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Tax through electricity connections on retailers, service providers

ISLAMABAD: The Federal Boar of Revenue (FBR) has issued explanation to tax collection through electricity connections from retailers and service providers.

In this regard the FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments introduced through the Finance Act, 2022 to the Income Tax Ordinance, 2001.

The FBR said that in order to collect income tax from certain retailers and specified service providers a special fixed tax regime has been introduced though insertion of section 99A of the Income Tax Ordinance, 2001.

READ MORE: FBR explains income tax on export of services

Now retailers, other than Tier-I retailers as defined in Sales Tax Act, 1990, and specified service providers will pay fixed income tax through their commercial electricity bills which has been provided in clause (3) of Division IV of Part IV of First Schedule to the Ordinance in the following manner:

Where the gross amount of monthly bill does not exceed Rs30,000: the tax rate shall be Rs3,000

Where the gross amount of monthly bill exceeds Rs30,000 but does not exceed Rs50,000: the tax rate shall be Rs 5,000.

READ MORE: FBR restores 100% depreciation deduction

Where the gross amount of monthly bill exceeds Rs50,000 but does not exceed Rs100,000: the tax rate shall Rs.10,000.

Retailers and service providers as notified by the Board in the income tax general order: the tax shall be up to Rs.200,000.

The FBR said that this is final tax on the income of persons covered in this section in respect of business being carried out from the premises for which tax is collected under this section.

READ MORE: FBR notifies graduated tax rates on disposal of securities

Retailers from whom tax has been collected in terms of sub-section (9) of section 3 of Sales Tax Act, 1990 shall not be required to pay tax under section 99A of the Ordinance and the tax collected under the Sales Tax Act, 1990 is also a final discharge of income tax liability under section 99A of the Ordinance.

The Board with the approval of Minister in-charge is empowered to determine the scope, mode, manner, record keeping, mechanism of collection and deduction etc and to include or exempt any person or class of person, any income or class of income though issuance of income tax general order for the purpose of this section.

READ MORE: FBR applies separates CGT rates on immovable properties

Furthermore, enabling provision has been provided by inserting sub-section (1A) in section 235 of the Ordinance to collect tax through electricity bills from retailers other than Tier-I retailers as defined in Sales Tax Act, 1990 and specified service providers for the purpose of this section.

The FBR issued another Circular No. 09 of 2022/2023 (Sales Tax, Federal Excise and ICT tax on service). According to this circular, the fixed tax regime for the retailers has been rationalized and now instead of percentage of the amount of monthly electricity bill, tax shall be charged on their monthly electricity bills as; Rs. 3000 for monthly bill upto Rs30,000, Rs5,000 if the monthly bill exceeds Rs30,000 but does not exceed Rs50,000 and Rs10,000 for monthly bill over Rs50,000.

This shall constitute full and final discharge of tax liability of such persons under both Income Tax Ordinance, 2001, and Sales Tax Act, 1990.

However, these tax amounts shall be doubled if the name of the retailer is not appearing on the Active Taxpayers List (ATL) issued by the Board under section 181A of the Income Tax Ordinance, 2001 on the date of issuance of monthly electricity bill, the FBR added.

In addition to the above, the Board has been empowered to notify through a Sales Tax General Order (STGO) persons or class of persons required to discharge their sales tax liability through payment of a fixed amount along with their monthly electricity bills.

July 23, 2022
Dollar hits new high at Rs228.37 at interbank closing

KARACHI: The US dollar made a new record high to close at Rs228.37 to the dollar on Friday at closing of interbank foreign exchange market.

The exchange rate recorded a decline of Rs1.56 in rupee value to end at Rs228.37 to the dollar from previous day’s closing of Rs226.81 in the interbank foreign exchange market.

READ MORE: Rupee ends to new low at Rs226.81 against dollar in interbank

Currency experts said that the rupee under severe pressure due to high dollar demand for external payments.

The foreign exchange reserves of the country have further declined.

READ MORE: PKR plunges Rs227 to dollar at interbank midday trading

Pakistan’s foreign exchange reserves have declined by $368 million to $15.242 billion by week ended July 15, 2022. The foreign exchange reserves of the country were $15.61 billion a week ago i.e. July 07, 2022.

The country’s foreign exchange reserves hit all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $11.986 billion.

READ MORE: Rupee hits fresh low Rs224.92 to dollar at interbank closing

The official reserves of the State Bank also depleted by $388 billion to $9.329 billion by week ended July 15, 2022 as compared with $9.717 billion a week ago.

The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since then the official reserves of the SBP declined by $10.817 billion.

READ MORE: Pakistani Rupee crashes to Rs222 against Dollar at closing on July 19, 2022

The SBP on July 07, 2022 announced a hike of 125 basis points in policy rate to bring it to 15 per cent. The purpose of increasing the interest rate was to curb the demand and support the rupee value. However, the effort of the SBP failed to support the rupee value.

July 22, 2022
Rupee hits new midday low of Rs228.50 against dollar

KARACHI: The Pakistani Rupee (PKR) made a new midday trading low of Rs228.50 against the US dollar on Friday in interbank foreign exchange market.

The dollar is being traded at Rs228.50, up Rs1.69 from last day’s closing of Rs226.81 in the interbank foreign exchange market.

READ MORE: Rupee ends to new low at Rs226.81 against dollar in interbank

Currency experts said that the rupee under severe pressure due to high dollar demand for external payments.

The foreign exchange reserves of the country have further declined.

Pakistan’s foreign exchange reserves have declined by $368 million to $15.242 billion by week ended July 15, 2022. The foreign exchange reserves of the country were $15.61 billion a week ago i.e. July 07, 2022.

READ MORE: PKR plunges Rs227 to dollar at interbank midday trading

The country’s foreign exchange reserves hit all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $11.986 billion.

The official reserves of the State Bank also depleted by $388 billion to $9.329 billion by week ended July 15, 2022 as compared with $9.717 billion a week ago.

READ MORE: Rupee hits fresh low Rs224.92 to dollar at interbank closing

The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since then the official reserves of the SBP declined by $10.817 billion.

The SBP on July 07, 2022 announced a hike of 125 basis points in policy rate to bring it to 15 per cent. The purpose of increasing the interest rate was to curb the demand and support the rupee value. However, the effort of the SBP failed to support the rupee value.

READ MORE: Pakistani Rupee crashes to Rs222 against Dollar at closing on July 19, 2022

July 22, 2022

Super tax to apply for Tax Year 2022 and onwards: FBR

ISLAMABAD: The Federal Board of Revenue (FBR) on Thursday said that super tax will be applicable for tax year 2022 and onwards.

The FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments made to Income Tax Ordinance, 2001 through Finance Act, 2022.

The FBR said that a new section 4C to Income Tax Ordinance, 2001 has been introduced through Finance Act, 2022 and this section will apply for tax year 2022 and onwards.

Except for the persons whose income as envisaged in this section is below Rs150 million, all other persons including those assessed under Fourth, Fifth and Seventh Schedules to the Ordinance are liable to pay super tax on graduated rates ranging from 1% to 4% based on graduated income slabs provided in Division JIB of Part I of First Schedule given as under:

S. No.	Income under Section 4C	Rate of Tax
1.	Where income does not exceed Rs150 million	0% of the income
2.	Where income exceeds Rs150 million 1% of the income but does not exceed Rs200 million	1% of the income
3.	Where income exceeds Rs200 million 2% of the income but does not exceed Rs250 million	2% of the income
4.	Where income exceeds Rs250 million but does not exceed Rs300 million	3% of the income
5.	Where income exceeds Rs300 million	4% of the income

However, for tax year 2022 the rate of super tax under this section will be 10% instead of 4%, where the income of the persons engaged, partly or wholly, in business of airlines, automobiles, beverages, cement, chemicals, cigarette & tobacco, fertilizer, iron & steel, LNG terminal, oil marketing, oil refining, petroleum & gas exploration and production, pharmaceuticals, sugar and textiles exceeds Rs.300 million. For tax year 2023, this super tax on income of banking companies will be 10% if the income for the year exceeds Rs. 300 million.

For the purposes of this section, the income will be the sum of the following:

(i) Profit on debt, dividend, capital gains, brokerage, and commission;

(ii) Taxable income (other than brought forward depreciation and brought forward business losses) under section 9 of the Ordinance, excluding amounts specified in (i) above;

(iii) Imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i) above; and

(iv) Income computed, other than brought forward depreciation, brought forward amortization and brought forward business losses under Fourth, Fifth and Seventh Schedule.

Super tax payable under this section will be paid on the date and manner as specified in under section 137(1) of the Ordinance.

In case of default by the person liable to pay super tax under this section, Commissioner through an order in writing will determine the liability of the person and proceed to recover the same under applicable provisions of the Ordinance, the FBR added.

July 21, 2022

Pakistan enhances income tax rates for banks

ISLAMABAD: Pakistan has enhanced tax rates for banks through amendments introduced through Finance Act, 2022.

In this regard the apex tax agency of the country, i.e. Federal Board of Revenue (FBR) on Thursday issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments made to Income Tax Ordinance, 2001 through Finance Act, 2022.

READ MORE: Declaring beneficial owner made mandatory for companies, AOPs

The FBR said that tax rates for banking companies are enhanced as explained hereunder:

The taxable income arising from additional income of banking companies earned from additional investment in Federal Government securities for tax year 2020 and 2021 was taxable at the rate of 37.5 per cent instead of rates provided in Division II of Part I of First Schedule of the Income Tax Ordinance, 2001.

READ MORE: Pakistan reintroduces capital value tax on motor vehicles

This provision was further amended through Finance Act, 2021, whereby income attributable to investment in the Federal Government securities of banking companies was made taxable on the basis of advances to deposit ratios at graduated tax rates of 40 per cent, 37.5 per cent and 35 per cent, if ratio was up to 40 per cent, 40-50 per cent and above 50 per cent respectively.

The Finance Act, 2022 has introduced enhanced rates of tax on taxable income of banks attributable to investment in Federal Government securities.

READ MORE: Customs duty exemption, concession granted

The enhanced rates for tax year 2022 are 55 per cent, 49 per cent and 35 per cent if gross advances to deposit ratio was upto 40 per cent, 40-50 per cent or above 50 per cent respectively.

For tax year 2023, and onwards tax rates will be 55 per cent, 49 per cent and 39 per cent if gross advances to deposit ratio is up to 40 per cent, 40 -50 per cent or above 50 per cent respectively.

The changes have been incorporated by substituting sub-rule (6A) of rule 6C of Seventh Schedule to the Ordinance.

READ MORE: Commodities’ illegal movement to be treated as smuggling

The tax rate on income of banking companies has been enhanced to 39 per cent for tax year 2023 from current 35 per cent through amendment in Division II of Part I of First Schedule of the Ordinance.

Additionally, the application of section 4B has been restricted up to tax year 2022 in case of banking companies.

July 21, 2022
Declaring beneficial owner made mandatory for companies, AOPs

ISLAMABAD: The Federal Board of Revenue (FBR) on Thursday said that declaration of beneficial owner has been made mandatory for companies and Association of Persons (AOPs) under income tax laws.

The FBR issued Income Tax Circular No. 15 of 2022-2023 to explain the important amendment made through Finance Act, 2022 to Income Tax Ordinance, 2001.

READ MORE: Pakistan reintroduces capital value tax on motor vehicles

The FBR said that previously companies and AOPs were not required to disclose the natural individuals who are ultimate beneficial owners.

Thus beneficial ownership could be hidden through intervening companies and trusts.

READ MORE: Customs duty exemption, concession granted

To bring transparency and to remove this obscurity, as per best international practices, companies and AOPs are now required to disclose details of their beneficial owners who are natural persons.

Definition of term ‘beneficial owner’ has been provided by inserting new clause (7A) in section 2 of the Income Tax Ordinance 2001.

READ MORE: Commodities’ illegal movement to be treated as smuggling

Corresponding new section 181E has been inserted in the Ordinance whereby every company and association of persons will furnish electronically, particulars of its beneficial owners and will be required to update these particulars as and when there is a change in particulars of beneficial owners.

Penalty of Rs. 1,000,000 has also been prescribed by incorporating entry No. 30 in the Table, in sub-section (1) of section 182 for each default of company or association of persons who contravenes the provisions of section 181E of the Ordinance.

READ MORE: Special tax regime for pharma sector introduced

July 21, 2022
Pakistan’s forex reserves decline to $15.24 billion

KARACHI: Pakistan’s foreign exchange reserves have declined by $368 million to $15.242 billion by week ended July 15, 2022, State Bank of Pakistan (SBP) said on Thursday.

The foreign exchange reserves of the country were $15.61 billion a week ago i.e. July 07, 2022.

READ MORE: Pakistan’s forex reserves drop to $15.61 billion

The country’s foreign exchange reserves hit all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $11.986 billion.

The official reserves of the State Bank also depleted by $388 billion to $9.329 billion by week ended July 15, 2022 as compared with $9.717 billion a week ago.

READ MORE: Pakistan’s forex reserves deplete to $15.74 billion

The SBP attributed the decline in foreign exchange reserves to external debt repayments.

It is pertinent to mention that the SBP received about $2.3 billion from Chinese banks for buildup of foreign exchange reserves. However, despite receiving the amount the external debt payment kept the pressure on the reserves.

READ MORE: State Bank’s reserves dip to 32-month low at $8.238 billion

The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since then the official reserves of the SBP declined by $10.817 billion.

The commercial banks held foreign exchange increased to $5.913 billion by week ended July 15, 2022 when compared with $5.893 billion a week ago, showing a rise of $20 million.

READ MORE: Pakistan’s central bank reserves shrink to one month import cover

July 21, 2022
Pakistan may increase petrol prices from August 1, 2022

KARACHI: Pakistan may review prices of petroleum products for the next fortnight on July 31, 2022, which also consider the massive depreciation of rupee value.

Previously the present government had started increasing the petroleum prices on May 26, 2022 when the benchmark Brent Oil was at $112 per barrel and now as of today July 21, 2022, the international prices of Brent Oil have fallen to $103 per barrel.

Considering the latest price slump of international oil, the government had reduced the prices of petroleum products from July 15, 2022. However experts believed it was political decision as the government had to increase petroleum levy and apply sales tax.

Furthermore the Pakistani Rupee (PKR) has sharply fell against the dollar leaving no room for the government but to increase the prices of petroleum products.

READ MORE: New petroleum prices in Pakistan from July 15, 2022

The local currency depreciated by around 11 per cent during the month of July to close at 226.81 to the US Dollar on July 21, 2022.

Pakistan is net importer of petroleum products and spends huge foreign exchange for the purchase.

The country imported petroleum products worth $23.32 billion during fiscal year 2021-2022 as compared with $11.35 billion in the preceding year, showing a growth 105 per cent.

In the previous announcement on July 14, 2022, the government announced the following prices of petroleum products.

The new prices of petrol have been decreased by Rs18.50 per liter to Rs230.24 from Rs248.74.

The rate of high speed diesel has been decreased by Rs40.54 per liter to Rs235.95 from Rs276.54.

The rate of kerosene oil has been decreased by Rs33.81 per liter to Rs196.45 from Rs230.26.

Similarly, the rate of light speed diesel has been decreased by Rs34.71 per liter to Rs191.44 from Rs226.15.

READ MORE: New prices of petroleum products in Pakistan from July 01, 2022

The Prime Minister on July 12, 2022 directed the authorities to pass on the full benefit of falling oil prices in the international markets to the masses.

The previous government of PTI had kept both the petroleum levy and sales tax at zero in order to provide relief to the masses. The PTI government also provided a huge subsidy on prices of petroleum products in order to lower the rates and provide relief to the masses.

However, former Prime Minister Imran Khan was removed through a vote of no-confidence motion on April 10, 2022.

Since then the new coalition government led by PML-N increased the prices of petroleum products sharply on three different occasions.

READ MORE: New petroleum prices in Pakistan from June 16, 2022

The new government of Prime Minister Shehbaz Sharif increased the prices of petroleum products on May 26, 2022, June 02, 2022 and June 15, 2022. Cumulatively, the government increased the price of petrol by 84 per liter in these price hikes.

The present government in the budget estimated to collect Rs750 billion as petroleum levy during the fiscal year 2022/2023. As this fiscal year is starting from July 01, 2022, it is likely that the government will opt to impose the levy from this date.

July 21, 2022
Rupee ends to new low at Rs226.81 against dollar in interbank

KARACHI: The Pakistan Rupee (PKR) fell to a new historic low at Rs226.81 to the US dollar on Thursday due to scarcity of the greenback and further rise in political instability.

The exchange rate recorded a decline of Rs1.89 in rupee value to end at Rs226.81 to the dollar from previous day’s closing of Rs224.92 in the interbank foreign exchange market.

Currency dealers said that the importers were running pillars to post for dollars to make payments to their foreign suppliers.

READ MORE: PKR plunges Rs227 to dollar at interbank midday trading

They further said that the market remained uncertain due to political instability. The dealers said that the fall in foreign exchange reserves also fueled the uncertainty in the market.

The foreign exchange reserves of Pakistan have depleted by $454 million to $15.742 billion by the week ended June 30, 2022. The foreign exchange reserves of the country were at $16.196 billion a week ago i.e. June 24, 2022.

The country’s foreign exchange reserves hit an all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $11.486 billion.

READ MORE: Rupee hits fresh low Rs224.92 to dollar at interbank closing

The official reserves of the State Bank also recorded a decline of $493 million to $9.816 billion by the week ended June 30, 2022 as compared with $10.309 billion a week ago.

The central bank attributed the decline in foreign exchange reserves to external debt repayments.

It is pertinent to mention that the SBP received about $2.3 billion from Chinese banks for buildup of foreign exchange reserves. However, despite receiving the amount the external debt payment kept the pressure on the reserves.

The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by the week ended August 27, 2021. Since then the official reserves of the SBP declined by $10.33 billion.

READ MORE:

READ MORE: Pakistani Rupee crashes to Rs222 against Dollar at closing on July 19, 2022

The SBP on July 07, 2022 announced a hike of 125 basis points in policy rate to bring it to 15 per cent. The purpose of increasing the interest rate was to curb the demand and support the rupee value. However, the effort of the SBP failed to support the rupee value.

July 21, 2022
Pakistan reintroduces capital value tax on motor vehicles

KARACHI: The federal government of Pakistan has reinstated the Capital Value Tax (CVT) at a rate of one percent on the value of both locally manufactured and imported motor vehicles. This move marks the revival of a tax that was previously withdrawn in phases and ultimately abolished in 2020.
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July 21, 2022