KARACHI: Individuals or companies falling under final tax are not required to file annual income tax returns and their statement will be treated as assessment.
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PTBA suggests return filing date extension up to December 31
LAHORE: The Pakistan Tax Bar Association (PTBA) has advised the Federal Board of Revenue (FBR) to extend the deadline for filing income tax returns to December 31, 2019. This recommendation was made in a letter addressed to the FBR chairman on Friday, citing several challenges faced by taxpayers and consultants.
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Will FBR extend return filing date or opt to collect surcharge
KARACHI: Federal Board of Revenue (FBR) has two options regarding income tax returns filing either to grant further extension or collect late filing surcharge, sources said on Friday.
The last date for annual filing income tax for tax year 2019 is December 16, 2019. The date for filing income tax returns by salaried persons, business individuals, Association of Persons (AOPs) and companies having special financial year was September 30, 2019.
However, the FBR granted first extension on September 30, 2019, second on October 31, 2019 and the third extension was granted on November 29, 2019.
Normally the FBR extends the last date up to mid of December every year. However, for the tax year 2018 the date was extended up to August 09, 2019 due to various reasons including the amnesty scheme launched during the time period.
The sources said that the FBR was eying to receive around 3.5 million income tax returns for tax year 2019 as it had received around 2.71 million returns for tax year 2018.
According to a letter of Pakistan Tax Bar Association (PTBA) the total return filing by November 26, 2019 for tax year 2019 was 1.6 million. So it is unlikely the FBR get around one million returns by December 16, 2019. If FBR eyes 3.5 million returns for tax year 2019 then the required number will be 1.8 million returns to be filed during the last extension or 16 days from December 01, 2019 to December 16, 2019.
The sources said that the after the introduction of Tenth Schedule to Income Tax Ordinance, 2001 the return filing had become very important and under the new schedule a person was required to pay 100 percent more withholding tax in case his name was not on the ATL.
Besides, the FBR also introduced slabs of late filing surcharges for individuals, AOPs and companies. The sources said that in case date was not extended beyond December 16, 2019 then return filers would required to pay late surcharge in order to ensure their name on the ATL.
Some sources believed that the FBR would extend the date for filing income tax returns for tax year 2019 as large segment of retailers and small business were required to file their returns and the FBR was working on a mechanism to resolve the issue with retailers and small traders.
The sources said that in case return filing date is given to this segment then FBR would grant general extension to all the persons to file their returns.
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Tenth Schedule enforces income tax return filing
KARACHI: The Tenth Schedule introduced to Income Tax Ordinance, 2001 has proved its importance as it compelled people for filing their income tax returns.
The importance of this schedule can be proved as return filing witnessed record high of 2.71 million for tax year 2018. This schedule will remain productive for tax year 2019 and onward for forcing people making financial transactions to file their returns.
“The newly introduced Tenth Schedule, which envisages the entire path to be adopted by the Inland Revenue Department to enforce the persons who make financial transactions yet choose not to file their returns of income,” officials of Federal Board of Revenue (FBR) said.
They said that prior to Finance Act, 2019, a concept of non-filer existed in the Ordinance whereby higher tax rates of withholding were prescribed for persons who were non-filers. Such non-filers could claim adjustment of the higher tax collected at the time of filing of income tax returns.
“The aim was to compel the non-filers to file their returns of income. However, it was observed that the non-filers, even though subjected to higher withholding rates, still had a propensity not to file their returns.”
This proved detrimental to the exercise of expansion or tax base. This was due to the absence of an explicit provision specifying a standard procedure for action against such persons.
Through the Finance Act, 2019, the concept of Non-Filers was done away with and a new concept regarding persons not appearing in the active taxpayers’ list was introduced. The officials said that this concept was a major paradigm shift from the erstwhile non-filer higher tax regime in that it not only penalized those persons not appearing in the ATL but also introduced an effective mechanism for enforcing returns from such persons.
In this regard, a new section 100BA has been introduced which provides that collection or deduction of advance income tax, computation of income and tax payable thereon should be determined in accordance with the rules in the newly introduced the Tenth Schedule.
Under this schedule persons whose names are not appearing in the ATL will be subjected to hundred percent increased rate of tax.
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FBR allows filing Annexure H for July 2019 to claim sales tax refund
ISLAMABAD: Federal Board of Revenue (FBR) has allowed filing of statement containing stock position for July 2019 to taxpayers for claiming sales tax refunds.
In an official memorandum issued on Thursday, the FBR condoned the time limit for filing of Annexure – H for the tax period July 2019 up to January 15, 2020.
Annexure-H is a statement for providing stock position by taxpayers along with monthly sales tax return.
The FBR from July 01, 2019 introduced expeditious payment of sales tax refunds within 72 hours subject to the true filing of Annexure – H.
Recently, Karachi Tax Bar Association (KTBA) highlighted this issue and urged the tax authorities to resolve for facilitating exporters and manufacturers.
The KTBA pointed out that as per the amendments made in Sales Tax Rules, 2006 vide SRO no. 918(I)/2019 dated August 7, 2019, mechanism for expeditious processing of refund claim has been devised only for manufacturers-cum- exporters.
As per the Rules, refund will be treated as having been filed only after filing of Annexure H of the Sales Tax return, for which deadline of 120 days has been prescribed in the Rules and the same can be extended for a period of 60 days on the basis of approval from the Commissioner.
However, the rules are silent about the mechanism for processing of Sales Tax refunds incase Annexure H has not been filed by manufacturer-cum-exporter for any reason. Considering the legal and legitimate right of the taxpayer to claim adjustment / refund of the input tax, either of the following two option be considered by the FBR for facilitation of exporters:
Allow filing of Annexure H without any time limit [present time limit of 4 months be abolished and taxpayer be allowed to claim refund as and when required] ii. Incase present limit of 4 months cannot be abolished, registered persons be allowed atleast to alternatively file refund on annual basis after the end of the tax year.
Apart from the above, Annexure H is only being allowed to be filed to taxpayers who have filed the said Annexure from sales tax returns of July 2019 and onwards. Instead of claiming refund, some taxpayers have reported sales tax carried forward balance in their sales tax returns from July 2019 onwards. In case they now intend to file Annexure H from the current month,
FBR’s online portal does not allow such taxpayers to enter opening balance of inventory / raw materials as the said field in blocked for editing. This limitation should be removed and taxpayers should be allowed to file Annexure H for any specific month, for which they intend to claim refund. From apparent mechanism being followed by the system, it appears that those taxpayers who have not filed Annexure H for the month of July 2019 will never be allowed to file Annexure H for any subsequent month. This apparent anomaly should be resolved at earliest.
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Irrecoverable loans to be allowed tax concession
KARACHI: Federal Board of Revenue (FBR) shall allow reduction in tax liability against bed debts where loans are irrecoverable, officials said.
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FBR deploys IR officers at 20 sugar mills for monitoring of production, supplies
ISLAMABAD: Federal Board of Revenue (FBR) has deployed officers of Inland Revenue at 20 sugar mills to monitor production and supply for checking tax evasion.
The IR officers have been deployed at the premises of sugar mills under Section 40B of Sales Tax Act, 1990 for the monitoring of stock, production and supply.
Sources told PkRevenue.com that Large Taxpayers Unit (LTU) Karachi had requested the FBR to allow monitoring of sugar mills as huge tax evasion was detected in the past.
Recently, the FBR conducted analysis of sugar production of the last year which revealed huge tax evasion by sugar mills.
The outcome of analysis showed that FBR and the Cane Commissioner of three provinces had a difference of 641,000 metric tons which showed that the sugar mills were under reporting their stock in order to evade tax payments.
It is also identified that the local supplies during the tax period of July 2019 fell by 255 percent due to enhancement in tax rate from eight percent in June 2019 to 17 percent in July 2019.
The analysis further revealed that the stock holding last year ending June 2018 was 3,147,000 metric tons where as closing stock of the year ending on June 2019 was only 2,230,778 metric tons, which showed 29 percent decline.
It is also pointed out that sugar manufacturers had declared high quantity of supplies during June 2019 to evade sales tax as the tax rate was to increase in July 2019.
The FBR analysis revealed that the sugarcane was the biggest raw material of sugar industry.
The undocumented/under-documented nature of this agriculture sector poses a great challenge to accurately gauge the quantity of sugarcane produced and supplied to a particular mill.
Considering the above facts the FBR allowed deployment of IR officers at the sugar mills.
It is worth mentioning that the FBR Chairman through an official memorandum barred the tax offices for invoking Section 40B of the Sales Tax Act, 1990 without prior permission of the board or Member IR Operations.
Following is the list of sugar mills where IR officers have been deployed:
01. M/s. Darya Khan Sugar Mills Limited.
02. M/s. Popular Sugar Mills Limited.
03. M/s. Deharki Sugar Mill Limited.
04. M/s. Adam Sugar Mill Limited.
05. M/s. Baba Farid Sugar Mill Limited.
06. M/s. Digri Sugar Mill Limited.
07. M/s. Mirpurkhas Sugar Mill Limited.
08. M/s. Faran Sugar Mills Limited.
09. M/s. Mehran Sugar Mills Limited.
10. M/s. Dewan Sugar Mills Limited.
11. M/s. Al-Abbas Sugar Mills Limited.
12. M/s. Ansari Sugar Mills Limited.
13. M/s. Bawany Sugar Mills Limited.
14. M/s. Larr Sugar Mills Limited.
15. M/s. New Dadu Sugar Mills Limited.
16. M/s. Rani Sugar Mills (Pvt) Limited
17. M/s. Al-Noor Sugar Mills Limited
18. M/s. Tando Allahyar Sugar Mills Limited
19. M/s. Habib Sugar Mills Limited
20. M/s. Sindabadgar Sugar Mills Limited
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Pakistan, China agree to expedite customs clearance through green corridor
ISLAMABAD: Pakistan and Chinese customs authorities have agreed to expedite clearance of agriculture products under proposed green corridor at Sost-Khunjarab Border.
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Tax exemption available on ‘profit on debt’ if security issued outside Pakistan
KARACHI: Tax exemption is available to profit on debt where security issued outside Pakistan for raising loan.
Officials in Federal Board of Revenue (FBR) on Wednesday said that tax exemption is available on profit on debt in certain conditions.
According to Income Tax Ordinance, 2001, any profit received by a non-resident person on a security issued by a resident person shall be exempt from tax under this Ordinance where—
(a) the persons are not associates;
(b) the security was widely issued by the resident person outside Pakistan for the purposes of raising a loan outside Pakistan for use in a business carried on by the person in Pakistan;
(c) the profit was paid outside Pakistan; and
(d) the security is approved by the FBR for the purposes of this section.
The income tax exemption is also available to any scholarship granted to a person to meet the cost of the person’s education shall be exempt from tax under this Ordinance, other than where the scholarship is paid directly or indirectly by an associate.
Any income received by a spouse as support payment under an agreement to live apart] shall be exempt from tax under the Ordinance.
The officials said income tax exemption is also available to the income derived by the federal government, provincial government, and local government.
The income of the Federal Government shall be exempt from tax under the Ordinance.
The income of a Provincial Government or a Local Government in Pakistan shall be exempt from tax under this Ordinance, other than income chargeable under the head “Income from Business” derived by a Provincial Government or Local Government from a business carried on outside its jurisdictional area.
Any payment received by the Federal Government, a Provincial Government or a Local Government shall not be liable to any collection or deduction of advance tax.
Exemption under this section shall not be available in the case of corporation, company, a regulatory authority, a development authority, other body or institution established by or under a Federal law or a Provincial law or an existing law or a corporation, company, a regulatory authority, a development authority or other body or institution set up, owned and controlled, either directly or indirectly, by the Federal Government or a Provincial Government, regardless of the ultimate destination of such income as laid down in Article 165A of the Constitution of the Islamic Republic of Pakistan:
Provided that the income from sale of spectrum licenses and renewal thereof by Pakistan Telecommunication Authority on behalf of the Federal Government after the first day of March 2014 shall be treated as income of the Federal Government and not of the Pakistan Telecommunication Authority.
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Intelligence discovery of around Rs1bn evasion raises question on customs collectorates performance
KARACHI: Performance of customs officials in clearance of imported has become questionable following back to back detection of around Rs1 billion by intelligence wing.
Directorate of Intelligence and Investigation (I&I) Customs pointed out tax avoidance of an amount of Rs221 million by Oil and Gas Development Company Limited (OGDCL) and recovered the same.
In another case the intelligence directorate detected tax evasion of around Rs755 million by three importers of steel products.
The sources said that the huge discovery of tax evasion and avoidance raised questions about the performance of customs officials posted at Customs collectorates in Karachi.
The officials of customs intelligence have jurisdiction over those goods which were cleared by customs collectorates. The sources said that huge discovery of evasion and avoidance showed inefficiency of the customs staff posted at collectorates or something else.
The sources said that in both the cases the intelligence was ascertaining the role of customs officials in evasion and avoidance.
They said that in the case of OGDCL, the company wrongly claimed the exemption. However, the company paid the amount as pointed out by the intelligence directorate.
However, in other case customs intelligence and investigation lodged around 26 FIRs two days ago against three importers for misusing SRO 655(I)/2006 dated June 26, 2006 for clearance of steel products.
The said consignments were cleared by three model collectorates in Karachi where only one percent customs duty was paid instead actual payment of 20 percent duty.
The sources said that the three importers jointly evaded around Rs755 million. They, however, said that the evasion was detected post clearance by the collectorates.
The sources in customs intelligence and investigation said that they had jurisdiction over cases where consignments were allowed clearance after proper scrutiny of prevailing laws and applicable customs valuations.
The sources further said that besides lodging FIRs against importers, the authorities had launched probe into the cases that why the consignments were not examined properly by the customs collectorates.
As per the concessions the importers cum-manufactures had been allowed imports at reduced rate of duty for in-house value addition but in the instant cases the importers had sold the goods in the open market in the raw form.
As per the FIRs the importers misdeclared the quality of steel products at the customs clearance stage.