KARACHI: The Finance Bill 2021 has proposed a final tax regime for export of IT and IT enabled services.
According to commentary on budget 2021/2022 released by KPMG Taseer Hadi & Co. currently, tax deduction on foreign proceeds from export of goods are taxed at 1 percent which is considered as final tax.
The Finance Bill proposes similar taxation regime for following specified services:
—Export of IT and IT enabled services where tax credit under section 65F is not available;
—Services or technical services rendered outside Pakistan or exported from Pakistan;
—royalty, commission or fees derived by a resident company from a foreign enterprise in consideration for the use outside Pakistan of any patent, invention, model, design, secret process or formula or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided to such enterprise;
—construction contracts executed outside Pakistan; and
—other services rendered outside Pakistan as notified by the Board from time to time.
The tax deductible will be final tax subject to following conditions:
(i) Income tax return has been filed;
(ii) withholding tax statements for the relevant tax year have been filed;
(iii) sales tax returns under Federal or Provincial laws have been filed, if required under the law; and
(iv) no credit for foreign taxes paid shall be allowed.
The Bill also proposes an option for taxation under Normal Tax Regime which is to be exercised every year at the time of filing of income tax return.
The Bill proposes while explaining the nature and source of any amount, investment, money, valuable article, expenditure, referred to in section 111, a taxpayer takes into account any source of income under this section, he shall not be entitled to take credit of a sum that can be reasonably attributed to the business activity under this section.