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  • FBR suggested reduced corporate tax rate for job creation

    FBR suggested reduced corporate tax rate for job creation

    KARACHI: Federal Board of Revenue (FBR) has been suggested to reduce corporate tax rate by one percent for companies creating 50 or more new jobs in a year.

    Pakistan Business Council (PBC) in its tax proposals for budget 2019/2020 suggested the government to reduce tax rate for companies creating more jobs during a year.

    “One percent lower tax rate for existing companies that create 50 or more new jobs on their own payroll in a year.”

    Giving rationale to the proposal, the PBC said that Pakistan needs to find employment for two million youth each year.

    The PBC further suggested first year depreciation allowance for investment in making upgrades to the provision of facilities (including lifts, ramps) for the specially challenged in the workplace or business.

    It further suggested 0.5 percent lower tax rate for providing livelihoods to specially challenged persons equal to five percent of the workforce.

    Giving rationale to the changes, the PBC said that in order to demonstrate a commitment to creating livelihoods for all and work toward target of sustainable development goal – “By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.”

    It further said that no or limited facilities that allow access in the workplace or business for the specially challenged thereby deterring the disabled from working.

  • Pakistan, China sign four CPEC agreements to boost bilateral cooperation

    Pakistan, China sign four CPEC agreements to boost bilateral cooperation

    ISLAMABAD: Pakistan and China on Sunday signed four agreements under China Pakistan Economic Corridor (CPEC) in order to further enhance bilateral cooperation.

    The signing ceremony was held here during the three-day visit of Chinese Vice President Wang Qishan, who arrived earlier in the day along with a high level delegation.

    Prime Minister Imran Khan and the Chinese Vice President witnessed the signing ceremony, which also attended by Minister for Foreign Affairs Shah Mahmood Qureshi, Planning Minister Khusro Bakhtiar, Finance Advisor Abdul Hafeez Sheikh and members of the Chinese delegation.

    A Framework Agreement on Agricultural Cooperation was signed by Chinese Vice Minister Zhang Taolin and Secretary Ministry of National Food Security Dr Muhammad Hashim Popalzai.

    A memorandum was signed on the “Requirements of FMD free zone where vaccination is practiced between General Administration of the Customs of China and Animal Quarantine Department of the Ministry of National Food Security and Research of Pakistan.”

    Chinese Ambassador in Pakistan Yao Jing and Dr Hashim Popalzai signed the document.

    The two countries also signed China Pakistan Economic Cooperation Agreement signed by Chinese Vice Minister Deng Boqing and Secretary Economic Affairs Division Noor Ahmed.

    Chinese Vice Minister Deng Boqing and Secretary EAD also signed a Letter of Exchange for Disaster Relief Goods between the two countries.

    The two friendly countries also inked agreement between CMEC and Government of Balochistan and Lasbela University in Modern Agriculture Comprehensive Development in Lasbela.

    The document was signed by Vice President of CMEC from China and Vice Chancellor Lasbela University Professor Dr Dost Muhammad Baloch and PS to Governor Balochsitan.

  • Ban foreign cigarettes without health warnings: OICCI

    Ban foreign cigarettes without health warnings: OICCI

    KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended to the government to impose a ban on the import of cigarettes lacking health warnings, as part of a strategy to deter the rampant smuggling of tobacco products.

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  • PTBA suggests allowing further tax adjustment to suppliers

    PTBA suggests allowing further tax adjustment to suppliers

    KARACHI: Pakistan Tax Bar Association (PTBA) has recommended the Federal Board of Revenue (FBR) to allow adjustment of further tax against input tax.

    The PTBA in its proposals for budget 2019/2020, said that presently further tax has been charged by the registered person on the supplies made to the person who are required to be registered but does not obtain registration is not available for adjustment against input tax in pursuance of section 7(1) of the Sales Tax Act, 1990.

    Moreover, through the Finance Act, 2017, further tax at the rate of 2 percent was also levied on zero-rated supplies.

    The PTBA said that this results in unnecessary increase in cost of doing business and unrest amongst the taxpayers which is creating a negative business environment.

    “Due to this amendment, all zero –rated supplies including exports are subject to further tax.”

    Exports are made to non-resident persons who are not required to be registered with Pakistan tax authorities. Resultantly, the exporters will have the bear the amount of further tax charged to exporters which will badly affect their competiveness in the international market.

    The PTBA recommended that the supplier should be allowed adjustment of further tax against input tax.

    Appropriate clarification should be issued that export sales are not subject to further tax, the PTBA further advised.

    The proposed amendments would put an end to unnecessary litigation, result in reducing the cost of doing business and create trust between taxpayers and tax collector.

    The exporters will not be burdened with extra cost of further tax.

  • FTO orders recovery from IR officers in unlawful bank account attachment

    FTO orders recovery from IR officers in unlawful bank account attachment

    ISLAMABAD: Federal Tax Ombudsman (FTO) has ordered recovery from officers of Inland Revenue Officers in a case of unlawful recovery through bank attachment of a taxpayer.

    The FTO ordered dated May 21, 2019 in a complaint filed by a taxpayer against unlawful recovery of tax demand from the bank account of the complainant outstanding against a private limited company, and undue delay in refunding the same.

    The complainant also sought for award of cost and compensation along with additional payment for delayed refund.

    The complainant as an individual assessed to tax at Regional Tax Office (RTO) – III Karachi. According to the taxpayer, the Inland Audit Officer Unit 2 Haripur, RTO Abbotabad, without considering the fact that the complainant was assessed to tax at, RTO-III Karachi against whom no tax demand was outstanding and without serving on him any prior notice, illegally attached his bank accounts and recovered Rs1.714 million.

    The findings of the FTO in this case showed that administrative excesses for improper motives, neglect, inattention, delay, incompetence, ineptitude and inefficiency in the discharge of duties and responsibility and as a consequence unlawful recovery of tax liability outstanding against a private limited concern from the bank account of the complainant tantamount to maladministration.

    The FTO directed the FBR to:

    i. recover Rs0.45 million from Muhammad Asghar Khan Niazi, Zonal CIR, RTO Abbottabad and Hafiz Muhammad Rafaqat, IAO, Unit RTO Abbottabad (costs and compensation) in equal shares and arrange to pay the same to the complainant;

    ii. fix responsibility regarding administrative excesses neglect, inattention, delay, incompetence, ineptitude and inefficiency in the administration or discharge of duties and responsibility and initiate appropriate disciplinary proceedings against the officials found accountable;

    iii. direct the commission – IR concerned to issue additional payment for delayed refund to the complainant.

  • Hafeez reviews proposals for budget 2019/2020

    Hafeez reviews proposals for budget 2019/2020

    ISLAMABAD: Dr. Abdul Hafeez Shaikh chaired a meeting on Sunday to review the proposals for budget 2019/2020.
    Shabbar Zaidi, Chairman, Federal Board of Revenue (FBR), gave a detailed presentation about the budget proposals for the upcoming budget.
    He proposed various steps to expand the tax base as well as increase revenue of the country.
    The adviser directed FBR to make tax collection process further easier and initiate measures to broadening the tax base.
    The meeting was also attended by the Adviser to PM on Commerce, Textile, Industry and Production and Investment, Abdul Razak Dawood, Minister of State for Revenue, Muhammad Hammad Azhar and other senior officials of Finance Ministry and FBR.

  • Reduction in corporate tax for E&P companies recommended to attract foreign investment

    Reduction in corporate tax for E&P companies recommended to attract foreign investment

    KARACHI: Federal Board of Revenue (FBR) has been recommended to reduce corporate tax rate for exploration and production companies in order attract foreign investment in this sector and generate more revenue for the country.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020 said that the applicable tax rate for the Oil and Gas Exploration and Production sector is 40 percent.

    Before the promulgation of Income Tax Ordinance, 2001, the tax rate was 50 percent to 55 percent, however, the royalty payment to government was adjusted against the tax liability, resulting in effective tax rate of approximately 35 percent or less.

    Applicability of effective 40 percent tax rate has in fact increased the tax expense of the Oil and Gas Exploration and Production Companies, as against the incentives given to other sectors of the economy, whereby the tax rate will be gradually reduced to 30 percent.

    The OICCI recommended that in order to incentivize oil and gas exploration in the country especially after the massive reduction in the international oil prices, the corporate tax rate on E&P sector should be reduced from the current 40 percent to the rate applicable to other corporate sector by making necessary amendments in the Income Tax Ordinance 2001 and Regulation of Mines and Oilfield and Mineral Development (Government Control) Act, 1948.

    Giving rationale, the OICCI said that foreign investment will be encouraged in the country, which will eventually increase the tax collection of the government and will also greatly help to overcome the energy crises in the country.

    The OICCI highlighted another issue of limitation on payment to federal government and taxes, and said that the rate of tax applicable on E&P companies on their Oil & Gas profits are given in their respective PCAs signed with government.

    Under Rule 4AA of Part I of the Fifth Schedule to the Income Tax Ordinance, Super tax has been imposed at 3 percent for E&P companies earning Rs 500million (equivalent to US$ 5million).

    It recommended that it is critical for E&P sector and recommended that the tax applicable should be calculated strictly in accordance with the provisions of the respective PCAs signed between Government and each E&P company and are legally binding, without changes throughout the full Lease period.

    The chamber said that this will remove the negative investment scenario, and potential for litigation – due to the varying interpretations by the FBR from time to time (despite the signed PCAs with Government)

    The OICCI said that tax credits under section 65A and 65B are not currently being allowed to E&P companies by the tax authorities despite the fact that appellate Tribunal decided the matter in favour of E&P companies.

    Therefore, it is suggested that necessary clarification needs to be provided by tax authorities to assessing authorities.

    In view the current energy deficit in the country and recent decision of appellate Tribunal, these credits should be allowed to the E&P companies to promote further investments in this sector.

    Regarding depletion allowance, the OICCI said that clarity over definition of well head value for computation of depletion allowance is required.

    As per clause 3 of Fifth Schedule, depletion is calculated at 15 percent of the gross receipts representing well-head value of production, but not exceeding 50 percent of taxable income.

    E&P industry interprets above by calculating depletion at 15 percent of gross revenue before royalty deduction.

    Tax authorities calculate depletion at 15 percent of Gross Revenue after deduction of royalty.

    Therefore, it is proposed that amendment be introduced in the relevant clause in favor of E&P companies i.e. depletion to be calculated at 15 percent of revenues before royalty deduction.

    The matter is under litigation at High Court level for various E&P companies. Clarification in the definition of Well head value will ease unnecessary burden of these litigations for E&P Companies, the OICCI added.

  • SBP issues procedure for payment of tax against foreign assets declaration

    SBP issues procedure for payment of tax against foreign assets declaration

    KARACHI: State Bank of Pakistan (SBP) on Saturday issued procedure for deposit of tax against foreign assets under Assets Declaration Ordinance, 2019.

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  • FBR notifies rules for applying amnesty scheme

    FBR notifies rules for applying amnesty scheme

    KARACHI: Federal Board of Revenue (FBR) on Saturday issued rules for implementing tax amnesty scheme 2019.

    The FBR on May 20, 2019 issued draft rules for inviting comments of stakeholders till May 22 to finalize the rules.

    In this regard the FBR today (May 25) issued SRO 578(I)/2019 to issue the rules for Asset Declaration Ordinance, 2019.

    Following is the text of the SRO 578(I)/2019:

    Rule 1. Short title and commencement.

    Sub-Rule (1): These rules may be called the Asset Declaration (Procedure and Conditions) Rules, 2019.

    Sub-Rule (2): They shall come into force at once.

    Rule 2: Definitions:

    Sub-Rule (1): In these rules, unless there is anything repugnant in subject or context:

    (a) ‘Ordinance’ means the Asset Declaration Ordinance, 2019; and

    (b) ‘Value of assets’ means value as per Section 5 of the Ordinance as on the date of declaration.

    Sub-Rule (2): All other words and expressions used but not defined in these rules shall have the same meaning assigned thereto under the Income Tax Ordinance, 2001, the Sales Tax Act, 1990, the Federal Excise Act, 2005, or the Benami Transactions (Prohibition) Act, 2017, the Ordinance and the rules made thereunder.

    Rule 3: Manner of filing declaration:

    Sub-Rule (1): For the purpose of Section 3 and 5 of the Ordinance, the declaration shall be filed on the form specified for the purpose on the web portal of the Board.

    Sub-Rule (2): Where an asset declared by the declarant is only beneficial owned by the declarant or is owned by a Benamidar of the declarant, the name and identification of the legal owner or Benamidar shall also be declared.

    Rule 4: Conditions for making declaration:

    Sub-Rule (1): For the purpose of incorporation of undisclosed assets and undisclosed expenditure declared under the Ordinance:

    (a) where income tax return for tax year 2018 has not been filed, the declarant shall, along with the declaration or such date as extended by the Board, file –

    (i) income tax return for the tax year 2018; and

    (ii) wealth statement or financial statement, as the case may be, as on June 30, 2018.

    (b) where income tax return for tax year 2018 has been filed under the provisions of the Income Tax Ordinance, 2001, the declarant shall, along with the declaration or such date as extended by the board, revise –

    (i) income tax return and financial statement for tax year 2018, if the declarant is a company; or

    (ii) wealth statement or statement of assets and liabilities, if the declarant is an individual or an association of persons.

    Sub-Rule (2): Where a person declares undisclosed sales in terms of Section 3, he shall declare the undisclosed sales subject to the Sales Tax Act, 1990 and the Federal Excise Act, 2005 from July 2014 to June 2018, in the first sales tax and federal excise return, due after the declaration.

    Sub-Rule (3): For the purpose of Section 3 and 4 of the Ordinance, in case of payment of tax on foreign assets, –

    (a) the fair market value and cost of such assets shall be declared in respective foreign currencies on board’s web portal;

    (b) tax shall be paid in foreign currency as per procedure specified by the State Bank of Pakistan; and

    (c) in case of tax payment after the June 30, 2019, liability of default surcharge shall be paid in foreign currency as per procedure specified by the State Bank of Pakistan.

    Sub-Rule (4): For the purpose of clause (d) of Section 8 of the Ordinance, if such assets represent cash or any other form of foreign exchange bearer assets, the same or its proceeds shall be deposited and retained in a foreign bank account of the declarant till June 30, 2019 and bank statement as evidence thereof, shall be provided by July 30, 2019 or such date as extended by the Board.

    Sub-Rule (5): For the purpose of clause (b) of Section 5 of the Ordinance, the value declared by the declarant as the fair value, cost or the price which the assets may ordinarily fetch on sale in the open market on the date of declaration shall be taken to be valid unless there is objective evidence to the contrary available with the Board.

    Sub-Rule (6): Where foreign assets are shares of a company incorporated in Pakistan held by the declarant, whether beneficially or otherwise, it may be declared subject to the condition that such shares shall be repatriated into Pakistan with the prior approval of the State Bank of Pakistan and registration of such shares with the State Bank of Pakistan in the name of declarant on non-repatriable basis.

    Sub-Rule (7): Where an asset being a receivable from a person is declared, complete particulars of the persons from whom the amount is receivable along with his identification and address shall also be declared.

    Rule 5: Payment of tax for original demand:

    For the purpose of sub-section (4) of Section 6 of the Ordinance, default surcharge and penalty shall not apply if, –

    (a) tax determined by an Officer of Inland Revenue in the original order, is paid up to June 30, 2019; and

    (b) such original order or an appellate order passed against such original order has not yet attained finality.

    Explanation: An original order passed by an Officer of Inland Revenue or an appellate order passed by an appellate authority shall be taken to be final if no right of appeal has been provided against such orders or no appeal has been filed within the time limit prescribed under the applicable laws against such orders.

    Rule 6: Payment of tax under other laws:

    For the purpose of Section 4, 12 and 16 of the Ordinance, where the declarant has paid tax under the Ordinance, no tax shall be payable by the declarant under the Income Tax Ordinance, 2001, the Sales Tax Act, 1990 and Federal Excise Act, 2005 in respect of such undisclosed assets, undisclosed expenditure or undisclosed sales.

    Rule 7: Revision of declaration:

    Any person who having filed a declaration hereinafter referred to as the ‘original declaration’ discovers any omission, mistakes, computational error or wrong statement therein may file revised declaration within the due date specified in Section 3 of the Ordinance subject to the condition that the value of assets and the tax paid thereon shall not be decreased.

    (PkRevenue.com takes no responsibility of any error of this text. The text is published in the interest of readers with ensuring no typo error.)

  • Pakistan needs to ensure direct import, exports: PSAA

    Pakistan needs to ensure direct import, exports: PSAA

    KARACHI: Pakistan exports need to maximize selling on C&F basis and imports to maximize buying on FOB basis in order to increase revenue earning along with reducing cost of doing business.

    In a letter to Adviser Commerce, Textile, Industry, production and Investment, Abdul Razzak Dawood, Chairman PSAA said that this will ensure direct exports to end users and imports direct from producers and will cut out third party intervention.

    One of the steps which is a major hurdle creating extra costs is freight tax, income tax ordinance 2001, section 7, sub-section (1), Para (a) and (b) and urged to revisit and deleted in total.

    This will result in zero tax freight in Pakistan and eradicate time wasting red tapisim.

    While giving example of export cargoes, he said that cargoes like cement clinker, rice etc, in shiploads which were being sold on C&F basis are now mostly sold on FOB basis.

    One of the reasons is freight tax which is applicable as per income tax ordinance 2001.

    Only few shipping agents /ship owners have the connections /papers work to get waiver of freight tax (Maximum freight tax is 8 percent on freight earned).

    Therefore third parties are involved which buys FOB from Pakistan exports, arrange /charter ships, get freight tax waiver and sell to end users or actual buyers on C&F basis.

    Giving example of import cargoes, he said when an imports wants to buy on FOB basis and arrange charter ship himself to save overall C&F cost then even on import cargo 8 percent freight tax on freight is attracted as per income tax ordinance 2001.

    Also State Bank of Pakistan does not permit /delays in opening FOB letters of credit.

    This again opens the door for third party intervention, they step in , receive the C&F letter of credit (thereby avoid freight tax) by FOB from suppliers, arranges /charter ships and sell C&F to Pakistani imports.

    Therefore in actual fact negligible ‘if any’ freight tax is earned but it has negative impact for both importers and exporters of cargoes in shiploads/ chartered vessels.

    As for as containerized cargoes are concerned, most of the shipping lines to get freight tax waivers as per existing bilateral trade agreements between Pakistan and other countries.

    Therefore in actual fact there is no major earning of freight tax.