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  • No audit of IT sector due to fixed tax regime: FBR chairman

    No audit of IT sector due to fixed tax regime: FBR chairman

    ISLAMABAD: Asim Ahmad, Chairman, Federal Board of Revenue (FBR) on Monday said there is no audit of the IT sector due to fixed tax regime.

    There is no audit of IT sector export-oriented companies through budgetary measures in the current financial year for ensuring ease of doing business and reducing the cost of tax compliance.

    READ MORE: Electricity withholding tax not applicable on ATL domestic consumers

    “As fixed and final tax regime has been introduced in this fiscal year therefore, no tax or audit notices will be sent to the IT sector professionals and easier documentation will be the priority,” FBR chairman said.

    Special Assistant to the Prime Minister on youth affairs Miss Shaza Fatima and the Prime Minister’s task force on Information technology and Telecom sector, convened a meeting in the Prime Minister’s office to discuss IT sector exports taxation issues and the impact thereof particularly of small and medium IT companies and software houses, with Chairman FBR Asim Ahmad, officials of the Ministry of IT and representatives of PASHA.

    READ MORE: Tax rates on goods, passenger transport vehicles during 2022-2023

    The Prime Minister Mian Shehbaz Shareef constituted a task force to devise ways to increase the Information Technology exports by $3 billion till 2023.

    On the note of exemption from the proposed 0.25 per cent tax, this will remain and it is a quarter of what the other exporters pay.

    In the Final Tax Regime, the Federal Board of Revenue has agreed in principle to resolve sales tax registration and return filing issues.

    READ MORE: FBR notifies tax rates on brokerage, commission during 2022-2023

    The definitions of IT in the June 2022 Finance Act were deliberated upon, and found to be all inclusive. The Federal Board of Revenue has also agreed in principle to propose necessary changes in law for all IT exports to attain the benefit of final tax regime.

    In principle the FBR agreed upon the proposal that if the Provincial consensus is reached, Federal Excise Duty (FED) can be reduced from 19.5 per cent to 17 per cent for Telecom sector.

    The funds received by the IT sector through applications like Payoneer etc. will be given the benefit of final tax regime through necessary changes in the law, if required.

    READ MORE: Non-ATL to pay 200% more tax on motor vehicle purchase during 2022-2023

  • Electricity withholding tax not applicable on ATL domestic consumers

    Electricity withholding tax not applicable on ATL domestic consumers

    Domestic consumers of electricity are not subject to withholding income tax if their names are in the Active Taxpayers List (ATL).

    The Federal Board of Revenue (FBR) has issued updated withholding tax card 2022-2023 after incorporating amendments made through Finance Act, 2022 to the Income Tax Ordinance, 2001.

    READ MORE: Tax rates on goods, passenger transport vehicles during 2022-2023

    The FBR collects withholding tax on the electricity consumption under Section 235 of the Income Tax Ordinance, 2001.

    Following are the withholding tax rates and text of the Section 235:

    WITHHOLDING TAX RATES ON ELECTRICITY

    For commercial and industrial consumers:

    1. There will be no tax on gross amount of bill up to Rs500

    2. The rate of withholding tax shall be Rs10 per cent of the amount where gross amount of bill exceeds Rs500 but does not exceed Rs20,000.

    READ MORE: FBR notifies tax rates on brokerage, commission during 2022-2023

    3. The tax shall be Rs1950 plus 12 per cent of the amount exceeding Rs20,000 for commercial consumers. Rs1,950 plus 5 per cent of amount exceeding Rs20,000 for industrial consumers where gross amount of bill exceeds Rs20,000.

    For domestic consumers: (The tax is applicable on person not appearing on ATL)

    The rate of tax to be collected on domestic electricity consumption shall be: (i) zero percent the amount of monthly bill is less than Rs. 25,000; and (ii) 7.5 per cent if the amount of monthly bill is Rs. 25,000 or more.

    READ MORE: Non-ATL to pay 200% more tax on motor vehicle purchase during 2022-2023

    Section 235. Electricity consumption

    (1) There shall be collected advance tax at the rates specified in Division IV of Part-IV of the First Schedule on the amount of electricity bill of a commercial or industrial or domestic consumer:

    Provided that the provisions of sub-section (1) shall not apply to a domestic consumer of electricity if his name appears on the Active Taxpayers’ List.

    (1A) In addition to tax collectible under sub-section (1), there shall be collected tax at the rates given in the Division IV of Part IV of First Schedule from retailers and service providers as provided under section 99A of the Ordinance:

    Provided that the tax shall not be collectible under this sub-section if the tax has been collected from the person under sub-section (9) of section 3 of the Sales Tax Act, 1990 as provided in the general order issued under section 99A of the Ordinance.

    READ MORE: FBR notifies tax rates on prize bond, lottery winning during 2022-2023

    (2) The person preparing electricity consumption bill shall charge advance tax under sub-section (1) in the manner electricity consumption charges are charged.

    Explanation.— For removal of doubt, it is clarified that for the purposes of this section electricity consumption bill referred to in sub-section (2) means electricity bill inclusive of sales tax and all incidental charges.

    (3) Advance tax under this section shall not be collected from a person who produces a certificate from the Commissioner that his income during tax year is exempt from tax or that he has discharged advance tax liability under section 147 or whose entire income is subject to final tax regime or minimum tax regime under any provisions of this Ordinance other than this section.

    READ MORE: Tax rates for rental income from immovable property during 2022-2023

    (4) Under this section, —

    (a) in the case of a taxpayer other than a company, tax collected upto bill amount of three hundred and sixty thousand Rupees per annum shall be treated as minimum tax on the income of such persons and no refund shall be allowed;

    (b) in the case of a taxpayer other than a company, tax collected on monthly bill over and above thirty thousand rupees per month shall be adjustable; and

    (c) in the case of a company, tax collected shall be adjustable against tax liability.

  • Prime Minister Shehbaz wishes Hindu community on Diwali

    Prime Minister Shehbaz wishes Hindu community on Diwali

    ISLAMABAD: Prime Minister Shehbaz Sharif on Monday whished the Hindu community in the country on their festive occasion of Diwali.

    “Wishing the Hindu community in Pakistan and around the world on Diwali, the festival of lights,” the prime minister said in a tweet.

    The prime minister wished for Diwali to become a source of peace and happiness for all.

    Hindus across the globe and in Pakistan are celebrating the occasion of Diwali that celebrates the triumph of light over dark and good over evil.

    The Constitution of Pakistan gives equal opportunities to minorities to freely practice their religion and celebrate their occasions.

  • Non-ATL to pay 200% more tax on motor vehicle purchase during 2022-2023

    Non-ATL to pay 200% more tax on motor vehicle purchase during 2022-2023

    Persons not on Active Taxpayers List (ATL) are required to pay 200 per cent more withholding tax for purchasing motor vehicles during 2022-2023.

    Federal Board of Revenue (FBR) issued withholding tax card 2022-2023 after incorporating changes made through Finance Act, 2022 to the Income Tax Ordinance, 2001.

    READ MORE: FBR notifies tax rates on prize bond, lottery winning during 2022-2023

    According to the withholding tax card 2022-2023, the tax authorities have increased burden on the persons not on the Active Taxpayers List (ATL).

    Following are the withholding tax rate on purchase of motor vehicles or registration:

    READ MORE: Tax rates for rental income from immovable property during 2022-2023

    Sr. No.Engine CapacityATLNon-ATL
    1.Upto 850 CCRs10,000Rs30,000
    2.851 CC to 1000 CCRs20,000Rs60,000
    3.1001 CC to 1300 CCRs25,000Rs75,000
    4.1301 CC to 1600 CCRs50,000Rs150,000
    5.1601 CC to 1800 CCRs150,000Rs450,000
    6.1801 CC to 2000 CCRs200,000Rs600,000
    7.2001 CC to 2500 CCRs300,000Rs900,000
    8.2501 CC to 3000 CCRs400,000Rs1,200,000
    9.Above 3000 CCRs500,000Rs1,500,000

    Provided that in cases where engine capacity is not applicable and the value of vehicle is Rupees five million or more, the rate of tax collectible shall be 3 per cent of the import value as increased by customs duty, sales tax and federal excise duty in case of imported vehicles or invoice value in case of locally manufactured assembled vehicles.

    READ MORE: FBR notifies withholding tax rates for exports during 2022-2023

    Following are the withholding tax rates at the time of transfer of registration to be collected by provincial excise and taxation department.

    Sr. No.Engine CapacityATLNon-ATL
    1.Upto 850 CCNilNil
    2.851 CC to 1000 CCRs5,000Rs15,000
    3.1001 CC to 1300 CCRs7,500Rs22,500
    4.1301 CC to 1600 CCRs12,500Rs37,500
    5.1601 CC to 1800 CCRs18,750Rs56,250
    6.1801 CC to 2000 CCRs25,000Rs75,000
    7.2001 CC to 2500 CCRs37,500Rs112,500
    8.2501 CC to 3000 CCRs50,000Rs150,000
    9.Above 3000 CCRs62,500Rs187,500

    Provided that where the engine capacity is not applicable and value of rupee is five million or more, the rate of tax collectable shall be rupee twenty thousand.

    READ MORE: Tax rates on payments for goods, services during 2022-2023

    Provided further that the rate of tax to be collected under this clause shall be reduced by ten per cent each year from the date of first registration in Pakistan.

    Following the withholding tax rates to be collected by every motor vehicle registration authority of Excise and Taxation Department at the time of registration, if the locally manufactured motor vehicle has been sold prior to registration by the person who originally purchased it from the local manufacturer.

    READ MORE: Tax rates on payments to non-residents during 2022-2023

    Sr. No.Engine CapacityATLNon-ATL
    1.Upto 1000 CCRs100,000Rs300,000
    2.1001 CC to 2000 CCRs200,000Rs600,000
    3.2001 CC and aboveRs400,000Rs1,200,000

    READ MORE: Up to 70% income tax imposed on dividends for year 2022-2023

  • FTO directs country-wide crackdown against smuggled vehicles

    FTO directs country-wide crackdown against smuggled vehicles

    ISLAMABAD: The Federal Tax Ombudsman (FTO) has directed tax authorities to launch country-wide crackdown against smuggled vehicles.

    (more…)
  • Foreign direct investment in Pakistan plunges by 47% in 1QFY23

    Foreign direct investment in Pakistan plunges by 47% in 1QFY23

    Foreign Direct Investment (FDI) into Pakistan has plunged by 47 per cent during first quarter (July – September) 2022/2023, according to data released by State Bank of Pakistan (SBP).

    The central bank said that the FDI fell to $253 million during the first quarter of the current fiscal year as compared with $479 million in the corresponding quarter of the last fiscal year.

    READ MORE: FATF removes Pakistan from grey list

    The inflows under the FDI recorded 31.7 per cent decline to $395 million during the quarter under review as compared with $579 million in the same quarter of the last year.

    On the other hand, the outflow under the FDI significantly increased by 42.5 per cent to $142 million during July – September 2022/2023 as compared with $99.6 million in the same period of the last fiscal year.

    READ MORE: Asian Bank approves $1.5 billion to finance Pakistan

    The total foreign private investment into the country fell by 36.3 per cent to $241.3 million during the quarter under review when compared with $379 million in the corresponding quarter of the last fiscal year.

    The portfolio investment in the capital market registered massive decline in outflow during the quarter under review. The outflow of portfolio investment recorded $12.1 million during the first quarter of the current fiscal year as compared with the outflow of $100.5 million in the same quarter of the last year.

    READ MORE: Pakistan’s weekly forex reserves increase nominally

    The foreign public investment under the head of debt securities recorded an outflow of $18.2 million during the first quarter of the fiscal year 2022/2023 as compare with inflow of $980 million in the same quarter of the last fiscal year.

    The total foreign investment including private and public recorded a decline of 83.6 per cent to $223 million during the first quarter of the current fiscal year as compared with $1.36 billion in the same quarter of the last fiscal year.

    READ MORE: Current account deficit declines by 37% to $2.21 billion in first quarter

  • FATF removes Pakistan from grey list

    FATF removes Pakistan from grey list

    Financial Action Task Force (FATF) on Friday decided to remove Pakistan from grey list after the country made compliance with the conditions.

    FATF is the world’s money laundering and terror-financing watchdog. It said that Pakistan has been removed from the grey list and is no longer subject to its increased monitoring process.

    The Paris-based inter-governmental body had put Pakistan on its grey list of untrustworthy jurisdictions in June 2018 because of “strategic counter-terrorist financing-related deficiencies.”

    Plenary meeting of the FATF ended and made decision regarding Pakistan.

    Earlier, Analysts at Arif Habib Limited said: “We expect Pakistan to be taken off the grey list by the FATF amid the progress Pakistan has made so far against money laundering and terrorist financing (AML/CFT) in the past few years.”

    To recall, Pakistan was placed on FATF’s Grey List in June 2018 whereby it was found non-compliant with recommendations of the FATF which targeted areas of risk assessment, national cooperation, targeted sanctions, preventative measures, due diligence, internal and third party controls, law enforcement, regulation and supervision for money laundering and terror financing, amongst others.

    Skip forward to 2022, the FATF Plenary in June, under the German Presidency of Dr. Marcus Pleyer, acknowledged the progress Pakistan made against money laundering and terrorist financing (AML/CFT) with all 34 action points implemented.

    Through various bills and amendments, the Pakistani authorities had diligently worked to satisfy the FATF. These related to laws against money laundering, freezing of assets and filing of cases against proscribed organizations, actions against terror financing etc.

    However, final decision to take Pakistan off the grey list was conditional upon successful on-site visit of FATF. FATF team conducted on-site visit to Pakistan few weeks back, with a purpose of inspecting the legal, regulatory and operational reforms and procedures implemented for compliance.

    The analysts said that following the exit from the list, Pakistan will still be required to work with the APG (its relevant regional bodies) in the regular course of the follow-up process to make further improvements in its AML & CFT framework, as and when required.

    Having already suffered direct consequences and economic difficulties from its time on the grey list, the climactic graduation of Pakistan from the grey list will come no less than a breath of fresh air. It will be a major relief and accomplishment for Pakistan, and is expected to reap benefits in both, short and long run.

    The immediate ramification of exiting grey list carries reputational implication for Pakistan, we believe. This positive development bodes well for Pakistan’s image which was recently further dented by the downgrading of rating by International Credit Rating agencies like Moodys.

    With the international community—investors in particular, the removal from grey list is likely to strengthen Pakistan’s position especially with regards to the soundness of our financial systems and help regain their confidence.

    Markets are expected to react positively to this news and overall sentiment is likely to remain upbeat for a while. Moreover, going forward, this should also help strengthen Pakistan’s case of re-rating and upgrading by the International Credit Rating agencies.

    In addition, one of the structural benchmarks laid down by the IMF for Pakistan stated ‘Adoption of measures to strengthen the effectiveness of the AML/CFT framework to support the country’s efforts to exit the Financial Action Task Force (FATF) list of jurisdictions with serious deficiencies.’ This means, Pakistan complies with one more structural benchmark of the IMF, paving way for successful ninth review which is due in November 2022 enabling disbursement of SDR 894 million from the Fund.

  • Asian Bank approves $1.5 billion to finance Pakistan

    Asian Bank approves $1.5 billion to finance Pakistan

    Asian Development Bank (ADB) has approved $1.5 billion in financing to help Pakistan provide social protection, promote food security, and support employment for its people amid devastating floods and global supply chain disruptions.

    In a statement issued on Friday, the ADB said the loan, provided under ADB’s Building Resilience with Active Countercyclical Expenditures (BRACE) Program, will help fund the government’s $2.3 billion countercyclical development expenditure program designed to cushion the impacts of external shocks, including the Russian invasion of Ukraine.

    “Pakistan’s recovery from the COVID-19 pandemic has been impeded by external shocks,” said ADB Director General for Central and West Asia Yevgeniy Zhukov.

    “Increasing business costs and rising living expenses are affecting millions of Pakistanis, especially the poor and vulnerable. ADB’s program will help the government manage the impacts of high prices, increasing food insecurity, slowing business activity, and reducing income for vulnerable groups, many of whom are also reeling from the devastating floods.”

    ADB’s financing will provide the fiscal space needed for the government to implement its countercyclical development expenditure package, which is designed to target the poorest families in Pakistan who are often disproportionately affected in times of crisis.

    The government’s support includes specific measures to promote gender empowerment and climate change adaptation, which have become even more important in light of the recent floods.

    ADB’s assistance will help to expand the number of families receiving cash transfers from 7.9 million to 9 million, increase the number of children enrolled in primary and secondary schools, and enhance geographic coverage of health services and nutritional supplies for pregnant and lactating mothers and children under 2 years old.

    “The program is part of a comprehensive and well-coordinated package of support. It will help the government deal with the impact of the immediate shocks to the economy, while, in parallel, continue the structural reforms that are necessary to improve the country’s medium- to long-term macroeconomic prospects,” said ADB Director for Public Management, Financial Sector, and Trade Tariq Niazi.

    “We are working closely with the International Monetary Fund and other development partners to ensure that our support through policy dialogue, technical assistance, and program lending is well-coordinated and that, ultimately, we are able to help the government improve Pakistan’s resilience to shocks.”

    ADB’s $1.5 billion countercyclical support is part of a significant response package to support people, livelihoods, and infrastructure in Pakistan in the wake of the recent floods which have affected over 33 million people and caused extensive damage to infrastructure and agriculture.

    Pakistan was a founding member of ADB. Since 1966, ADB has committed over $37 billion in loans, grants, and other forms of financing to promote inclusive economic growth in Pakistan and improve the country’s infrastructure, energy and food security, transport networks, and social services.

  • Suzuki Pakistan announces plant shutdown on inventory shortage

    Suzuki Pakistan announces plant shutdown on inventory shortage

    KARACHI: Pak Suzuki Motor Company Limited on Thursday announced a temporary plant shutdown due to shortage of inventory after conditions imposed by the central bank.

    In a communication sent to Pakistan Stock Exchange (PSX), the company stated that the State Bank of Pakistan (SBP) had introduced a mechanism for prior approval for importer under HS Code 8703 category, including CKDs through a circular No. 09 issued on May 20, 2022.

    READ MORE: Suzuki Motors extends plant shutdown in Pakistan

    “Restriction had adversely impacted clearance of import consignment which resultantly affected the inventory levels,” it added.

    Therefore, due to shortage of inventor level, the management of the company has decided to shut down automobile plant for period extending from October 24, 2022 to October 26, 2022. “However, motorcycle plant will remain operative,” it said.

    READ MORE: Suzuki Motor Pakistan continues plant shutdown

    The company for the last several months is making similar announcement due to shortage of inventory and raw material for the locally manufactured cars.

    READ MORE: Suzuki Motor announces further plant shutdown in Pakistan

    According to latest data of locally assembled car sales, Pak Suzuki witnessed sharp decline during the first quarter (July – September) of fiscal year 2022/2023. The car sales of Pakistan Suzuki fell to 16,639 units during the first quarter of the current fiscal year as compared with 38,431 units in the same quarter of the last fiscal year.

    READ MORE: New prices of Suzuki cars in Pakistan from August 16, 2022