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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.

  • FBR waives penalty on overstayed consignments

    FBR waives penalty on overstayed consignments

    ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday waived penal surcharges on overstayed consignments to facilitate trade community.

    The FBR said that the waiver had been granted in pursuance to decision taken at the Economic Coordination Committee (ECC) of the Cabinet held on March 27, 2019 to waive penal surcharges on the overstayed cargoes at ports.

    The FBR said that the time to stay of the cargo has been extended up to April 13 the period for which warehoused goods may remain in the warehouse.

    Further the government also directed to remit penal surcharges in the case of goods which are cleared from the warehouse within the period starting on April 08, 2019 and ending April 13, 2019.

    The FBR said that the decision would not apply to the goods which had since been abandoned or auctioned under the rules.

  • Many withholding tax provisions to be abolished in budget

    Many withholding tax provisions to be abolished in budget

    ISLAMABAD: The government has intended to abolish large number of withholding tax provisions in the budget.

    According to Medium-Term Economic Framework (MTEF), which was launched by Finance Minister Asad Umar on Monday, pointed out that withholding taxes become regressive if people who are not liable to income taxes and/or if firms treat them as consumption taxes and are generally passed them on to the consumers, badly impacting the progressivity of the tax.

    As such, the tax needs some fundamental reforms.

    “As a first step, the government intends to discontinue a large number of low yielding withholding taxes in the next year’s budget.”

    The framework also highlighted about the taxation and valuation of immovable properties.

    Since the federal government collects tax on income from property and provincial and local governments collect property and transaction tax on immovable property, all parties have an interest in proper documentation and valuation of property.

    “The government intends to pursue a coordinated approach to taxation and valuation of the real estate sector in a way to collect optimum revenue from it without discouraging investment.”

  • FBR empowered to use third-party information for identifying tax dodgers: MTEF

    FBR empowered to use third-party information for identifying tax dodgers: MTEF

    ISLAMABAD: Federal Board of Revenue (FBR) has been empowered for using third-party information to identify tax dodgers.

    The Medium-Term Economic Framework (MTEF), which was launched on Monday by the Finance Minister Asad Umar, the government had promulgated a law so as to allow FBR to access third-party data bases.

    The MTEF pointed out building data analytics capacity to utilize available information. “This involves identifying and identifying and pursuing individuals falling outside the tax net through the use of third-party information on consumption patterns utilizing data from income, income tax returns and expenditure data from various sources such as travel, bank account, car ownership, property ownership, children studying abroad, children studying in expensive schools etc.”

    Since FBR does not have adequate capacity to utilize these data using latest techniques available, it would be necessary to collaborate with researchers and experts to develop efficient and effective analytical tools.

    The government has evolved measures to strengthening tax enforcement and tax audits

    The framework said that tax enforcement has remained one of the weakest areas of tax administration.

    The government intends to overcome this shortcoming by building enforcement capabilities within FBR through staff training and an intensive use of information technology.

    In this regard, priority is being given to putting in place a track-and-trace system and strengthening the risk-based tax audits.

    The government also planned harmonizing the tax codes. The MTEF said that the government is well aware that some tax issues (e.g. non-harmonized sales tax rates across tiers of government, taxation of real estate, etc.) adds to the cost of doing business by requiring multiple tax returns to be filed in a single tax year.

    While working with the provincial governments in the National Finance Commission (NFC) framework, the federal government intends to harmonize the tax code and integrate tax processes through digitization and process automation.

    In addition, it intends to establish a mechanism to fast-track resolution of tax disputes, thus reducing compliance cost.

    This will reduce the cost of doing business to some extent and make it harder for taxpayers to play the tax administrations off against each other to evade taxes.

    An NFC sub-group has already been tasked with formulating recommendations to simplify payment of taxes to enhance ease of doing business in taxation area.

  • All tax exemptions to have sunset clause: MTEF

    All tax exemptions to have sunset clause: MTEF

    ISLAMABAD: The ministry of finance on Monday launched Medium-Term Economic Framework (MTEF), which envisaged that all permanent exemptions to be withdrawn or have a sunset clause.

    The MTEF said that presently tax policy has a predominant revenue focus and as such is likely to create distortions in the economy which can adversely affect the growth and equity objectives.

    In addition, even the revenue objective is compromised by large scale exemptions.

    To correct this shortcoming, the government intends the following:

    i) Enact a law to ensure that no tax exemption is allowed through law or notification without an estimate of its cost independently by the tax department as well as the concerned ministry. Such cost will be made public before notification of the exemption.

    ii) Review all existing exemptions, with the purpose of eliminating as many of those as possible. Even if an exemption is to be retained its cost will be determined and made public. Ministry of Finance to publish annually a statement of tax expenditures to show how much revenue is being foregone due to exemptions.

    iii) Ensure that all exemptions, existing or newly proposed, will have a sunset clause (ideally not more than 5 years).

    iv) Publish a list of all government owned, quasi-government and government-linked enterprises availing tax exemption/concession in any way along with quantification of the tax expenditure. In addition, a plan be prepared for phasing out of these concessions.

    v) Withdraw FBR powers to issue SROs to grant exemptions. This power will vest only with the Parliament.

    vi) Ensure that all non-procedural existing SROs will expire at the end of the fiscal year. Steps taken over the last two years to incorporate all exemptions granted through SROs to be made part of the body of law.

  • Amnesty Scheme 2019 likely be introduced on April 15

    Amnesty Scheme 2019 likely be introduced on April 15

    ISLAMABAD: The government likely to introduce new tax amnesty scheme 2019 for undeclared foreign and local assets from next week.

    In this regard a briefing was give to Prime Minister Imran Khan on Monday.

    According to the sources the amnesty would be introduced from April 15, 2019 and will continue till June 30, 2019.

    The amnesty scheme may be announced through Presidential Ordinance and subsequently passed I Finance Act, 2019 in May or June this year.

    According to documents, all companies and individuals would be qualified for the scheme except: holders of public office since January 01, 2000, their spouses, children, brothers and sisters or lineal ascendant or descendant; proceeds derived from commission of a criminal offence are excluded; cases pending before a court of law with the exception of older pending litigation.

    The amnesty scheme would have conditions, included:

    — filing of income tax returns or revision thereof for 2018 and payment of tax.

    — filing/revising sales tax returns for last completed tax period and declaring last 5 years undisclosed sales and payment of three percent sales tax/Federal Excise Duty.

    –Depositing the case declared in a bank account and retaining the balance till June 30.

    — Gold and precious stones declaration shall not exceed value of Rs5 million.

    According to valuation of assets for the amnesty, the Benami assets would be allowed to declare at 10 percent. Foreign liquid assets repatriated into Pakistan at five percent.

  • Active taxpayers list shows 1.88 million return filers

    Active taxpayers list shows 1.88 million return filers

    KARACHI: The number of active taxpayers has surged to 1.88 million for the tax year 2018 as of April 07, 2019, according to an official document released on Monday. This marks a significant increase from the previous year, reflecting a growing compliance among taxpayers in Pakistan.

    (more…)
  • Sales Tax Act 1990: buyer, seller jointly responsible for unpaid tax

    Sales Tax Act 1990: buyer, seller jointly responsible for unpaid tax

    KARACHI: Where an amount of tax unpaid in supply chain then registered buyer and seller are both responsible for paying to national exchequer.

    According to updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR), the Section 8A explained joint and several liability regarding unpaid tax.

    Section 8A: Joint and several liability of registered persons in supply chain where tax unpaid.

    Where a registered person receiving a taxable supply from another registered person is in the knowledge or has reasonable grounds to suspect that some or all of the tax payable in respect of that supply or any previous or subsequent supply of the goods supplied would go unpaid, of which the burden to prove shall be on the department such person as well as the person making the taxable supply shall be jointly and severally liable for payment of such unpaid amount of tax:

    Provided that the Board may by notification in the official gazette, exempt any transaction or transactions from the provisions of this section.

    Section 8B: Adjustable input tax.

    Sub-Section (1): Notwithstanding anything contained in this Act, in relation to a tax period, a registered person shall not be allowed to adjust input tax in excess of ninety per cent of the output tax for that tax period:

    Provided that the restriction on the adjustment of input tax in excess of ninety percent of the output tax, shall not apply in case of fixed assets or Capital goods:

    Provided further that the Board may by notification in the official Gazette, exclude any person or class of persons from the purview of sub-section (1).

    Sub-Section (2): A registered person, subject to sub-section (1), may be allowed adjustment or refund] of input tax not allowed under sub-section (1) subject to the following conditions, namely:

    (i) in the case of registered persons, whose accounts are subject to audit under the Companies Ordinance, 1984, upon furnishing a statement along with annual audited accounts, duly certified by the auditors, showing value additions less than the limit prescribed under sub-section (1) above; or

    (ii) in case of other registered persons, subject to the conditions and restrictions as may be specified by the Board by notification in the official Gazette.

    Sub-Section (3): The adjustment or refund of input tax mentioned in sub-sections (2), if any, shall be made on yearly basis in the second month following the end of the financial year of the registered person.

    Sub-Section (4): Notwithstanding anything contained in sub-sections (1) and (2), the Board may, by notification in the official Gazette, prescribe any other limit of input tax adjustment for any person or class of persons.

    Sub-Section (5): Any auditor found guilty of misconduct in furnishing the certificate mentioned in sub-section (2) shall be referred to the Council for disciplinary action under section 20D of Chartered Accountants, Ordinance, 1961 (X of 1961).

  • Customs to auction huge quantity of vehicles, motor bikes on April 09

    Customs to auction huge quantity of vehicles, motor bikes on April 09

    KARACHI: Pakistan Customs has announce public auction of used motor vehicles and heavy bikes to be held on April 09, 2019 at Bay West, West Wharf Road, Karachi.

    Auction of fresh vehicles under schedule No. 04/ 2019 to be held on April 09, 2019:

    01. Nissan Moco Car, Chassis No. MG33S-1434760, year 2014

    02. Honda-N car, Chassis No. JGI-1208909, year 2016

    03. Toyota Aqua Hybrid Car, Chassis No. NHP10-6492089, year 2016, capacity 1496ml

    04. Toyota Passo, Chassis No. M700A-0068740, Year 2017, Capacity 996cc

    05. Toyota Aqua Hybrid Car, Chassis No. NHP10-6675744, year 2017, capacity 1496ml

    06. Daihatsu Move Car, Chassis No. LA160S-0022740, year 2016, capacity 658cc

    07. Honda Vezel Hybrid Car, Chassis No. RU3-1009600, Year 2014

    08. Suzuki Alto, Chassis No. HA36S-318639, year 2019-04-07

    09. Toyota Prius Hybrid car, chassis no. ZVW50-6057948, capacity 1797ml, year 2016

    10. Suzuki Wagon-R, chassis no. NH34-535805, year 2016

    11. Suzuki Alto, Chassis No. HA36S-283360, year 2016

    12. Toyota Prius Hybrid Car, Chassis No. AVW50-6040670, year 2016, capacity 1797cc

    13. Toyota Aqua Hybrid Car, chassis No. NHP10-6489786, year 2016, capacity 1496ml

    14. Suzuki Alto Lapin Car, Chassis No. HE33S-114646, year 2015

    15. Suzuki Every Wago, Chassis No. DA17W-160902, Year 2018

    16. Honda-N WGN Car, Chassis No. JHI-1399120, year 2018, milage 562kms

    17. Honda Fit Hybrid Car, Chassis No. GP5-3313188, year 2016

    18. Suzuki Every Van, Chassis No. Da64V-827933, year 2013

    19. Toyota Aqua Hybrid Car, Chassis No. NHP10-6537080, year 2016, Capacity 1496ml

    20. Nissan Dayz Car, Chassis No. B21W-0473466, Year 2017

    21. Honda Vezel Hybrid Car, Chassis No. RU3-1129894, year 2016

    22. Suzuki Wagon-R Car, Chassis No. MH35S-109600, year 2017

    23. Nissan Dayz Roox Car, Chassis No. B21A-0346728, year 2017

    24. Daihatsu Hijet Cargo Van, Chassis No. S331V-0119751, year 2014, Capacity 658cc

    25. Honda Fit Hybrid Car, Chassis No. GP5-1213366, Year 2016

    26. Toyota CH-R Hybrid, Chassis No. ZYX10-2030563, year 2017, capacity 1797ml

    27. Daihatsu Mira E:S, Chassis No. La350S-0087051, year 2018, capacity 658cc

    28. Toyota Aqua Hybrid Car, Chassis No. NHP10-2545720, year 2016, capacity 1496ml

    29. Suzuki Alto Car, Chassis No. HA36S-339803, year 2017, capacity 658cc

    30. Daihatsu Move Car, Chassis No. LA160S-0029143, year 2017, capacity 658cc

    31. Toyota Voxy Van, Chassis No. ZWR80-0035138, year 2014, capacity 1794ml

    32. Suzuk Wagon-R, Chassis No. NH34S-532308

    33. Honda Vezel Hybrid, Chassis No. RU3-1202746, year 2016

    34. Suzuki Singray Wagon-R, Chassis No. MH44S-509107, Year 2016

    35. Suzuki Alto Car, Chassis No. HA36S-367262, year 2017

    Auction of leftover vehicles:

    01. Suzuki Audi, Chassis No. WAUZZZGAIJ018984, mileage 3664km

    02. Suzuki Bandit Car, Chassis No. MA36S-609297, year 2015

    03. Toyota Passo Car, Chassis No. M710A-0005138, year 2016, capacity 998cc

    04. Toyota Prius Hybrid Car, Chassis No. ZVW41-0037004, year 2016, capacity 1797

    05. Toyota Aqua Hybrid Car, Chassis No. NHP10-6360564, year 2014, capacity 1496ml

    06. Range Rover Evoque, Chassis No. SALVA2AG70H828587, year 2013

    07. Suzuki Lapin Car, Chassis No. HE33S-179190, year 2017

    08. Daihatsu Copen Car, Chassis No. LA400K-0007555, year 2014, capacity 658cc

    09. Mitsubishi Mirage Car, Chassis No. A03A-0034375, year 2015

    10. Daihatsu Move Car, Chassis No. LA150S-0119262

    Used motor bikes:

    i. New Arctic Cat ATV Bike, Chassis No. RFB14ATV3EK6T0888, year 2014, Capacity 90cc

    ii. New Arctic Cat ATV Bike, Casssis No. RFB14ATVXEK6T0905, year 204, capacity 90cc

    iii. New Arctic Cat ATV Bike, Chassis No. RFB14ATVXEK6T0919, year 2014, capacity 90cc

    iv. New Arctic Cat ATV Bike, Chassis No. RFB14ATV2EK6T0896, year 2014, capacity 90cc

    v. New Arctic Cat ATV Bike, Chassis No. RFB14ATV9EK6T0928, year 2014, capacity 90cc

    vi. New Arctic Cat ATV Bike, Chassis No. RFB14ATV9EK6T0894, year 2014, capacity 90cc

    vii. New Arctic Cat ATV Bike, Chassis No. RFB14ATV3EK6T0910, year 2014, capacity 90cc

    viii. New Arctic Cat ATV Bike, Chassis No. RFB14ATV3EK6T0938, year 2014, capacity 90cc

  • Accountability framework for FBR officials suggested to make tax audit transparent

    Accountability framework for FBR officials suggested to make tax audit transparent

    KARACHI: Pakistan Tax Bar Association (PTBA) has said that there should be accountability framework for tax officers in order to make audit transparent.

    Abdul Qadir Memon, President, PTBA in a message to PTBA Tax Journal outlined eight-point recommendations to tax authorities for making audit system more transparent in order to boost confidence of taxpayers on the authorities.

    Memon said that the accountability framework and service standards should be introduced for the employees of Federal Board of Revenue (FBR), more particularly for the revenue officers in respect of quality of assessment order and standing of their orders in the test of appeal including but not limited to final revenue generated by the exchequer.

    The PTBA said that laws should be formulated in such a manner that there is a clarity, certainty and finality of an assessment, which has been universally recognized as hallmark of audit and an assessment.

    Following are suggestions for effective audit selection mechanism and amendment of assessment based on cogent, honest, justifiable with reasoning and intelligible nexus with the tax affairs of the taxpayers and capacity to pay tax:

    — To place sophisticated tax intelligence system to gather data from withholding collection of taxes and third party information collected on the basis of transactions conducted through computerized national identity cards (CNICs).

    — Cases are selected by the FBR only on the basis of defined risk areas or red flags trigger tax audit. The field forces are restricted to conduct audit of only such cases.

    — The amendment of assessment is framed by the field forces under the following circumstances guided the rules of justice, equity and judicial conscious:

    i. Any income chargeable to tax or sales has escaped assessment, under assessed, assessed at low rate or has been misclassified on the basis of definite information.

    ii. The deemed assessment is erroneous in so far as it is prejudicial to the interest of revenue.

    — In line with global practice (USA, UK, New Zealand, Australia, Canada) to provide a more supportive legislative and administrative environment for existing self-assessment arrangements and to make the taxation system fairer and more certain, it is imperative that a system of Binding Public and Private Ruling for Resident and Non-Residents be introduced.

    — The commissioner should not be empowered to amend the assessment as many times as may be necessary on the same issue or point, which has already been subject matter of reassessment or further assessment proceedings.

    — The time limit for amendment of assessment should be reduced to two years from the end of the financial years in which the commissioner has issued the original order to the taxpayer and one year in case of amended assessment; whichever is later.

    — Relevant laws under the provisions of Direct and Indirect Taxes should be amended in a manner that:

    i. Once the audit for any tax year is conducted/completed under Section 177 read with Section 214C of Income Tax Ordinance, 2001; there should not be any audit of monitoring of withholding/collection of taxes and amendment of assessment unless ‘definite information’ comes into the possession of the commissioner.

    ii. Once the sales tax audit for any year is conducted in respect of registered taxpayer under the Section 72B there should not be audit under Section 25 of the Sales Tax Act, 1990.

  • Sales Tax Act 1990: tax credit not allowed under various conditions

    Sales Tax Act 1990: tax credit not allowed under various conditions

    KARACHI: A registered sales tax person is not allowed to entitle to reclaim or deduct input tax paid on various activities of manufacturing / supplies.

    The Section 8 of updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR) explained where tax credit is not allowed.

    Section 8: Tax credit not allowed

    Sub-Section (1): Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on –

    (a) the goods or services used or to be used for any purpose other for taxable supplies made or to be made by him;

    (b) any other goods or services which the Federal Government may, by a notification in the official Gazette, specify;

    (c)] the goods under sub-section (5) of section 3:

    (ca) the goods or services in respect of which sales tax has not been deposited in the Government treasury by the respective supplier;

    (caa) purchases, in respect of which a discrepancy is indicated by CREST or input tax of which is not verifiable in the supply chain;

    (d) fake invoices;

    (e) purchases made by such registered person, in case he fails to furnish the information required by the Board through a notification issued under sub-section (5) of section;

    (f) goods and services not related to the taxable supplies made by the registered person.

    (g) goods and services acquired for personal or non-business consumption;

    (h) goods used in, or permanently attached to, immoveable property, such as building and construction materials, paints, electrical and sanitary fittings, pipes, wires and cables, but excluding pre-fabricated buildings and such goods acquired for sale or re-sale or for direct use in the production or manufacture of taxable goods;

    (i) vehicles falling in Chapter 87 of the First Schedule to the Customs Act, 1969 (IV of 1969), parts of such vehicles, electrical and gas appliances, furniture furnishings, office equipment (excluding electronic cash registers), but excluding such goods acquired for sale or re-sale;

    (j) services in respect of which input tax adjustment is barred under the respective provincial sales tax law;

    (k) import or purchase of agricultural machinery or equipment subject to sales tax at the rate of 7 percent under Eighth Schedule to this Act;

    (l) from the date to be notified by the Board, such goods and services which, at the time of filing of return by the buyer, have not been declared by the supplier in his return or he has not paid amount of tax due as indicated in his return; and

    (m) import of scrap of compressors falling under PCT heading 7204.4940.

    Sub-Section (2): If a registered person deals in taxable and non-taxable supplies, he can reclaim only such proportion of the input tax as is attributable to taxable supplies in such manner as may be specified by the Board.

    Sub-Section (3): No person other than a registered person shall make any deduction or reclaim input tax in respect of taxable supplies made or to be made by him.

    Sub-Section (4): omitted

    Sub-Section (5): Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of this section, no input tax credit shall be allowed to the persons who paid fixed tax under any provisions of this Act as it existed at any time prior to the first day of December, 1998.

    Sub-Section (6): Notwithstanding anything contained in any other law for the time being in force or any provision of this Act, the Federal Government may, by notification in the official Gazette, specify any goods or class of goods which a registered person cannot supply to any person who is not registered under this Act.

    Sub-Section (7): Omitted.