pre-budget seminar to formulate tax proposals for budget 2019/2020. Saud-ul-Hassan, Director Tax at EY Ford Rhodes presented issues pertaining to sales tax.

    He said that the VAT system was adopted for documentation of economy. However, presently the Sales Tax Act, 1990 is a blend of numerous, included:

    — exemption; zero-rating, subsidized/reduced rates;

    — fixed tax regimes, extra tax, further tax, value addition tax;

    — withholding tax provisions;

    — various restrictions on claiming input tax; and

    — various special regimes.

    He recommended that all the distortions in VAT system should be removed and full fledged uniformed VAT system should be adopted.

    “This will provide a level playing field for all registered persons and restore their confidence,” he said and added that it would ensure proper documentation of economy and a genuine increase in the tax to GDP ratio.

    Highlighting the higher sales tax rate at 17 percent, he said that it was coupled with various increasing conditions such as further tax, extra tax, minimum VAT etc.

    Further restrictions on claim of input tax, the sales tax cost (effective rate) is further enhanced. “Such outlook on a tax compliant person promotes tax evasion in the masses,” he added.

    It is suggested that the tax rate may be brought down to 15 percent and gradually up to 10 percent. “The reduced rate will encourage the unregistered persons to get themselves registered.”

    “It will also result in broadening of tax base and documentation of economy and discourage under invoicing, corruption and smuggling,” he added.

    Pointing out the issue of extra tax levied on certain goods, which disallowed input tax, he said recommended that in order to reduce the cost of doing business the extra tax should not be levied on goods sold to manufacturers for their own use.

    He said that through the Sales Tax General Order 27 of 2014, the FBR had exempted the supply of parts and accessories to the automobile manufacturers from the levy of extra tax, however, other manufacturers have not been granted similar exemption.

  • FBR suggested to abolish FTR for commercial importers

    FBR suggested to abolish FTR for commercial importers

    KARACHI: Federal Board of Revenue (FBR) has been suggested to abolish Final Tax Regime (FTR) for commercial importers and other segment of the economy in order to make the taxation system equitable.

    FBR sources said that suggestions had been received from business community and large business houses to eliminate the FTR and presumptive tax regime.

    The sources said that large private sector entities and chartered accountants urged the newly appointed chairman Shabbar Zaidi, who is also a chartered accountant and had represented Institute of Chartered Accountants of Pakistan (ICAP), to status of normal tax regime for commercial importers should be restored.

    The ICAP in its tax proposal for tax year 2019/2020 said that certain sectors/goods are being taxed under the presumptive/value added/ fixed/ final tax regimes.

    Pakistan Business Council (PBC) also said that the presumptive/value added/fixed/final tax regimes are taxing turnover as opposed to income. In addition, entities availing this regime are not required to file tax returns.

    “Under garb of the FTR, massive evasion of customs duties and sales tax are taking place putting the formal sector under undue pressure.”

    The informal economy has outgrown the formal economy and the major driver of this has been the FTR.

    The FBR said that the chartered accountants were strongly supporting elimination of FTR for commercial importers and recommended: “commercial importers status under Normal Tax Regime as introduced through the Finance Act, 2018 should be restored.”

    They said that the presumptive/ value added/ fixed / final tax regime should be replaced with a normal tax regime.

    Income has to be the only basis for taxation and option to exit the tax chain should not be available for whatever reason.

  • ACCA opposes tax amnesty, recommends enforcement on available information

    ACCA opposes tax amnesty, recommends enforcement on available information

    KARACHI: Association of Chartered Certified Accountants (ACCA) Pakistan has opposed tax amnesties and suggested the tax machinery to use available information with proper enforcement.

    “Tax Amnesties without proper penal clauses had been a failure. With the strengthening of OECD, they should be done away with and focus should instead be shifted on using the organization’s platform to retrieve necessary information and ensure proper enforcement of applicable laws and regulations,” the association recommended this in its tax proposals for budget 2019/2020.

    ACCA has presented detailed recommendations for bringing structural reforms in the taxation system while opposing any amnesty scheme in the presence of plethora of information maintained by the Federal Board of Revenue.

    For the structural reforms following measures have been suggested by the ACCA:

    • A single tax return for all taxation affairs of a taxpayer which all authorities can utilize to obtain the relevant data.

    • Harmonization of taxation laws in the country.

    • Resolving issues within IRIS to make it more user friendly

    • Integration of Federal and Provincial Revenue Authorities’ systems and databases

    Structural Reforms

    • Reducing the discretionary powers vested in FBR officials and shifting towards an objective criteria based approach

    • Developing the existing policy of differential tax treatments and incentives for filers while penalizing non-filers

    • Introducing impact on economic sectors (GDP development) and numbers of decisions upheld at the appellate forums along with collections target as a performance evaluation criteria for FBR functionaries

    • Ensuring time limits adherence as specified in the laws and rules particularly pertaining to refund matters

    • Facilitating the tax payers

    • Introducing confidence by establishing a swift response complaint resolution cell to deal with corruption and harassment of tax payers

    • Change in discretionary powers of FBR for moveable and/or immovable property including bank accounts attachment to improve ease of doing business and trust of taxpayers in the tax apparatus. Limit the attachment powers to only cases involving concrete information re asset disposal.

    • Ensuring no post remains vacant for more than two weeks to avoid delays in resolving tax-payers issues arising out of transfers, postings and additional charges, etc.

    • Limiting charge on a single post in FBR to a maximum of two (2) years to discourage the corrupt practices and collaborations.

    • Effective enforcement should be ensured by working on maximum automation of the taxation system.

    • Effective enforcement should be ensured by working on maximum automation of the taxation system.

    • Hiring and training of adequately qualified staff with ongoing capacity building should be focused on to ensure efficient and productive results from the tax apparatus.

    • Appointing independent officials as Commissioner Appeals ideally from the judicial service and qualified accountants practicing taxation from various bodies including ACCA.

    • ACCA is the largest Global accountancy body, which is now the largest in Pakistan too. Including ACCA members practicing taxation within the definition of accountant members for the Appellate Tribunal Inland Revenue will further strengthen the competition and meritocracy.

    • Hiring and training of adequately qualified staff with ongoing capacity building should be focused on to ensure efficient and productive results from the tax apparatus.

    • Limiting charge on a single post in FBR to a maximum of two (2) years to discourage the corrupt practices and collaborations.

    Related Stories

    ACCA suggests making FBR immovable property values in line with fair market value to stop asset undervaluation

  • SRB suspends sales tax registration of M/s. Hellenic Shipping Agencies

    SRB suspends sales tax registration of M/s. Hellenic Shipping Agencies

    KARACHI: Sindh Revenue Board (SRB) has suspended sales tax registration of M/s. Hellenic Shipping Agencies (Pvt) Limited for non-payment and non-compliance of return filing for the last eight years.

    (more…)
  • Customs recovers Rs450 million illicit currency, arrests 30 percent in anti-money laundering drive

    Customs recovers Rs450 million illicit currency, arrests 30 percent in anti-money laundering drive

    ISLAMABAD: Pakistan Customs (Operation) has taken vigorous actions to counter illicit movement of currency, which is the primary tool used for money laundering and moving proceeds of crime in and out of the country, a statement said on Saturday.

    The current lead taken by Customs Operations FBR, and the effective control measures implemented by enforcement collectorates against currency smuggling has led to record seizures of around Rs. 450 million during July 2018 to April 2019, against seizures of Rs150 million in the corresponding period last year, exhibiting an increase of more than 200 percent.

    During the current year more than 30 persons have been arrested for currency smuggling, with ongoing investigations to unearth their domestic/international linkages.

    This remarkable achievement is a result of various policy and institutional measures taken under Customs Operations – FBR and the field formations.

    After an overall assessment of risks of Cash Smuggling through border areas and entry points, the Customs Operations – FBR is embarked upon an extensive ‘Risk Mitigation Strategy’ to curb cash smuggling.

    Currency Declaration System (CDS) has been implemented at international entry/exit points, which has been recently upgraded and linked with FIA database.

    During January to April 2019, the CDS has captured currency declarations of around US$20 million by incoming/outgoing passengers. Further, suspected travelers are being targeted by accessing the FIA database.

    In the same spirit, Baggage/vehicle scanners have been installed at Torkham, Chaman and Taftan border stations, for passenger and cargo screening.

    At land border Customs stations, Collector of Customs are coordinating with the relevant LEAs and intelligence agencies for information/intelligence sharing and coordinated operations for countering illicit currency movement.

    Further, joint control rooms have been established at international airports, manned jointly by Customs, ASF, ANF and FIA.

    To continue this momentum, a new Directorate of Cross Border Currency Movement (CBCM), has recently been established under Directorate General (I & I-Customs), through Customs General Order (CGO) 04/2019 dated 06.05.2019 which has defined its charter and scope of functions such as, Analysis and profiling of currency seizures/declarations, suspected banking transactions, maintenance of seizure database and sharing of currency seizure cases with other LEAs, institution of money laundering cases emanating from suspicious banking transactions and investigation and prosecution of cases under AML Act, 2010, Customs Act, 1969 and CrPC.

    Under the said order, the guidelines have also been provided to the Investigative Officers for improving investigations such as investigation of accused/arrested person(s) association with any religious/political/social organization or group(s), travel history, past criminal record, professional history, etc., along with the motive/linkages of each currency smuggling case with any of the associated offence, Identification of involvement of any foreign networks other than trans-national terrorist networks in the seizures data.

    The seizing agency (MCC or Regional Directorate) also urged to investigate foreign linkages of the investigation at hand through Chief (International Customs)-FBR, investigation of the source of funding for cash smuggling and the end user of the smuggling proceeds.

    In addition, an Office Order 01/2019 dated 10.04.2019 has been issued, providing a proper mechanism for investigating officers of seizing agency to conduct initial probe of Terror Financing (TF) linkages in all currency seizures, and sharing it with the relevant LEA, through Directorate of CBCM.

    For enhancing international cooperation in controlling smuggling, Pakistan Customs has so far signed 22 MoUs/agreements with foreign governments/Customs administrations for mutual cooperation in Customs matters. Under these agreements, requests for Mutual Legal Assistance (MLA) have been sent to foreign counterparts for identification of linkages in currency seizures.

    Ongoing initiatives of Pakistan Customs includes further re-structuring of enforcement formations on the basis of ground demands, introduction of Advance Passenger Information System (APIS) at the international airports, and establishing a National Targeting Centre, which shall serve as an integrated database of all LEAs working against the menace of smuggling.

    With the introduction of these initiatives, Pakistan Customs is optimistic of ridding Pakistan economy of the malaise of currency smuggling, and the ancillary ills of TBML, black economy, tax evasion, etc.