Finance Minister Asad Umar announced on Saturday that the government is contemplating the implementation of a new tax amnesty scheme, driven by proposals received from the business community.
(more…)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.
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Legislation to encourage tax non-compliance
KARACHI: All efforts of tax collecting agency in broadening of tax base will be in vain due to changes introduced to tax laws by the present government, which allows non-compliant taxpayers to make transactions.
The government through Finance Supplementary (Second Amendment) Bill, 2019, which was passed by the national assembly, allowed non-filers of income tax returns to purchase locally assembled motor vehicles of any engine capacity.
Though the decision was made to generate more revenue through high rate of withholding tax for non-filers but this would discourage compliant taxpayers.
Whereas through Finance Act, 2018 a Section 182A late filers of income tax returns have been deprived of appearing on the Active Taxpayers List (ATL), which is mandatory for availing reduced withholding tax rates applicable on various transactions for compliant taxpayers.
In a realistic approach if the government allowed late filers, who filed their returns after due date, to appear on the ATL then more people would file their returns in order to purchase motor vehicles as it has been done in the case of purchasing immovable properties.
Another change brought through Finance Supplementary (Second Amendment) Bill, 2019 was allowing commercial importers into Final Tax Regime (FTR).
It is surprising that business community belonging to industrial associations strongly proposed bringing commercial importers into the FTR from minimum tax regime, where tax rates are comparatively lower.
It is obvious that the commercial importers do not want to declare their transactions and want to stay remain out of audit proceedings.
The government has already allowed several concessions and exemptions to industrial sector, especially the export sector for importing raw material.
Allowing commercial importers an audit free regime when the country is facing challenges of money laundering will be problematic.
It is pertinent to mention here that associations of foreign investors and multinational companies do not want relaxation to commercial importers and termed it would be counterproductive for documentation of economy.
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Income Tax Ordinance 2001: offences and penalties
KARACHI: Any person who commits any offence under provisions of Income Tax Ordinance, 2001, he may be liable to penalty.
According to updated Income Tax Ordinance, 2001 issued by Federal Board of Revenue (FBR), Section 182 explains the offenses and penalty under the Ordinance:
01. Where any person fails to furnish a return of income as required under section 114 within the due date. Section 114 and 118
— Such person shall pay a penalty equal to 0.1 percent of the tax payable in respect of that tax year for each day of default subject to a maximum penalty of 50 percent of the tax payable provided that if the penalty worked out as aforesaid is less than twenty thousand rupees or no tax is payable for that tax year such person shall pay a penalty of twenty thousand rupees:
Explanation.— For the purposes of this entry, it is declared that the
expression “tax payable” means tax chargeable on the taxable income on the basis of assessment made or treated to have been made under section 120, 121, 122 or 122C.
01A.Where any person fails to furnish a statement as required under section 115, 165, or 165A, 165A or 165B within the due date. Sections 115, 165 and 165A, 165A and 165B
— Such person shall pay a penalty of Rs.5000 if the person had already paid the tax collected or withheld by him within the due date for payment and the statement is filed within ninety days from the due date for filing the statement and, in all other cases, a penalty of Rs.2500 for each day of default from the due date subject to a minimum penalty of Rs. 10,000.
01AA. Where any person fails to furnish wealth statement or wealth reconciliation statement. Sections 114, 115 and 116
— Such person shall pay a penalty of “0.1 percent of the taxable income per week or Rs.20,000 whichever is higher.”
01AAA. Where any person fails to furnish a foreign assets and income statement within the due date. Section 116A
— Such persons shall pay a penalty of 2 percent of the foreign income or value of the foreign assets for each year of default.
02. Any person who fails to issue cash memo or invoice or receipt when required under this Ordinance or the rules made thereunder. Section 174 and Chapter VII of the Income Tax Rules.
— Such person shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved, whichever is higher.
03. Any person who is required to apply for registration under this Ordinance but fails to make an application for registration. Section 181
— Such person shall pay a penalty of five thousand rupees.
04. Any person who fails to notify the changes of material nature in the particulars of registration. Section 181
— Such person shall pay a penalty of five thousand rupees.
05. Any person who fails to deposit the amount of tax due or any part thereof in the time or manner laid down under this Ordinance or rules made thereunder.
Provided that if the person opts to pay the tax due on the basis of an order under section 129 on or before the due date given in the notice under sub-section (2) of section 137 issued in consequence of the said order, and does not file an appeal under section 131 the penalty payable shall be reduced by 50 percent. Section 137
— Such person shall pay a penalty of five per cent of the amount of the tax in default.
For the second default an additional penalty of 25 percent of the amount of tax in default.
For the third and subsequent defaults an additional penalty of 50 percent of the amount of tax in default.
06. Any person who repeats erroneous calculation in the return for more than one year whereby amount of tax less than the actual tax payable under this Ordinance is paid. Section 137
— Such person shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved, whichever is higher.
07.Any person who fails to maintain records required under this Ordinance or the rules made thereunder. Sections 174 and 108
— Such person shall pay a penalty of ten thousand rupees or five per cent of the amount of tax on income whichever is higher.
08. Where a taxpayer who, without any reasonable cause, in non-compliance with provisions of section 177—
(a) fails to produce the record of documents on receipt of first notice.
— Such person shall pay a penalty of twenty-five thousand rupees;
(b) fails to produce the record or documents on receipt of second notice;
— such person shall pay a penalty of fifty thousand rupees; and
(c) Fails to produce the record or documents on receipt of third notice.
— such person shall pay a penalty of one hundred thousand rupees.
09. Any person who fails to furnish the information required or to comply with any other term of the notice served under section 176 or 108.
— Such person shall pay a penalty of twenty-five thousand rupees for the first default and fifty thousand rupees for each subsequent default.
10. Any person who –
(a) makes a false or misleading statement to an Inland Revenue Authority either in writing or orally or electronically including a statement in an application, certificate, declaration, notification, return, objection or other document including books of accounts made, prepared, given, filed or furnished under this Ordinance;
(b)furnishes or files a false or mis-leading information or document or statement to an Income Tax Authorityeither in writing or orallyor electronically;
(c) omits from a statement made or information furnished to an Income Tax Authority any matter or thing without which the statementor the information is false or misleading in a material particular.
Sections 114, 115, 116, 174, 176, 177 and general
— Such person shall pay a penalty of twenty five thousand rupees or100 percent of the amount of tax shortfall whichever is higher:
Provided that in case of an assessment order deemed under section 120, no penalty shall be imposed to the extent of the tax shortfall occurring as a result of the taxpayer taking a reasonably arguable position on the application of this Ordinance to the taxpayers’ position.
11. Any person who denies or obstructs the access of the Commissioner or any officer authorized by the Commissioner to the premises, place, accounts, documents, computers or stocks. Sections 175 and 177
— Such person shall pay a penalty of twenty five thousand rupees or one hundred per cent of the amount of tax involved, whichever, is higher.
12. Where a person has concealed income or furnished inaccurate particulars of such income, including but not limited to the suppression of any income or amount chargeable to tax, the claiming of any deduction for any expenditure not actually incurred or any act referred to in sub-section (1) of section 111, in the course of any proceeding under this Ordinance before any Income Tax authority or the appellate tribunal. Sections 20, 111 and general
— Such person shall pay a penalty of twenty five thousand rupees or an amount equal to the tax which the person sought to evade whichever is higher. However, no penalty shall be payable on mere disallowance of a claim of exemption from tax of any income or amount declared by a person or mere disallowance of any expenditure declared by a person to be deductible, unless it is proved that the person made the claim knowing it to be wrong.
13. Any person who obstructs any Income Tax Authority in the performance of his official duties. Sections 209, 210 and general
— Such person shall pay a penalty of twenty five thousand rupees.
14. Any person who contravenes any of the provision of this Ordinance for which no penalty has, specifically, been provided in this section.
— Such person shall pay a penalty of five thousand rupees or three per cent of the amount of tax involved, which-ever is higher.
15. Any person who fails to collect or deduct tax as required under any provision of this Ordinance or fails to pay the tax collected or deducted as required under section 160. Sections 148, 149, 150, 151, 152, 153, 153A, 154, 155, 156, 156A, 156B, 158, 160, 231A, 231B, 233, 233A, 234, 234A, 235, 236, 236A.
— Such person shall pay a penalty of twenty five thousand rupees or the 10 percent of the amount of tax which-ever is higher.
16. Any person who fails to display his NTN at the place of business as required under this Ordinance or the rules made thereunder. Section 181C
— Such person shall pay a penalty of five thousand rupees.
17. Any reporting financial institution or reporting entity who fails to furnish information or country-by-country report to the Board as required under section 107, 108 or 165B within the due date.
— Such reporting financial institution or reporting entity shall pay a penalty of two thousand rupees for each day of default subject to a minimum penalty of twenty five thousand rupees.
18. Any person who fails to keep and maintain document and information required under section 108 or Income Tax Rules, 2002. Section 108
— 1 percent of the value of transactions, the record of which is required to be maintained under section 108 and Income Tax Rules, 2002.
19. Where any manufacturer of a motor vehicle accepts or processes any application for booking or purchase of a locally manufactured motor vehicle in violation of the provisions of clause (a) of section 227C
— Such person shall pay a penalty of 5 percent of the value of the motor vehicle
20. (i) Where any registering authority of Excise and Taxation Department accepts, processes or registers any application for registration of a locally manufactured motor vehicle or for the first registration of an imported vehicle in violation of the provisions of clause (a) of section 227C
(ii) Where any authority responsible for registering, recording or attesting the transfer of immovable property accepts or processes the registration or attestation of such property in violation of the provisions of clause (b) of section 227C
— Such person shall pay a penalty of 3 percent of the value of motor vehicle or immovable property.
(2) The penalties specified under sub-section (1) shall be applied in a consistent manner and no penalty shall be payable unless an order in writing is passed by the Commissioner, Commissioner (Appeals) or the Appellate Tribunal after providing an opportunity of being heard to the person concerned:
Provided that where the taxpayer admits his default he may voluntarily pay the amount of penalty due under this section.
(3) Where a Commissioner (Appeals) or the Appellate Tribunal makes an order under sub-section (2), the Commissioner (Appeals) or the Appellate Tribunal, as the case may be, shall immediately serve a copy of the order on the Commissioner and thereupon all the provision of this Ordinance relating to the recovery of penalty shall apply as if the order was made by the Commissioner.
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FBR unveils basic concepts of income tax
KARACHI: Federal Board of Revenue (FBR) has pointed out basic concepts of income tax for persons intending to get registration and filing income tax returns.
The FBR said that knowledge of basic concepts would not only ensure that the tasks are performed easily but also in the prescribed manner.
Taxable Income
Taxable Income means Total Income reduced by donations qualifying straight for deductions and certain deductible allowances.
Total Income
Total Income is the aggregate of Income chargeable to Tax under each head of Income.
Head of Income
Under the Income Tax Ordinance, 2001, all Income are broadly divided into following five heads of Income:
Salary;
Income from property;
Income from business;
Capital gains; and
Income from Other Sources
Resident
An Association of Persons is Resident for a Tax Year if the control and management of its affairs is situated wholly or partly in Pakistan at any time in that year;
A Company is Resident for a Tax Year if :
It is incorporated or formed by or under any law in force in Pakistan;
The control and management of its affairs is situated wholly in Pakistan at any time in the year; or
It is a Provincial Government or a local Government in Pakistan.
An individual is Resident for a Tax Year if he/she:
Is present in Pakistan for a period of, or periods amounting in aggregate to, 183 days or more in the Tax Year; or
Is an employee or official of the Federal Government or a Provincial Government posted abroad in the Tax Year.
Non-Resident
An Association of Persons, a Company and an Individual are Non-Resident for a Tax Year if they are not Resident for that year.
Pakistan source Income
Is defined in section 101 of the Income Tax Ordinance, 2001, which caters for Incomes under different heads and situations. Some of the common Pakistan source Incomes are as under: –
Salary received or receivable from any employment exercised in Pakistan wherever paid;
Salary paid by, or on behalf of, the Federal Government, a Provincial Government, or a local Government in Pakistan, wherever the employment is exercised;
Dividend paid by Resident Company;
Profit on debt paid by a Resident Person;
Property or rental Income from the lease of immovable property in Pakistan;
Pension or annuity paid or payable by a Resident or permanent establishment of a Non-Resident;.
Foreign source Income
Is any Income, which is not a Pakistan source Income.
Person
An Individual;
A Company or Association of Persons incorporated, formed, organized or established in Pakistan or elsewhere;
The Federal Government, a foreign government, a political subdivision of a foreign government, or public international organization
Company
A Company as defined in the Companies Ordinance, 1984 (XLVII of 1984);
A body corporate formed by or under any law in force in Pakistan;
A modaraba;
A body incorporated by or under the law of a country outside Pakistan relating to incorporation of Companies;
An amendment has been made through Finance Act, 2013 to enlarge the scope of definition of a Company. Now as per Income Tax Ordinance, 2001 a company includes:
A co-operative society, a finance society or any other society;
A non-profit organization;
A trust, an entity or a body of persons established or constituted by or under any law for the time being in force.
A foreign association, whether incorporated or not, which the Board has, by general or special order, declared to be a company for the purposes of this Ordinance;
A Provincial Government;
A Local Government in Pakistan;
A Small Company
Association of Persons
Includes a firm (the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all), a Hindu undivided family, any artificial juridical person and any body of persons formed under a foreign law, but does not include a Company.
Tax Year
Is a period of twelve months ending on 30th day of June i.e. the financial year and is denoted by the calendar year in which the said date falls. For example, tax year for the period of twelve months from July 01, 2017 to June 30, 2018 shall be denoted by calendar year 2018 and the period of twelve months from July 01, 2018 to June 30, 2019 shall be denoted by calendar year 2019. It is called Normal Tax Year.
Special Tax Year
Means any period of twelve months and is denoted by the calendar year relevant to the Normal Tax Year in which closing date of the Special Tax Year falls. For example, Tax Year for the period of twelve months from January 01, 2017 to December 31, 2017 shall be denoted by calendar year 2018 and the period of twelve months from October 01, 2017 to September 30, 2018 shall be denoted by calendar year 2019.
Basic concepts on Income Tax would help answer a lot of fundamental questions, avoiding unnecessary mistakes or errors that normally arise during Registration and Filing of Income Tax Return.
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FBR investigates tax evasion by 200 Sindh govt employees
KARACHI: Federal Board of Revenue (FBR) has initiated investigation into massive tax evasion by at least 200 employees of Sindh government.
The investigation has been launched by Broadening of Tax Base (BTB) wing of Regional Tax Office (RTO)-II Karachi, according to official documents received on Friday.
Sources said that the BTB wing selected high profile cases of government employees in Sindh on the basis of their expenditures and income.
The sources said that preliminary scrutiny revealed that their income and expenses were not matched.
They also said that such identified government employees had also not filed their income tax returns and wealth statement.
The RTO-II Karachi has issued notices to the persons for filing their income tax returns otherwise department would prepare unilateral assessment and initiate action.
The sources said that in case of non-compliance by them in payment due taxes their bank account would be attached for recovery.
The tax office also issued notices to high profile 16,000 salaried persons working in private sector. The sources said that such persons had been given opportunity of being heard and in case they failed in doing so such harsh provisions of the tax law would be invoked against them.
The sources said that the RTO-II also issued notices to 2,000 persons who had purchased huge amount immovable properties but had not declared or not filed their returns.
The investigation has been launched by Broadening of Tax Base (BTB) wing of Regional Tax Office (RTO)-II Karachi, according to official documents received on Friday.
Sources said that the BTB wing selected high profile cases of government employees in Sindh on the basis of their expenditures and income.
The sources said that preliminary scrutiny revealed that their income and expenses were not matched.
They also said that such identified government employees had also not filed their income tax returns and wealth statement.
The RTO-II Karachi has issued notices to the persons for filing their income tax returns otherwise department would prepare unilateral assessment and initiate action.
The sources said that in case of non-compliance by them in payment due taxes their bank account would be attached for recovery.
The tax office also issued notices to high profile 16,000 salaried persons working in private sector. The sources said that such persons had been given opportunity of being heard and in case they failed in doing so such harsh provisions of the tax law would be invoked against them.
The sources said that the RTO-II also issued notices to 2,000 persons who had purchased huge amount immovable properties but had not declared or not filed their returns.
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If FBR not fixed, new tax authority will be created: PM
ISLAMABAD: Prime Minister Imran Khan on Thursday said that reforming Federal Board of Revenue (FBR) is priority of the government.
If the FBR fails to deliver then we will replace with a new tax authority, he said while addressing at the 11th All Pakistan Chambers President Conference.
He said that the reforms in the taxation system was need of the hour because without it the government would not able to meet its developmental expenditures.
The prime minister informed the business community that he was regularly discussing with Commerce Adviser Abdul Razak Dawood and Finance Minister Asad Umar on ways to boost revenue generation and making the FBR a business-friendly organization.
“But I should also tell you this: if we realise that the FBR cannot be fixed, we will create a new FBR,” he said.
Imran Khan said that the economy was facing challenging conditions and revenue generation was a must.He also urged the nation to come into the tax net, adding that in return he would guarantee that their tax would not be misspent.
He assured the nation that each and every penny of Pakistanis’ tax collection will be spent with great caution, he said.
He said that the government will end all unnecessary expenses. He urged the business community to pursue people that it is impossible for any country to succeed without paying their taxes.The prime minister said that it was shocking that only 72,000 taxpayers were declaring Rs200,000 or more monthly income out of 210 million people in Pakistan.
The prime minister assured the business community that his government will do all he can to facilitate them, indicating that “some more incentives are coming your way in the upcoming days”.
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KTBA requests FBR to include late-filers’ name into ATL
KARACHI: The Karachi Tax Bar Association (KTBA) on Thursday requested tax authorities to include names of late filers of income tax returns, who already applied for extension, into Active Taxpayers List (ATL).
The KTBA requested the chairman of Federal Board of Revenue (FBR) to issue instructions for inclusion of the names of those taxpayers who had duly applied for extension for filing of return of income and the rejection order of which was not passed by the commission and they filed return of income by the requested due date and also those taxpayers who are registered with FBR after June 2018 and are entitled for inclusion as per SRO831(I)/2015 dated August 21, 2015 in the ATL issued by the FBR.
It said that the instruction will be in accordance with the true spirit of law and for the facilitation of taxpayers who fulfilled their responsibility as compliant taxpayers and will also encourage new taxpayers, consequently helping in increasing the tax base.
The tax bar further said that it cannot be considered reasonable that these taxpayers should be treated as non-filer for the entire next year equating them with those non-filers who did not even bother to file return at all and you will be agree that both should not be treated in the same manner.
Under Section 182A of Income Tax Ordinance, 2001 the taxpayers, who filed their returns after due date, have been denied to have their names into ATL for tax year 2018.
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SRB suspends sales tax registration of Baba Farid Carriage
KARACHI: Sindh Revenue Board (SRB) has suspended sales tax registration of M/s. Baba Farid Carriage Company for default payment related to period January 2017 to August 2018.
The SRB said that non-payment of Sindh sales tax on services is contravention of provincial tax laws. It said that record showed that M/s. Fauji Fertilizer Company Limited, M/s. Engro Fertilizers Limited and M/s. Efert Agritrade (Private) Limited have declared purchases of Rs211 million (including sales tax of Rs33.46 million) from M/s. Baba Farid Carriage Company during January 2017 to August 2018.
However, M/s. Baba Farid Carriage Company have declared sales of Rs192.78 million during November 2016 to August 2018 with SRB leading to sales suppression of Rs18.62 million and short payment of Sindh Sales Tax of Rs5.98 million.
The SRB suspended the sales tax registration of the company and directed to make remedial actions by March 18, 2019, including declaration of correct monthly sales tax returns and submit all sales and purchase record for the tax periods with income tax returns for the period of 2016/2017, 2017/2018 and copies of sales tax return filed with other provincial sales tax authorities.
“In case of non-satisfactory response or failure to take remedial measures as suggested on or before March 18, 2019, further necessary action shall be taken under the law,” the SRB warned.
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FBR notifies transfers, postings of key IRS posts
ISLAMABAD: The Federal Board of Revenue (FBR) on Thursday notified transfers and postings of key posts in Inland Revenue Service (IRS) with immediate effect.
The FBR transferred and posted Zulfiqar Hussain Khan (IRS/BS-20) as the Director General (OPS), Directorate General of Internal Audit (Inland Revenue), Islamabad from the post of Chief (L&C) FBR, Islamabad.
The FBR also transferred and posted Mir Badshah Khan Wazir (IRS/BS-20) as Director General (OPS) Broadening of Tax Base (BTB) FBR HQ Islamabad.
The officers who are drawing performance allowance prior to issuance of this notification shall continue to draw this allowance on the new place of posting, the FBR said.
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Local car assemblers to be beneficiary on concession to non-compliant taxpayers
KARACHI: The local car assemblers are main beneficiary of the government decision to allow non-compliant taxpayers for purchasing motor vehicles, analysts said on Thursday.
A day earlier on floor of the house Finance Minister Asad Umar presented this proposal to the Finance Supplementary (Second Amendment) Bill, 2019 to allow non-filers of income tax returns to purchase any engine capacity of motor vehicles.
Though the decision has been taken to generate tax revenue through collection of withholding tax on purchase of motor vehicles as non-filers are required to pay higher rate but it seems to be a big ‘U’ turn by the present government.
The PML-N government in its last budget 2018/2019 announced to imposed restriction on non-filers to purchase motor vehicles of any engine capacity in order to bring large number of tax evaders into tax net.
The present PTI government however in its Finance Supplementary (Second Amendment) Bill, 2019 initially proposed to allow non-filers for purchasing motor vehicles with engine capacity up to 1300CC. However, finalizing this bill and approval from the parliament the concession to non-filers further enhanced and now they would be able to purchase any engine capacity motor vehicle.
The analysts at Taurus Securities Limited said that the Supplementary Finance (Second Amendment) Bill, commonly known as the ‘Mini-Budget’, passed in the National Assembly yesterday, in the midst of an opposition walk-out protesting the Bill’s contents.
The Bill has wholly removed the ban on Non-Filers; the initial proposal allowed Non-Filers access to the market for cars with a cylinder capacity of less than 1300cc.
All three auto players (PSMC, INDU and HCAR) will be the beneficiary of this reversal in policy, as they will now be able to clear their build-up of stock.