KARACHI: Any misdeclaration or false declaration of baggage carrying by passengers or crew members shall be treated as smuggled goods and penalties will be applicable related to smuggled goods.
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Stay updated on taxation news, tax laws, FBR policies, compliance, audits, income tax, sales tax, and fiscal developments in Pakistan.
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Automatic issuance of exemption certificate granted
KARACHI: The Federal Board of Revenue (FBR) allowed automated issuance of exemption certificate in case commissioner delays in approval.
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SRB notifies sales tax exemption on services provided by restaurants, marriage halls
KARACHI: Sindh Revenue Board (SRB) has notified exemption of 13 percent sales tax on services rendered by restaurants and marriage halls.
The SRB issued working tariff applicable from January 01, 2020.
The service provided or rendered by restaurants and marriage halls are subject to 13 percent sales tax.
The SRB said that services provided or rendered by restaurants shall be exempted from sales tax whose turnover does not exceeds Rs4 million in a financial year:
Provided that the exemption shall not apply in case of restaurants:-
(i) which are air-conditioned on any day in a financial year and which are located within the building or premises of air-conditioned shopping malls or shopping plazas;
The SRB further said that the marriage halls and lawns are also exempt from sales tax at 13 percent, which are located on plots measuring 800 square yards or less.
Provided that the exemption shall not apply in case of marriage halls and lawns:
(i). which are air-conditioned on any day in a financial year;
(ii).located within the building, premises or precincts of a hotel, motel, guest house, restaurant or club whose services are liable to tax;
(iii). as are owned, managed or operated by caterers whose services are liable to tax;’
(iv). which are franchisers or franchisees; and
(v). marriage halls and lawns having branches or more than one hall or lawn in Sindh.
(ii) located within the building, premises or precincts of any hotel, motel, guest house or club whose services are liable to sales tax;
(iii) providing or rendering services in the building, premises, precincts, hall or lawn of any hotel, motel, guest house, marriage hall or lawn or club whose services are liable to sales tax;
(iv) which are franchisers or franchisees;
(v) having branches or more than one outlet in Sindh; and
(vi) whose total utility bills (gas, electricity and telephone) exceed Rs. 40,000/- in any month during a financial year.
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Traders given tax incentives
KARACHI: Federal Board of Revenue (FBR) has allowed tax concession to traders to bring them into tax net.
The tax concessions have been granted through Tax Laws (Second Amendment) Ordinance, 2019.
Tax experts at PwC A F Ferguson Chartered Accountants said that pursuant to the agreement between representatives of federal government and trade bodies on October 30, 2019; certain concessions have been allowed to traders through the Second Amendment Ordinance.
The term ‘trader’ has been defined to mean an individual engaged in business of buying and selling of goods in the same state, including a retailer and a wholesaler but excluding a distributor.
The concessions provided to traders are as under:
(i)The general rate of minimum tax payable (under section 113 of the Income Tax Ordinance 2001) has been reduced from 1.5 percent to 0.5 percent for tax year 2020 for traders having turnover up to Rs100 million.
However, for traders who have filed income tax returns for tax year 2018, the tax liability for tax years 2019 and 2020 should not be less than the tax liability for tax year 2018, to become eligible for reduced rate of minimum tax of 0.5 percent.
(ii)Individual having turnover of Rs. 50 million or more in any of the preceding tax years is liable to deduct tax under section 153 while making payments against supply of goods, services and contracts.
Through the Second Amendment Ordinance, traders being individuals having turnover up to Rs100 million have been exempted from deducting tax under section 153 while making payment against supply of goods, services and contracts.
The board is expected to clarify the year with respect to which turnover of Rs100 million will be calculated by the trader.
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Taxpayers’ declarations to be checked for money laundering
ISLAMABAD: Financial Monitoring Unit (FMU) has been allowed to obtain information of taxpayers from tax authorities to check income tax returns and other declarations for money laundering and terror financing.
The FMU has been granted access to taxpayers’ data through amendment introduced to Section 216 of the Income Tax Ordinance, 2001. The amendment has been brought through Tax Laws (Second Amendment) Ordinance, 2001.
Under Section 216 of the Income Tax Ordinance, 2001, public servants are barred from disclosing any information relating to income tax filings, evidences or proceedings of any taxpayer.
Certain exceptions to this general prohibition are also contained in the said section whereby information may be disclosed to specified persons, organizations or authorities.
By way of an amendment made through the Second Amendment Ordinance, Financial Monitoring Unit (FMU) established under the Anti-Money Laundering Act, 2010 has been included in the list of such exceptions which do not fall within the ambit of confidentiality clause contained in Section 216, tax experts at PwC A F Ferguson Chartered Accountants said.
This amendment is intended to enable FMU to better implement anti-money laundering procedures by directly obtaining necessary information from public servants.
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PTBA demands probe into fake FBR’s date extension letters
LAHORE: Pakistan Tax Bar Association (PTBA) has approached law enforcement agencies to probe circulation of fake/forged circulars related to date extension in income tax return filing.
The PTBA – the apex trade body of the country – in an application for lodging FIR against culprits on Saturday informed Federal Investigation Agency (FIA) about the circulation of forged/fake circulars through WhatsApp groups and on Facebook (FB) regarding extension of date for filing of income tax return for tax year 2019.
The said that the last date for filing of income tax returns for tax year 2019 was extended till December 16, 2019 through Circular No. 16/2019 dated November 29, 2019. The date was further extended till December 31, 2019 through circular No. 17/2019 dated December 16, 2019 but a forged /fake circular with similar signature of a government official was circulated in different WhatsApp groups on December 16, 2019 around 2:15pm and TV channels have also broadcasted the same news without verification, whereas the original circular No. 17/2019 dated December 16, 2019 was uploaded on FBR’s official portal around at 5:15pm.
The tax consultants/taxpayers were busy in filing for returns 2019 on December 12, 2019 because of last date for filing returns but suddenly at 3:45pm another forged / fake circular 18/2019 dated December 12, 2019 showing extension till January 31, 2020 was again circulated approx at 8:55 pm in WhatsApp groups, whereas the original circular No. 18/2019 dated December 12, 2019 was uploaded on FBR portal at around 10:55pm.
The PTBA provided fake letters and screenshots of TV channels to the FIA authorities.
“The fake circulars created miserable situation for tax consultants, FBR and taxpayers,” the PTBA said and also suggested media should on air such new after confirmation with relevant authorities,
The PTBA complained that due to such criminal activities the reputation of FBR as well as of tax bars was tarnished.
It is also matter of due consideration that leakage of confidential information affects the goodwill of an institution and it also against the constitution of Pakistan.
The tax bar said that such act of a person circulating the forged/fake extension circular attracts various offences under Prevention of Electronic Crime Act, 2016 as well as offences under Pakistan Penal Code, 1860.
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FBR empowered for closure of automatic audit selection
ISLAMABAD: Federal Board of Revenue (FBR) has been empowered to conclude cases which were automatic selected for audit.
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Massive tax relief announced for foreign investment in debt securities
KARACHI: The government has announced massive tax relief to foreign investment in debt securities considering the attractive environment due to higher interest rate in the country.
The foreign investment in domestic debt market including government securities including Market Treasury Bills and Pakistan Investment Bonds, is around $1.5 billion during first six month (July – December) of 2019/2020 and in total it is around $2 billion when investment included in the equity market.
Through Tax Laws (Second Amendment) Ordinance, 2019, the government facilitated the foreign investment by making significant changes to Income Tax Ordinance, 2001.
A commentary released by Pwc A F Ferguson Chartered Accountants on the tax ordinance 2019 explained the tax relief on the foreign investment through changes brought into the main statute.
The chartered accountancy firm said that foreign investors particularly foreign institutional investors invest in Pakistan’s capital market through Foreign Portfolio Investment (FPI) scheme, which allows such investors to invest in equity and debt securities (including Government Bonds, Term Finance Certificates, Pakistan Investment Bonds) without any physical presence.
The FPI scheme makes it mandatory for foreign investors to open Special Convertible Rupee Account (SCRA).
The requirement for non-residents to open SCRA is provided in Chapter 20 of the Foreign Exchange Manual issued by the State Bank of Pakistan (SBP).
The funds available in SCRA can be transferred outside Pakistan or credited to a foreign currency account of non-resident investor maintained in Pakistan at any time without prior approval of SBP.
Such non-resident corporate investors not having a Permanent Establishment in Pakistan are hereinafter referred to as NRI.
The tax incidence applicable on NRI on return from their investment in equity instruments, either as dividend or capital gains, is largely aligned and same (being 15 percent).
However, tax incidence applicable on return from investment in debt securities by NRI is not aligned. Interest income from debt investment is subject to final tax upon tax withholding at 10 percent whereas capital gains from disposal of debt instruments are taxable at corporate rate of tax which is presently 29 percent.
The Second Amendment Ordinance has aligned and rationalized the tax incidence through following amendments, apart from relieving NRI from certain compliances:
(i) Banking company / financial institution maintaining SCRA of NRI is now required to deduct tax from capital gains arising on disposal of debt instruments and Government securities (including Treasury Bills and Pakistan Investment Bonds) @ 10 percent.
Such tax deduction constitutes final tax on such capital gains. It appears that tax withholding is required to be made at the time when proceeds from disposal are accounted for in the SCRA and also that no adjustment for any capital loss may be made by the Banking company / financial institution while deducting tax @ 10 percent from capital gains earned by NRI on disposal of debt securities.
(ii) The requirements to obtain tax registration [under Section 181 of the Income Tax Ordinance, 2001 (‘ITO 2001’)] and also to file statement of final taxation [under Section 115(4)] will no longer apply, in case capital gains or profit on debt is earned from investments made through SCRA (maintained with a banking company or financial institution) in debt instruments & Government securities (including treasury bills and Pakistan investment bonds).
Despite not appearing on Active Taxpayers List (ATL), they will not be subjected to higher tax withholding under the Tenth Schedule on interest income and capital gains relating to such securities.
(iii) Advance tax under section 147(5B) will also be not payable in respect of capital gains arising on investment made through SCRA (maintained with a banking company or financial institution) in debt instruments and Government securities (including treasury bills and Pakistan Investment Bonds).
(iv) Tax withholding applicable on banking transactions by those not appearing on ATL (under section 236P) will not apply to SCRA. This is a blanket exemption for companies maintaining SCRA regardless of whether investment is made in equity or debt securities.
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Procedure for making correction in cash payment receipt issued
ISLAMABAD: Federal Board of Revenue (FBR) has notified procedure for making correction in computerized payment receipt (CPR).
The FBR issued a circular on Friday stating that the electronic procedure for correction of CPR had been updated in IRIS software and following e-procedure would be followed for the correction of CPR of income tax, sales tax and federal excise duty.
The FBR said that the scope of changes would be restricted to the following ares:
a. Change of name, address, National Tax Number (NTN)/Computerized National Identity Card (CNIC).
b. Change in tax year/tax period
c. change in payment code/payment section.
The FBR said that online application for the changes should be submitted through Iris software. An applicant is required to provide documents, included: copy of CPR; in case of mistake made by withholding agent, letter from withholding agent and affidavit from the taxpayer on stamp paper that amendment may be made in CPR; for correction of NTN/CNIC in CPR, affidavit from the person on whose name the payment has been deposited mistakenly.
The FBR said that the chief commissioner shall designate an officer in his office for such purpose. In case, where scope of correction falls in different territorial jurisdiction, the chief commissioner to who such application has been made shall forward such application electronically to the chief commissioner where such CPR was recorded incorrectly.
Change in CPR will only take place in the system of FBR for all accounting purpose and the taxpayer will be entitled to take such credit accordingly.
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Withholding agent condition withdrawn on individuals with turnover up to Rs100 million
ISLAMABAD: Federal Board of Revenue (FBR) has withdrawn the condition on individuals to act as withholding agent in case the business turnover is up to Rs100 million.
The government through Tax Laws (Second Amendment) Ordinance, 2019 introduced major change to Income Tax Ordinance, 2001.
Under section 153 of the Ordinance, individuals having turnover of Rs50 Million or above in any of the preceding Tax Years are obliged to act as withholding tax agents whilst making payments for supply of goods, rendering of services or for execution of contracts.
“Henceforth traders, being individuals and having turnover up to Rs100 million shall not be required to act as a withholding agent under section 153 of the Ordinance,” according to the FBR.
Tax experts explained that individual having turnover of Rs50 million or more in any of the preceding tax years is liable to deduct tax under section 153 while making payments against supply of goods, services and contracts.
Through the Second Amendment Ordinance, traders being individuals having turnover up to Rs100 million have been exempted from deducting tax under section 153 while making payment against supply of goods, services and contracts.
However, the FBR may clarify the year with respect to which turnover of Rs100 million will be calculated by the trader.