KARACHI: A leading chartered accountancy firm has highlighted tax measures taken by the government through Finance Bill, 2022.
According to PwC A. F. Ferguson&Co. the Finance Bill 2022 represents the First Budget of the current coalition government which has been announced in extremely difficult economic conditions. Due to current account deficit and shortfall in local tax revenue, there has been an increased pressure on the government to adopt certain strict fiscal measures. At the same time, due to higher cost of inflation and cost of living, the government is expected to take some concrete economic decisions which could provide relief to the common man. In the above backdrop, the current budget therefore contains certain proposals which are aimed to increase tax revenue in a manner that only the affluent or well to do class of the country is affected and the burden of such taxes is not passed on to the lower strata of society.
Important measures announced by the Government are listed as under:-
1. Poverty Alleviation tax on persons earning income above Rs 300 million at the rate of 2%.
2. General rate of tax on banking companies enhanced from 35% to 45%.
3. Deemed rental income concept introduced to collect 1% tax on Fair market value of certain immovable properties of resident persons situated in Pakistan.
4. Capital gains tax provisions relating to immovable properties situated in Pakistan revamped aiming to collect tax on sale of open plots held for a period of less than six years.
5. Capital gains on immovable properties held outside Pakistan to be taxed at normal rate irrespective of holding period.
6. Capital Value Tax at 1% on offshore assets of resident persons exceeding Rs 100 million and 5% on vehicles valuing more than Rs 5 million.
7. Advance tax from non-filer purchasers of immovable properties enhanced from 2% to 5%.
8. Slab rates for salaried individuals amended to decrease the effect on low-income employees and increasing the incidence on higher income slabs.
9. Withdrawal of tax credits on investments in listed securities & insurance policies as well as deductible allowance on house loans.
10. Minimum tax carry forward discontinued.
11. Interest income on government securities to be taxed at normal rate instead of 15%.
12. Rate of tax on income from Bahbood certificates reduced from 10% to 5%.
13. Tax credit withdrawn on income from export of software and IT services with 0.25% tax on export proceeds of such services.
14. Commercial importers to be taxed under final tax regime.
15. 10% withholding tax introduced on fees for international money transfer facilitators.
16. The rate of withholding tax on fees for offshore digital services increased from 5% to 10%.
17. CNIC condition for taxable supplies to unregistered persons withdrawn.
18. Definition of resident individual amended to include Pakistani citizens not resident in any other country.
19. Capital gains tax on disposal of listed securities revised with upward impact on holding period of less than one year.
20. Companies and AOPs required to electronically submit details of their beneficial owners.
21. Exemption from Islamabad Capital Territory Sales tax introduced on locally rendered IT and IT enabled services.
22. Exception available to listed companies on restriction to claim input tax beyond 90% withdrawn.
23. Further tax under sales tax extended to registered persons not appearing on Active Taxpayers List.
24. Sales tax exemption extended on all books imported and locally supplied.
25. Federal Excise Duty (FED) on tobacco enhanced.
26. Telecommunication services in Islamabad subjected to higher incidence of FED.
27. The concept of essential commodities introduced in Customs law with a proposal to include in the definition of smuggled goods.
28. Sales tax exemption re-introduced on import of machinery, equipment and materials for exclusive use within the limits of Export Processing Zone.
29. Tax amnesties under promotion package of industries withdrawn.
30. Simplified tax regime for retailers and certain service providers introduced.
31. Alternative Dispute Resolution mechanism revamped.
32. Withholding tax on education fees and payments for use of machinery abolished.
33. Reinstatement of withholding tax on remittances through debit or credit cards.
34. Advance tax on registration of vehicles increased.