Finance Supplementary Bill: Major changes introduced to income tax

Finance Supplementary Bill: Major changes introduced to income tax

ISLAMABAD: Federal Board of Revenue (FBR) on Thursday issued salient features of changes brought into income tax regime through Finance Supplementary (Second Amendment) Bill, 2019, presented on January 23, 2019.

The major changes introduced to tax laws are as follow:

— Simplified scheme for small shopkeepers

In order to broaden the tax base this provision intends to empower the Federal Government to prescribe simplified schemes for small shopkeepers in specified cities and terrifies.

— Incentives to banks for advancing loans to Micro & Small Enterprises Low-cost housing Agricultural finance

Majority of the manpower in Pakistan in employed in Agriculture, Micro, Small & Medium Enterprises. Low-cost housing is also a priority area. It is proposed to provide incentive to the Banks to provide loans to these sectors and to low cost housing schemes to boost economic activities and generate employment. Banks’ income arising from loans to these sectors in addition to loans in 2018 shall be taxed at 20 percent instead of 35 percent and shall be exempt from super tax.

— Removal of Advance Income Tax on cash withdrawal and cash denominated instruments from banks for filers

To provide relief to filers advance tax on cash withdrawal and sale of banking instruments has been totally abolished.

— Enabling purchase of immovable property and vehicles by non-resident Pakistanis

It is proposed to allow Non-resident Pakistanis holding international passports can purchase any motor vehicle and immovable property without filing requirements.

— Enabling purchase of locally manufactured vehicles up to 1300 CC without filing requirement

After amendments, the restriction on purchase of locally manufactured motor vehicles above 1300 cc is proposed to be abolished for non-filers.

— Number of Withholding statements to be reduced from 12 to 2

For furthering ease of doing business the frequency of monthly withholding statements has been done away with. Now businesses shall have to file biannual statements instead.

— Reduced rate of Advance Tax on small marriage halls

For small marriage halls, community halls etc with function area less 500 sqyd, the minimum advance tax has been reduced from Rs. 20,000 to Rs. 5,000.

— Removal of Advance Tax on cash withdrawal from foreign remittance fed accounts

To incentivize foreign remittance by overseas Pakistanis, advance tax on cash withdrawal on accounts solely fed by foreign remittance has been exempted.

— Abolition of Super Tax on non-banking sector

For Banks the rate of super tax at 4 percent as was previously has been maintained till tax year 2021 whereas for non-banking persons it is intended to abolish this tax from tax year 2020.

— Reduction of tax on inter-corporate dividend in case of companies availing group relief

For companies availing group relief, tax on inter-corporate dividend has been reduced to the extent of percentage of shareholding the recipient of dividend has in the distributing company.

— Abolition of tax on undistributed profits

To promote capital formation, the tax on undistributed profits is being abolished.

— Abolition of withholding tax on members of stock exchange

The tax on members of stock exchange in lieu of their commission has been abolished. Now their income from commission is to be taxed under normal law.

— Allowance of carry forward of losses to persons dealing in shares and stocks

The amendment intends to allow carry forward of losses from securities sustained in a year to subsequent three years.

— Final Tax on imports by Commercial importers

The advance income tax collected on imports by commercial importers is being made final tax liability instead of being part of the minimum tax regime.

— Incentives for industrial undertakings set up for manufacturing of equipment used in generation of renewable energy

Through this amendment exemption has been granted for five years to industrial undertakings set up for manufacturing of equipment used in generation of renewable energy if such undertaking is set up between 1st March 2019 and 30th June 2023.

— Tax concession for teams participating in national & international sports tournament

The advance tax at the time of auction of franchise rights, from participating teams in national and international sports tournament organized by any Sports Board or entity established by the Government is being abolished

— Provisional assessment of offshore assets

Through this amendment provisional assessment may be made in case of an offshore asset not declared earlier if such asset is discovered by the Commissioner or any department or agency of the federal or provincial government.

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